Research

Two weeks ago, we wrote a note about Costco (Ticker: COST), as it eclipsed 50x price-to-forward earnings (Link). We studied all companies that first eclipsed 50x as a proxy for becoming optically expensive and analyzed subsequent multiples and returns. The odds increasingly become stacked against their success. Today, we studied the opposite – stocks whose

For Healthcare investors, the last few years have been particularly difficult to navigate. Less than 20% of Healthcare stocks have beaten the market over the last two years, the lowest percentage of winners in at least two decades. In fact, on a rolling two-year basis, the equally-weighted Healthcare sector has now experienced its worst performance

Trade Ideas Following the Red Sweep There has been an unbridled risk-on tape over the last few months. In today’s Level Set, we offer buy ideas based on where see recent optimism as likely to continue to be supported by potential catalysts in the first half of 2025, and sell ideas where we are dubious

Optimistic Sentiment We hosted a dinner with several investors last week. The first discussion topic was the view we put forth in last week’s Level Set (see here), where we posited that the market could sell off when Trump is inaugurated on January 20th, 2025. We were curious about sentiment, and found the dinner crowd

Another Arrow in the Quiver of the Bull Case The prospect of a Republican Sweep never rose above 50% on the Polymarket (the world’s largest betting market) prior to Election Day, but the “Red Sweep” caused a huge risk-on trading environment. The certainty of the political environment caused many assets to move, including a plummeting

Thinking About Small Cap Exposure? For months, investors have been asking us about small caps, aiming to understand the factors that might spark a lasting rally. Many cross-asset investors continue to make the case to overweight small caps, based on the contention that small caps appear attractively valued relative to history. Our general stance has

Costco (Ticker: COST) bottomed after it posted disappointing earnings in May 2022, but since then the stock has more than doubled. At the same time, its price-to-forward earnings has expanded from 31x to 50x. While we can certainly appreciate many merits of Costco’s unique business model, it strikes us as a lofty increase in valuation

What Is the Bear Case? Last week we wrote about the Bull Case for the US equity market (SEE HERE). We outlined that a combination of the average stock having gross margin expansion, the early phases of Fed accommodation, the US deficit essentially helping mega-cap US equities, the specter of incremental China stimulus, and some

Up 23% Year-to-Date The S&P500 and NASDAQ are up 23% year-to-date, and the majority of portfolio managers we speak with believe the market will end the year higher than current levels. There is a long list of concerns from a risk-taking perspective, including potentially over-optimistic estimates for 2025, geopolitical uncertainty, a polarized and difficult-to-forecast US

Most investors have exposure – either explicitly or through bottom-up stock selection – to the key themes that are likely to grow above GDP for the next couple of years or more. While it would be ideal if everything we liked went straight up, prudent risk management requires tracking the correlation of returns of these