February 21, 2024

The Appetizer

“Look, it was a bad error, and that’s on me.”

• Lyft CEO David Risher took the blame for a clerical error that misstated the company’s margins in its Q4 earnings release

Now, on to the numbers. Drum roll, please …

• 16.1 million: The estimated number of workers who called out “sick” the day after the football game.
• ~2/3: The proportion of white-collar workers who use generative AI at least once a week that said their productivity has improved as a result, according to a November 2023 survey.
• 3,667 points: The NCAA Division I all-time basketball record for points held by Pete Maravich, unbroken for five decades. Iowa guard Caitlin Clark recently became the all-time leader in NCAA Division I women’s basketball history (3,569 points) and is closing in on this historic record!
• 80%: The increase in total wealth of Americans under 40 between the first quarter of 2019 and the third quarter of 2023. The biggest driver of the gains was stocks, according to the study.

Dig In
Unpacking the Magnificence of the Magnificent Seven

Parents often claim they don’t play favorites among their children, but let’s face it, every parent secretly does. Enter the Magnificent Seven (M7) – not the movie with Denzel Washington – but a group of stocks that has contributed more than half of the S&P 500’s 32% rally since the start of 2023. By M7, we are referring to Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia, and Tesla.

So what makes them “magnificent”? One could argue it’s their earnings power compared to the other 493 stocks in the S&P 500. For example, earnings for the M7 grew 32.5% in 2023 while the other 493 companies saw earnings fall 3.7%.

What’s driving earnings? Artificial intelligence (AI) and the demand for AI services as it gets adopted across many industries, not just technology.

So the $64,000 question: Are valuations expensive? Based on a price-to-earnings (P/E) multiple, you can’t deny that these M7 stocks trade at a premium to the rest of the market. But when you adjust for earning growth, a ratio we finance nerds call price-to-earnings-to-growth (PEG) ratio, valuations still look reasonable.

The bottom line is there is a long runway for growth, as we are just at the beginning of a new era and AI is emerging as the next transformative force.

Weekly Specials

U.S. stocks took a dip last week as January’s inflation report surprised, putting rate cut hopes on hold. The consumer price index (CPI) edged up 0.3%, mostly from housing costs. Fed futures now give lower odds for March and May cuts.

Australia, like Sweden, is embracing work-life balance with a “right to disconnect” bill, joining Kenya, Italy, and Portugal. Australians rank 4th globally in work-life balance, while the U.S. trails at 53rd. Time to unplug and enjoy that fika!

The 2024 Olympic medalists are in for a cool upgrade this year! The medals will contain an 18-gram iron piece from the Eiffel Tower itself. These pieces were swapped out during renovations and allow the medalists to bring home a piece of France. Leave it to the French to add a touch of romance to the Olympics.

Corporate Lunch

L’Oreal’s stock fell after the company’s profit came in lower than expected. Management will try to… make up… this lost ground next quarter.

Delta is opening its first “premium” airport lounge, starting with a 38,000-square-foot monster in JFK International Airport. You could fit 125 New York City apartments in there.

Tiger Woods launched an apparel partnership with TaylorMade. The logo is a tiger, but it should have been a goat.

Lyft made an oopsie that sent the stock flying up 60% for a short period of time. The company added an extra 0 to a profitability figure. The stock came back down faster than management could say “no take backs.”

Squishmallows is suing Build-A-Bear, claiming Build-A-Bear’s new “Skoosherz” line is a knock-off version of its own. Pillow Pets is sitting on the sideline waiting for the right moment to strike.

Sony cut its PlayStation 5 sales forecast to 21 million units after posting record revenue over the past quarter.

A woman from Seattle went viral after returning a couch to Costco after two and a half years. This sparked a debate online where some people are claiming she abused Costco’s refund policy by following the rules… whose side do you sit on?

Diversification does not ensure a profit or protect against loss.

Indices are unmanaged and are not available for direct investment.

The Standard & Poor’s 500 Index is a capitalization-weighted index that is generally considered representative of the U.S. large capitalization market.

Past performance is not indicative of future results.