Sandbox Financial Partners

Interesting analysis by BofA Global Research on how Artificial Intelligence (“AI”) may drive margins in various industries over the next 5 years.

AI vs. margins. “AI may drive margin expansion for 23 of 25 industry groups.”

Ford (symbol: F) stock trades below the price it did in January 1994 ($11/share), +30 years ago. The S&P 500 is up 1,090 percent on a price basis over the same period.

The auto manufacturing sector is a tough industry to invest in, largely due to it’s capital intensive businesses where the majority of profits have been shifted to the service side of the business. There are always a few outliers like Tesla (symbol: TSLA) and Ferrari (symbol: RACE) but it’s been tough to be an investor in this sector, and more specifically Ford.

This is another example of how difficult picking individual stocks can be. For every Apple or Nvidia, there are plenty of names like Intel who were industry leaders and have not provided any returns for shareholders over the long-term.

You can see fortunes made or lost by having heavy concentration in a single stock. Owning a more diversified basket of stocks or an index has been more compelling over the long-term.

S&P 500 Index Heat Map thru August 31, 2024

The all stock index of 500 companies is +18.42% this year. If you look under the hood, there are many interesting stories.

Top 3 Performing Company Stocks:

⬆ Nvidia +141.05%
⬆ Vistra Corp +121.78%
⬆ Howmet Aerospace +78.60%

Worst 3 Performing Company Stocks:

⬇ Walgreens Boots Alliance - 64.57%
⬇ Intel Corp - 56.14%
⬇ Lululemon Athletica -49.25%

Happy Labor Day!

Let’s take a moment to celebrate the hard work and dedication of all workers who help build and sustain our communities. Enjoy a well-deserved day of rest and relaxation!

Intel trades today for the same price as it on January 31, 1997 ($20/share). The S&P is up 611 percent on a price basis over the same period.

This is another example of how difficult picking individual stocks can be. For every Apple or Nvidia, there are plenty of names like Intel who were industry leaders and have not provided any returns for shareholders over the last 27 years unless you perfectly timed your investments in and out.

Fortunes can be made or lost by having heavy concentration in a single stock. Owning a more diversified basket of stocks or an index fund has been more compelling for the long-term investors.

The Top 25 companies in the world by market capitalization (market cap), as of Aug. 19, 2024

From this dataset we can see that 20 of the top 25 companies are based in the United States.

Narrowing it down to trillion-dollar companies, all are American with the exception of Saudi Aramco, which happens to be the world’s most valuable oil company.

We can also see that there are two companies close to reaching the trillion-dollar milestone. First is Warren Buffett’s Berkshire Hathaway, which was valued at $967 billion as of Aug. 19, 2024. Second is Taiwan’s TSMC, the world’s largest contract chip manufacturer, meaning it produces chips for clients like Apple and Nvidia (these companies design chips but do not produce them on their own).

With Nvidia earnings tonight (Aug 28), let’s see if it can jump Apple to become the world’s most valuable company.

Source: Visual Capitalist

💡 You can make money or excuses, just not both.

For Cava, expectations will be high for the company’s Q2 earnings this afternoon (August 22).

Tune in with your your pita and tzatziki...

Cava has risen more than 150% since its IPO last June and is now worth some $11 billion, 2.6x what rival salad chain Sweetgreen is worth. That’s modest compared to fast-food giants like McDonald’s ($200 billion) or Yum! Brands ($39 billion), but it’s remarkable because Cava only has 323 stores to its name.

That values Cava at about $35 million per store!

Some investors have also been drawn to the tantalizing “Cava is the next Chipotle” narrative. Since its IPO in 2006, the Mexican Grill stock has delivered eye-popping returns of over 6,000%.

Source: Chartr & Sherwood News

The S&P 500 is on track for one of its best “election years” on record.

Source: All Star Charts

If you decide to invest in BRK.B, what are you really buying? 👀 🔎

For starters, Berkshire now has more cash than ever, ~ $277 billion at the end of Q2. Taking that at face value (assuming no holding company discounts), that’s roughly 30% of the company’s market value. So $292 of the $1,000 hypothetical investment in this example is just cash.

Next up is the company’s stock portfolio.

