🧭 Navigating 2024’s Rough Seas & Predictions

What’s on the Menu 🍴

Welcome to 2024, Investors!

As the new year dawns, it's like flipping a fresh page in our investment journals.

Gone are yesterday's strategies, and in their place, we sketch bold strokes for tomorrow's gains.

We're here to stir the pot of forecasts, adding a pinch of insight and a dash of daring to your financial recipe.

Let's sail into this year with our eyes on the horizon of opportunity, ready to capture the winds of fortune! ⛵💼🌅

• Insights From 2023’s Top Performing Stocks 👨‍🎓

• What Lies Ahead for Crypto in 2024? ₿

• Think The Stock Market Is Too Expensive?
  Not If You Look Forward 📈

• 2024 Market Outlook & Predictions! 📺

Today’s newsletter is a 5 minute read.

Insights From 2023’s Top Performing Stocks 👨‍🎓 

With 2023 officially wrapped up, we thought it might be interesting to look at the top performing stocks in the S&P 500 index last year.

Might there be some lessons there that we can apply to our 2024 investing playbook?

We crunched the returns for the top 25 performers, as well as sales growth, earnings growth, and valuation multiple changes throughout 2023.

Here’s the summary:

The lowest return in the top 25 was Expedia (EXPE) which delivered a VERY robust 73% annual return. The highest was of course Nvidia (NVDA) with a whopping 239% return for 2023.

While most of the top 25 companies delivered sales AND earnings growth in 2023, a few did not.

In fact, six companies posted strong stock returns WITHOUT growing earnings last year: AMD, Blackstone, Builders Firstsource, Intel, Lam Research, and Tesla (though Tesla did grow revenues).

This is a perfect illustration that stock returns in the short run are not just driven by earnings or sales growth, but also by valuation multiple changes.

Every single top performing stock saw its price-to-sales multiple increase in 2023. And 20 out of the 25 saw their price-to-earnings multiple expand as well.

What causes valuation multiple expansion? A few potential factors including:

• Improving investor sentiment

• Industry tailwinds & hype cycles

• Optimism about a company’s future growth potential

• Risks & bear theses get disproven

As an example, the semiconductor sector as a whole performed well last year and lifted stocks like AMD, INTC, and LRCX because expectations of future demand from AI applications increased.

So even though those companies didn’t deliver actual growth in reported earnings, their valuation multiples expanded, driving the stocks higher.

In addition to semiconductors, travel stocks also made a strong showing in the top 25 last year, with RCL, CCL, UBER, BKNG, and EXPE making the list.

All five travel stocks had robust sales and earnings growth.

The takeaway is that growth is very important, and so is sentiment!

As we think about 2024, we want to identify strong industry themes, especially those that coincide with robust revenue & earnings growth.

If we can do that early in the cycle, and if the sector in question has more room for valuation multiple expansion, then we might just be able to hit some investing homeruns!

While this may be harder in 2024 than in 2023, we do have some early potential ideas for stocks that could fit the criteria.

Stay tuned to the Daily Dough because we’ll be writing about these in the coming weeks and months!

What Lies Ahead for Crypto in 2024? ₿

As 2024 gets into full gear, the crypto community reflects on a transformative 2023 and braces for a year teeming with expectations.

2023 saw Bitcoin's staggering 155% surge, Ethereum's commendable 90% rise, and Solana's jaw-dropping 919% increase.

Justice and Repercussions: The crypto industry experienced a reckoning in 2023, as the aftershocks of 2022's monumental collapses of Terra Luna and FTX resonated.

The year marked a significant stride towards justice as key figures like Do Kwon faced trials and Sam Bankman-Fried was found guilty, offering a semblance of closure to the aggrieved investors.

Changpeng Zhao, Binance's ex-CEO, wasn't spared from the SEC's scrutiny but managed to settle with a substantial $4 billion fine.

Spot ETFs - The Game Changer: The industry is anxiously awaiting the potential approval of Bitcoin spot ETFs, especially after BlackRock, the world's largest asset manager, entered the arena with its application.

