By Haddon Libby
It seems hard to believe but 2024 is half over.
Stocks have had a solid year. At the mid-year point, the S&P 500 index is up 15% for the year with a total market value of just over $45 trillion.
The S&P 500 is a weighted index. What this means is that each stock represents a different percentage of the index. The most valuable stock in the index is Microsoft at $3.4 trillion and represents 7.3% of all value in the S&P 500. Apple and NVIDIA are jockeying for the second position with valuations of $3.2 trillion and $3 trillion, respectively. Each company represents more than 6.5% of the index’s value meaning that these three stocks represent 20% of the index. Amazon, Google, Meta, Berkshire Hathaway, Eli Lilly, Broadcom and JP Morgan Chase round out the ten highest valued stocks in the index and represent 37% of the index. S&P 500 stocks have values of $10 billion or more.
Twenty percent of S&P 500 stocks are up 15% or more. Approximately 200 or 40% of the stocks were down on the year with half of these companies down by 10% or more. The top performer amongst the 500 stocks of the S&P 500 during the first half was Super Micro Computer, up by 200%. NVIDIA came in second, up 150%, followed by Vistra Energy (125%), Constellation Energy (75%) and Eli Lilly (55%).
Super Micro Computer is currently valued at $30 billion, a $20 billion increase in 2024 alone. Based in San Jose, SMCI was founded in 1993. The reason for the explosive growth in the stock price is its role in building server systems. With the emergence of NVIDIAs GPU computing chips as the best option for Generative Artificial Intelligence, there is a need for a lot of data centers. SMCI is a leader in the creation of GPU-based data centers.
Vistra Energy is based just outside of Dallas, Texas. Founded in 1882, Vistra is valued at a little less than $30 billion, a $15 billion increase on the year. The company creates electricity and power with a focus on the Texas market.
Constellation Energy is another energy company with a focus on the Atlantic coast states and Texas. Whether it is Vistra, Constellation or another energy company, the need for more electricity and improvements to the energy grid are critical to future growth in the US economy.
Rounding out the top ten are Micron, NRG Energy, Crowdstrike, Deckers and Targa Resources.
The worst performers in the index were led by Walgreens, down over 50%. Others down by at least one-third include Lululemon, Intel, Epam Systems, Warner Discovery, Albermarle and Nike.
Walgreen’s 50%+ decline continues the ugly decline in its stock that began way back in 2015. Valued at nearly $100/share nine years ago, the stock is currently hovering a bit over $10/share with a valuation of $10 billion. At present, 25% of their locations lose money. Margins made on the sale of pharmaceuticals are down with market share eroding while front of the store sales are anemic.
Lululemon and Nike are both in the athletic/leisurewear space. Both companies have struggled to maintain market share as domestic and offshore consumers look for better value. Nike has also been hurt by brands like Hoka and New Balance that have taken market share. Nike’s value is down by more than $35 billion this year to $110 billion while Lululemon is down $15 billion to $37 billion.
Warner Discovery operates traditional cable stations like CNN, TNT, The Discovery Network and others. With megacaps like Amazon, Apple, Google and Netflix entering the live sports broadcasting business via streaming services, old line broadcasters like Warner Discovery are poorly positioned to compete. The company has a hefty debt load that exacerbates the disadvantage versus competitors.
Haddon Libby is the Founder and Chief Investment Officer of Winslow Drake Investment Management. For a review of your investment portfolio, please visit us at www.WinslowDrake.com.