An updated 13F filing from last week reveals that — again assuming no conglomerate discount — it’s worth about $317 out of our $1,000.

That implies that the rest of the business, primarily Berkshire’s actual operating divisions, is worth the remainder, or some $391 in our example.

So if you’re buying Berkshire Hathaway’s stock then you’re getting exposure to: a bunch of iconic American stocks, some Japanese equities, cash, some railroads, insurance companies, and energy assets. Oh, and Dairy Queen and Duracell, which Berkshire also owns.

There’s even some technology investments… but that portion is shrinking with the recent news of trimming their highly appreciated position in Apple stock.

Source: Chartr / Sherwood News

As Uber and Lyft battle for profitability and market share, their stock prices have moved in two different directions.

Over the trailing 3 years, Uber has gained +53% while Lyft has declined -82% in value.

Investors have turned toUber, which is now a profitable company and more diversified than their largest competitor.

Uber has also gained “dictionary” status in a similar fashion to Google. This is a big deal with consumers when you become the go to name for a specific service.

There will ALWAYS be times of fear and panic in the stock market.

Short-term events may seem scary, but most of you are not investing for the short-term.

Do you have enough cash on hand (“reserves”)❓
Should you be buying when investments are on sale❓

These market environments are a good time to revisit your financial goals and time horizons. Be careful letting emotions dictate decisions for the future, today... this is why planning is so important.

Sandbox’s Blake Millard, CFA® was invited to join the Making Money Show with Charles Payne on Fox Business yesterday to share his perspectives on “surviving a bear attack.”

Blake outlines some of our thoughts and research on the current economic & market environment in “The Sandbox Daily.”

Read here 👇

What it's like to prepare for a tv hit also: my prep notes for Making Money with Charles Payne

The market may or may not be “too high” today...

If this has you worried, then your time horizon is almost certainly too short.

$1.50 HOTDOG 🌭

Costco hot dogs have cost $1.50 since the 1980s, despite inflation saying the price tag should be closer to $4.50 these days.

While most companies have been busy raising prices the last few years to squeeze extra revenue from their customers, Costco hasn’t blinked on its mainstay item.

would rather operate its hot dog business at a loss because it builds customer loyalty and brings customers in the door (in which people buy higher margin items).

After all, it’s membership business is the golden ticket, and it just raised the annual fee.

In a year where dozens of management teams have destroyed shareholder value based on management missteps, this C-Suite continues to best understand their customer base and execute its strategy.

Source: National Public Radio

Dreams without goals are just dreams. And ultimately, they fuel disappointment.

On the road to achieving your dreams, you must apply discipline, but more importantly, consistency.

Because without commitment you’ll never start, and without consistency you’ll never finish.

-Denzel Washington

Top 10 holdings in S&P 500 now represent 38.14%.

Over the past 35 years, the top 10 holdings have averaged a 20% weighting in the index.

Note that the S&P 500 index weightings are market cap based, or better said, the larger the company, the larger the weighting.

Leadership in the markets is coming from the largest companies in the world. The big, continue to get bigger.

🌟 NVDA’s Impact on the S&P 500: A Mid-Year Update 🌟

NVIDIA recently hit an all-time high and the stock’s influence on the S&P 500 is something to watch this year. Will continue to be a leading contributor in the second half of 2024?

As of June 30, 2024, NVIDIA accounted for ~ 6.70% of the S&P 500 Index.

YTD Performance:

➡ Nvidia +149.50%
➡ S&P 500 +14.48%
➡ S&P 500 (with out NVDA) +10.25%

Happy July 4th from Sandbox !!

❌ POLITICS AND INVESTING DON’T MIX ❌

It seems that every election cycle is labeled “the most important election ever.” It may or may not be, but there is one thing that both sides of the aisle share in common: It’s the belief that the opposition (from whichever side you stand) is sure to doom our country, the economy, and the stock market.

At least with regard to investing, this has never been the case. If anything, the opposite has been true, as the data shows that since 1949, investors have been MUCH better served staying invested — regardless of the party in power — than letting their politics dictate whether or not to participate in the market.

