To The Moon

On the last trading day of Aug 31, US market did not manage to end on a “high” as many retail investors had hoped.

The “third time is a charm” magic did not take place.

Could it be due to the release of US’s Personal Consumption Expenditure (PCE) report for July 2023?

When evening arrived:

• DJIA: -0.48% (-168.33 to 34,721.91). For Aug 2023, the 30-stock Dow dropped -2.36%.

• S&P 500: -0.16% (-7.21 to 4,507.66). Index soared +21% in the first 7 months. For Aug 2023, the broad-market index lost -1.77%.

• Nasdaq: +0.11% (+15.66 to 14,034.91). Only index registering a 5th consecutive win. But still suffered its worst monthly loss of 2023. For Aug 2023, the tech-heavy index lost -2.17%.

• The culprit that led to US market Thursday's mixed performance was none other than US’s July 2023 Personal Consumption Expenditures (PCE) Index report.

• Fed's preferred inflation measure edged higher for both headline and "core" readings, in line with expectations.

• Headline PCE came in at 3.3% (July) versus 3.0% (June).

• Core PCE came in at 4.2% (July) versus 4.1% (June).

• From the table (see above), “services” had the highest monthly and annual increase among the PCE components in July 2023.

• Strongly implying that services were the main driver of July core PCE inflation.

• Example of “services” include (a) health care, (b) recreation, (c) transportation & (d) financial services.

• Yesterday also saw the regular US weekly jobless claims report released.

• US jobless claims fell to 228,000 last week, undershooting expectations for 235,000.

• Against last, last week’s claim of 232,000 - it shows a fall of -4,000 claims or -1.72%.

• The latest reading is the lowest in 4 weeks.

• The Fed may view the latest jobless claims as a sign that businesses continue to retain employees in an economy that has largely withstood rapidly rising interest rates for more than a year.

The weekly jobless claims sets the stage for Friday’s release of another official data - US Nonfarm payrolls report that the Fed will pour over as they try to make sense of where the economy & inflation stands.

With September 2023 touted to be another month of lacklustre performance (based on history), where does an investor look for value stocks to park one’s limited resources?

The above information is a summary of S&P 500 Top Performing companies from 1980 to 2022.

Summarized Statistics:

• Information Technology sector has 6 stocks or 30% in the Top 20 stocks pick.

• Communication Services sector also have 6 stocks or 30% in the Top 20 stocks pick.

• Consumer Discretionary sector has 4 stocks or 20% in the Top 20 stocks pick.

• Financial sector has 2 stocks in the Top 20 stocks pick.

• Finally, Heathcare & Utilities sectors each has 1 stock in the Top 20 stocks pick.

My Viewpoint:

1) When it comes to investing, looks like stocks from the Top 3 performing sectors are a must (?)

1. Information Technology.

2. Consumer Discretionary.

3. Communication Services.

2) If you look carefully at the Top 20 stocks by Returns (in percentage) tables, you would have noticed that some of the companies no longer exists.

• DSC Communications. Acquired by Acatel in 1998,

• Coleco Industries. Bankrupted in 1988 & attempted a comeback in 2005 but failed.

• Avaya. Delisted from NYSE in Feb 2023. Post-restructuring, it will emerge as a private company.

• XL Capital was acquired by French insurer AXA in Mar 2018.

• Dynegy filed for Chapter 11 in July 2012.

• Sprint was acquired by T-Mobile in April 2020.

• Nextel Communications was acquired by Sprint in August 2005.

• LSI Logic merged with Agere Systems in April 2007 as LSI Corp. 7 years on, it was acquired by Avago Technologies (now known as Broadcom Inc) in May 2014.

• Nortel Networks filed for bankruptcy in January 2009. It was eventually acquired by Ciena Corp in March 2010.

3) Lesson learnt from above point #2 are:

• There will always be risks associated with any stocks listed in US market.

• Therefore, when reading news articles on stocks with 5 years potential or 10 years potential down the road, read and digest it with a pinch of salt.

• If we cannot even foretell what is going to happen to the US market by December 2023, what is the probability of accurately pinpointing stock in a particular sector - 5 years or 10 years down the road?

4) Of the Top 20 stocks, that are still “standing” & fits the Top 3 sectors (mentioned in above point #1):

• $Qualcomm(QCOM)$ - Information Technology.

• Tesla Inc. - Consumer Discretionary.

• $Advanced Micro Devices(AMD)$ - Information Technology.

• Ford - Consumer Discretionary.

• Nvidia - Information Technology.

• $Etsy(ETSY)$ - Consumer Discretionary.

• $Micron Technology(MU)$ - Information Technology.

• $Netflix(NFLX)$ - Communication Services.

As we stand at the “September” crossroad, may these nuggets of information give everyone reading my post a sort of guide and reference; as I prepare to scale down my posting.

• Do you think you have some stock/s to suggest as well?

• Do you think there are other sectors that are worth a mention too?

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