Rise November Equity Portfolio Report

Risevest November Report
Risevest Novmeber Report

Report Summary 

The US equity markets in November was a story of two halves as strong quarterly earnings, inflation, potential interest rate hike, and pandemic supply chain problems swirled the markets. The S&P 500 closed the month down 0.83% after setting record highs during the course of the month. The Rise portfolio gained 1.7% despite high growth stocks in our portfolio recording significant drag downs on the back of growing inflation as investors re-priced future cash flows lower leading to price corrections on many growth stocks perceived as overvalued. Markets are expected to remain mixed in December as investors continue to worry about the new Covid-19 omicron variant, inflationary pressures, job reports and potential interest hikes. 

November Rally 

November opened with a lot of promise for the US equities market after markets rose to record highs on optimism of economic stability and outstanding quarterly results in October. Setting the path for the S&P 500 to rebound from earlier losses, as initial gains were led by the energy and consumer-discretionary firms. The Dow Jones Industrial Average touched the 36,000 level for the first time, shrugging off concerns about pandemic supply bottlenecks that had dragged the manufacturing index downwards the previous month.  

The US Federal Reserve convened its usual FOMC meeting for the month and kept all monetary parameters constant as it announced tapering of the government’s bond purchase program would start later in the month in line with market expectations. 

High growth tech companies powered the NASDAQ Composite index to briefly cross the 16,000 mark after reporting above expectation quarterly earnings sending their valuations even higher as investors rush to get a piece of these companies. As positive investor sentiment in the first half of the month ensured that the NASDAQ eked out a gain after concerns of growing inflationary pressures and interest rate hikes finally caught up with the market. 

In November, the S&P 500 and Dow Jones closed the month negative losing 0.83% and 3.73% respectively while tech-heavy NASDAQ closed gaining 0.25%. 

November Sell-offs 

Meanwhile, as November moved past the halfway mark and earnings release season began to wind down, investors optimism took a downturn. As a long list of worries overshadowed by the euphoria of better than expected quarterly returns from Corporate America finally caught up with the market.  

The renomination of Federal Reserve Chair Jerome Powell for another 4-year term by President Biden brought a brief respite to the market as investors expect the government to maintain its stance of supporting the equities markets.  

Rise Portfolio 

In November, our portfolio eked out a 1.70% gain despite a number of high growth stocks recorded significant drag downs on the back of growing inflation and potential interest rate hikes. The portfolio opened the month bullish as most of the tickers in our portfolio recorded strong quarterly earnings ensuring our portfolio closed the month in the positive.  

Apple Inc pushed past the $150 mark to return over 10% after the iPhone maker announced new service lines such as the self-repair service giving customers access to genuine Apple parts and tools for those who are comfortable with completing repairs by themselves. News on the long-awaited Apple Car is closer to seeing the light of day and the announcement of  Alex Gorsky, chairman and CEO of Johnson & Johnson, as an elected member of Apple’s board of directors also spiked investors optimism concerning the stock. 

Teladoc Health Inc, 3M company and Fiverr were all removed from the portfolio while Microsoft, Upstart, General Motors, Cloud Flare, Mercado Libre and Brilliant Earth were added to the portfolio based on attractive business models and valuations. 

This month Trade Desk Inc (TTD) outperformed every other stock in our portfolio on the back of impressive Q3 earnings results and an advanced partnership with NBCUniversal to provide more offerings. The ad tech company gained an impressive 38% despite the month being a bad outing for growth stocks. Trade Desk reported revenue of $301.1 million increasing 39% year over year and 7.5% from the second quarter. The company’s net earnings increased 38.5% from the year-ago. 

Meanwhile, Walt Disney (DIS) fell 14% to lead declines among Dow (.DJI) components and the S&P 500, as it reported the smallest rise in Disney+ subscriptions since the service’s launch and posted downbeat profits at its theme parks.

Paypal and crowd strike holdings also recorded drag downs after big hedge fund analysts downgraded the stocks from buying ratings citing increased competition and reduced market share and competitive edges. Paypal earlier in the month had announced a cut in sales and profit forecast which piled on the pressure on the ticker. However, Rise continues to hold on to these tickers as their investment thesis has not failed and we continue to see potential upsides as regards the growth of the stocks. 

In November the rise portfolio recorded 9 gainers and 23 losers. The portfolio held a basket of 32 stocks. However, historically only 4 out of our 32 total holdings are in the red. The remaining 28 are comfortably in the green.

Market Outlook for December 

As a new list of concerns bugs the US equity market in December, the market is expected to remain mixed for the better part of the month. Omicron the new variant of Covid-19 and weaker than expected job number top the list of concerns plaguing investor optimism 

However, once price correction is done, the markets are expected to tick upwards.