This move is seen as potentially groundbreaking, given BlackRock's commendable history with ETF approvals, and could significantly bolster mainstream adoption and investment in cryptocurrencies.

Ethereum's Underlying Strength: Despite underperforming against Bitcoin in the charts, Ethereum's fundamental outlook has never looked stronger.

With a steady circulating supply and an increasing amount of staked ETH, especially post the successful Shanghai Upgrade, Ethereum's ecosystem is robust with Layer 2 solutions like Optimism and Arbitrum gaining traction.

Also, Ethereum's own spot ETF application signals a positive market sentiment and a potential resurgence.

The Ordinal Wave: A notable 2023 milestone was the advent of the Ordinals protocol, allowing individual Satoshis to be inscribed with data.

This innovation sparked an inscription mania, with builders leveraging the protocol to potentially usher in a DeFi revolution on Bitcoin's blockchain.

The Ordinals wave represents a creative and utilitarian shift in blockchain technology, opening new avenues for development and application.

The Year Ahead:

As 2024 unfolds, the crypto world awaits the outcomes of ETF applications, the impact of the Bitcoin halving, and the ongoing dance with regulatory authorities like the SEC.

With technological advancements continuing to push the boundaries, the industry is poised for another year of growth, innovation, and perhaps, more stability.

As the cycle of fear and optimism perpetuates, we watch with bated breath, ready to help you navigate the wild ride of cryptocurrencies.

Think The Stock Market Is Too Expensive?
Not If You Look Forward. 📈

As the S&P 500 index has roared towards all-time-highs in 2023, it’s leaving a lot of people wondering if stocks are too expensive to invest in right now.

The most important metric we want to pay attention to for valuing how expensive or cheap stocks are, is the price-to-earnings ratio (P/E).

For reference, the 10 year average of the S&P 500 P/E is 17.6.

So, as it stands now, S&P large cap stocks are trading above this 10 year average at a 19.6 forward P/E ratio (assumes 2024 full-year earnings, which is why it’s a “forward P/E”).

So, this leaves stocks not being inexpensive by that measure.

But, what can justify higher stock prices even at this higher valuation level today?

Future earnings growth.

2024 is still an important year of data for investors, but, believe it or not, 2025 is now in view.

So, earnings (how much money corporations are making) is what wags the valuation dog.

Right now, analysts expect to see 11% earnings growth in 2024 and 12% earnings growth in 2025:

So, if we look into 2025’s numbers, you could justify buying stocks even at today’s elevated level.

The kicker is, realistically these are probably over-optimistic earnings growth expectations for both years.

But… even if companies put in half of the expected growth, we’re still looking at growth none-the-less unless a black swan event comes in to derail the economy.

So, if you’re a long-term investor, you have to remember that profits generally go up over time (with some short-term bumps along the way with recessions).

So, as 2023 taught many people, trying to time the market can be a challenge. You have to be clear on why you’re investing and HOW LONG you plan to be invested for with your capital.

Pay attention to P/E ratios, forward earnings expectations and important economic data to help you GET invested and STAY invested with more confidence.

Joining something like our Wealth Building Community can also help you get questions answered so you’re not left wondering what to do.

Long term, betting on American innovation will likely continue to pay dividends as it always has, and if growth continues, it’s not hard to see why the stock market can continue its trek higher over the year.

Video of the Day: 
2024 Market Outlook & Predictions! 📺

The massive market gains in 2023 surprised most “industry experts”…

But we were able to build significant wealth last year in spite of a ton of people missing the boat.

And the big question this year is - “What is everyone missing?”

So, in today’s We Talk Money episode, we dive into our market predictions for 2024!

You’ll also learn:

• Why did stocks and bitcoin dump on the first week of the year?

• What is most likely going to happen with interest rates?

• How will the spot Bitcoin ETF impact its price?

• And we answer a BUNCH of questions from you!

Food For Thought 🧠

"The person who follows the crowd will usually go no further than the crowd. The person who walks alone is likely to find himself
in places no one has ever seen before.”
- Albert Einstein

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.