The Wealth Boom & Stock Market Sentiment
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This is the weekly article and Pod/Video Show 44 – I am going to combine a bit of last weeks article and this weeks since I didn’t get a pod/show out.
The title is The Wealth Boom & Stock Market Sentiment – I’d like to share a few thoughts/views that may drive my playbook for 2025 here (it’s a working title!) with everyone this week.
There are two groups post-election as I see it; the groups who are talking about who spent what, what lists are released, etc – all valid views and not to be diminished, that’s the conversation I hear at the cigar shop the last few weeks where I spend time post-market/evenings (whether in PHX of SJU) to clear my mind and catch up on texts etc.
Then there is the group that is looking at what policy changes are coming, what sectors are going to be in play and how a Trump Presidency is likely to play out for global capital markets – that group is my email group of friends (money managers, ex analysts, current analysts) and what I can say is that group is excited – as am I, for what is to come with investing in equities not only next year but the next 4 years.
I only bring this observation up here because if you miss what is about to come then you’re missing a “fat pitch” – or maybe that’s just me projecting that I may miss it but none-the-less, it’s been interesting to see the two different categories of folks post election and their discussions.
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This article/show is not intended to be financial advice, please due your own due diligence. These views are opinions.
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This article/show is not intended to be financial advice and/or a stock-picking show. Please do your own DD, these are just my personal views.
Some photos from 2015 when me and my brother ventured out to trade our own money, I found them this week going through an old i-phone, what a journey!
Quote of The Week
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Mapping Out The Policy Picture
The first quarter will give us a view of what gets implemented as well as to see what comes of tariffs and reaction to them. Provided they go through, there is still an offset from them as corporate tax cuts are likely to be a big fundamental driver for corporations next year (esp. Small & mid caps).
- Regardless of who is in office the markets (at large) tend go trend higher but it’s the nuances in other sectors that matter, at least to me.
- Not really concerned with the broad-market for 2025
My views are really concerned more with:
- Small Caps (specific sectors more than others)
- The tax cuts
- Emerging markets
- Argentina
- The Wealth Effect
Small Caps Set to Perform
I want to target outperformance from the broad market and with small-caps beaten down the last 4 (even more) years it might be time for a shift.
Our L/S equity approach at the firm is Absolute Return – this allows us to look anywhere and everywhere for returns and Small Caps will be a theme for 2025.
- Tom Lee from Fundstrat sees small caps outperforming in the coming years
Companies in the Russell 2000 (which has been dead weight for years) generate nearly +90% of their sales in North America (source: Bloomberg) which means there’s a theme there brewing.
- The downside is that roughly 40% of companies in The Russell 2000 lost money over the last 12 months
What that means is there’s a lot of work to do on the research side to find the gems and build the portfolios out for net year.
Asset Managers Next 4-8 Years Will Boom
This is a tangible theme for me from both portfolio positions and from building our investment firm out. I wrote a piece two years ago called “Goodbye passive management” and I think that is still the case, especially given the resurgence of event-driven investing.
For me that means a few things:
- Select stocks in the wealth management and financial sector are going to be winners
- Plan to expand our firm and right now many who want to retire are selling their RIAs, that’s a big deal for what our plans are in adding the wealth management side of the business
This was sent to me from UBS
- Wealth creation is coming and it will need to be managed
- 500,000 new millionaires last year (CNBC)
- A great transfer of wealth is on the way – a positive for what we do in managing assets for clients but also in investing into certain publicly traded asset managers ($SCHW being one of them)
- According to UBS $83.5 trillion will be transferred the next 20-25 years
- This only continues with tax cuts, M&As and as more sell their small business in coming years but in a more favorable tax environment
This should lead to not only a boom in wealth management companies like $SCHW (my alma matter) and where we house part of our client portfolios for our SMA L/S equity model – but they are in the process of creating advisors with their own Financial Consultant academy.
NOV Global Energy Services
NOV Inc. is one the largest providers of equipment for oil and gas drilling for the offshore and land markets. Attractive valuation and expecting to be lifted by deregulation and corporate tax reform in 2025.
Some key notes.
- Cost reductions of $75mm last year helping this year
- +50% dividend increase
- Sale of $180mm asset in Q1
- $1B, 36-month share buyback plan
Final Word.
- Issue 46 Out Sunday
- Small Caps in Play Next Year
- Wealth Management & Schwab on my radar
Next Lesson
Patience Pays and Stock Market Sentiment
GXO Logistics and Stock Market Sentiment
Ready for Take Off or Jet Lagged?
About the Author
Daniel Bustamante is the founder, managing partner, and CIO of Bustamante Capital Management L.L.C., a multi-strategy investment management firm based in San Juan, Puerto Rico. He has over 10 years of experience in the financial industry, specializing in equities, futures, and event-driven trading strategies.
He is also the founder of TheLongVol.com, a blog and newsletter that shares his insights on his investing process, travel, and other private investments. He has been featured in Bloomberg, Arizona Business Journal, Business Insider, Yahoo! Finance, Forbes, Seeking Alpha, and other publications over his career on Wall Street.