Do not forget that we are NOT investing in the government; we ARE investing in some of the greatest businesses in the world. And those businesses are run by incredibly capable management teams dedicated to making the best real-time decisions possible. My encouragement is to let them do what they do best.

As many of these types of charts and commentary suggest, one of the great risks to our financial plans is letting the “noise” distract us from what’s really important to achieving our long-term goals.

It’s just as the late Charlie Munger encouraged, “The big money is not in the buying and selling, but in the waiting.” Like all wisdom, I don’t expect this to change.

Credit: First Trust

Every pundit wants to be the one to “predict” what will happen next in the market. The media attempts to sensationalize every move in the market, which is why investors always feel the need to focus on what happens next.

Spoiler: It doesn’t matter.

What matters to your long-term plan is... what happens in the long run.

Focus on that, and you’ll be a better investor. 💰

One of the key themes for the stock market in 2024 has been the narrow leadership. One-third of S&P 500 index constituents are currently higher by 10% or more for the year.

Focusing at the top end, 8% of the index is returning 30% or more – that’s 40 stocks, not just the 7 being reported in mainstream media.

The current 8% share of S&P 500 index constituents returning 30% or more through June is roughly in line with the 10% historical average since 1990, implying 2024 is fairly typical of past years.

This leadership in 2024 actually sits right in the middle of returns if you look at the last 35 years. So while narrow leadership becomes a headline, take note that this is a “normal” market dynamic and stock market returns are typically concentrated in a smaller subset of companies/stocks.

Credit: FundStrat

When it comes to , the more certainty you seek in the near-term, the less comfort you are likely to have in the long-term.

In other words, there is no such thing as no risk, there’s only the question as to when you want that risk.

Now, or later?

Choose wisely...

“In investing, what is comfortable is rarely profitable.” - Rob Arnott

🌟 Happy Father’s Day to all the amazing dads out there! 🌟

Today, we celebrate the love, strength, and guidance you bring into our lives. Your unwavering support and endless sacrifices don’t go unnoticed. Here’s to the everyday heroes who show us what it means to be strong, kind, and loving.

Enjoy your special day, you deserve it!

The concentration of locked into low fixed-rate mortgages have softened the impact of higher rates...

🏠 ~60% of borrowers paying a mortgage rate of 4% or less.
🏠 ~95% of borrowers have interest rates below current market rates.

Furthermore, the share of homeowners without a or with a low remaining balance on their mortgage – both of which lower the financial disincentive to move – has increased meaningfully over the last decade.

This dynamic has resulted in fewer buyers and fewer sellers in both 2023 and 2024. For homeowners, the good news is an increase of equity (often substantial) but a very competitive environment for those looking to buy.

Welcome Ryan Knabusch, CPFA to Sandbox Financial Partners.

Ryan joins as a VP, Wealth Advisor and brings 10+ years of financial industry experience. He also holds the certification of Certified Plan Fiduciary Advisory (CPFA).

Ryan resides in Michigan and will continue working closely with his clients, creating personalized plans to achieve their financial goals.

The stock market is filled with individuals who know the price of everything, but the value of nothing.

-Philip Fisher

Prices are 20-30% higher than they were in 2020 — and, while has cooled to 3.4% as of the latest CPI report, that still means costs are rising.

The chart shows a few consumer categories and where prices sit today on a comparative basis. Price are all higher and the impact on the consumer and the economy are still TBD.

McDonald’s went so far as to comment directly on its own price rises, after videos of expensive Big Mac meals, including one for $18, went viral. McDonald’s says its prices are up 40% in the last 5 years, reflecting a broader rise in the cost of labor, paper, and food.

Source: Chartr

Clothing > AI Chips

12 Month Trailing Performance (05.29.2024)

$ANF = +543%
$NVDA = +196%

Both great performers but wow, just wow. 👀💸

If you’re expecting 2024, or any future year, to give you the average long-term return of the market, you’ll probably be disappointed.

Because, in the short term, the market may trade to extreme highs and lows.

But over the long-term, the average return of the market has been incredibly consistent. 📈

Investment Advice💡= Know your time horizon, invest accordingly and if you have long-term goals then invest with that mindset and you’ll be rewarded (and have much less emotional stress along the way).