Wayman Value Investing October 2024 Portfolio
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October 2024 Outlook
September, historically the worst-performing month for the S&P 500, surprised investors with a positive performance this year. The S&P 500 gained 2.02%, pushing its year-to-date return to an impressive 20.81%. Meanwhile, the Dow Jones Industrial Average rose 1.85% for the month, bringing its year-to-date gain to 12.31%. This resilience in the face of typically challenging market conditions speaks volumes about the current economic landscape and investor sentiment.
Despite initial concerns about interest rates, the Federal Reserve, and potential economic headwinds, the market demonstrated remarkable strength. The Fed's decision to cut interest rates by 0.50%, with indications of two additional 0.25% cuts later this year, provided a significant boost to market confidence. This move, coupled with controlled inflation and continued economic stability, helped drive the S&P 500 to five new closing highs during the month, with the index ending at a record 5,762.48.
Corporate earnings continue to be a bright spot, with Q2 2024 setting a new record. An impressive 78.8% of S&P 500 companies beat operating earnings estimates, while 61.1% surpassed sales expectations. Looking ahead, analysts anticipate further earnings records in Q3 and Q4, underscoring the robust health of corporate America. Operating margins also showed improvement, rising to 11.94% in Q2 2024, up from 11.58% in the previous quarter.
Looking forward, there's cautious optimism on Wall Street. The S&P 500's one-year Street consensus target price has increased for the tenth consecutive month to 6,265, suggesting an 8.7% potential gain from current levels. However, investors should remain vigilant. The Fed's projections for a slight increase in unemployment and ongoing geopolitical uncertainties could introduce volatility in the coming months. As always, a diversified approach and focus on long-term fundamentals remain prudent strategies in navigating the ever-evolving market landscape.
User Guide - Tracking the Spreads
What are spreads, and why should you care? I believe that tracking spreads is essential for making informed investment decisions. Each month I categorize stocks into tiers based on the spread between their calculated value and market value.
Here’s how it works:
STASH: This tier includes stocks with the largest spreads. These are the hidden gems that offer significant potential upside. Based on my valuation, now is the perfect time to capitalize on their undervalued status.
GATHER: Stocks in this tier have a substantial spread, but not as significant as those in the Stash tier. They still offer attractive opportunities for investment, and I recommend considering them for your portfolio.
STORE: The Store tier consists of stocks with modest or tightening spreads. While they may not have as much potential for immediate growth, they still hold value and can contribute to a balanced portfolio. Wayman holds these stocks, but I am not actively buying additional shares this month.
CACHE: In this tier, stocks have narrow or no spreads, indicating that their market value aligns closely with Wayman’s calculated value. It may be time to consider exiting positions in these stocks and reallocating your resources.
Categorizing stocks based on spreads helps you identify stocks with the greatest potential for growth. I believe in capturing maximum upside while minimizing potential losses, and Wayman’s tiered system allows you to prioritize your investment decisions.
Model Allocation
For the purpose of third-party portfolio tracking and validation we use the following model portfolio allocation:
65% invested in Stash tier stocks
30% invested in Gather tier stocks
5% invested in Store tier stocks
The Wayman portfolio is tracked and audited by Hulbert Ratings, which has been rigorously tracking the real-world performance of investment advisory newsletters for over 40 years. You can follow our performance here.