Happy Independence Day! My favorite week of year. Summer weather, cookouts, fireworks, and my birthday. It’s nice to see everyone celebrating with me. I sincerely hope that you and your family are having a great holiday week.
We invest in order to protect our capital against reduced buying power caused by inflation. Investing in equities (the stock market) has been a good way over time to beat inflation. Many point out that their goal is earning independence to be able to retire and enjoy life.
Just don’t miss out on enjoying the journey. We spend a lot more time in the journey mode than we do when we reach the goal. Let’s dig into last month’s results.
Portfolio Update - June 2023
June was a very strong month for the equity markets with the NASDAQ having its best first six months in over 40 years, up 31.7%. The S&P is up 15.9% YTD and moved up 6.5% in June. The small-cap Russell 2000 Index finally received some love up 7.8% for the month but is only up 7.4% YTD. Is it time for the small-cap stocks to catch up with the large cap companies?
Another good metric to track market breadth is the number of new 52-week highs versus 52-week lows. On the final day of June, highs outnumbered lows 93 to 7 on the NYSE and the tally is 96 to 62 in the NASDAQ. This metric is showing a positive vibe.
Market Talk
We continue to hear about the divergence of a handful of large cap tech companies who are pulling the market higher even though the small and mid-cap had been struggling. However, the results for June could be that turning point as the small cap Russell 2000 beat the other indexes (7.8% to 6.5%). The chart below shows the YTD 2023 returns for the NASDAQ (yellow), the S&P 500 (blue), and the Russell 2000 (black).
The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing 96% of the investable U.S. equity market. It is constructed to provide a comprehensive, unbiased and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are included.
The Russell 2000 (ticker: RTY or the ETF: IWM) represents the small-cap companies defined as those ranked between 1,001 and 3,000. It is built as a comprehensive, unbiased small-cap barometer and is updated annually to ensure larger stocks do not distort the performance of the true small-cap opportunity set. Therefore, it has been described “…as the bottom 2,000 stocks of the Russell 3000.”
The market cap of these 2,000 stocks is about 7% of the largest 3,000 companies (in other words, the top 1,000 stocks represent 93%). The largest market cap in the 2000 index is ~$12B, the average is less than $3B, and the median is $927 million sized company.
Watch the performance of the Russell 2000 to check on the participation, or breadth, of the market. If small cap companies participate in the uptrend, it could signal a new bull market and not just a bullish correction in a bear market.
Climate Tech Company News
TSLA Tesla. In May, Ford was the first manufacturer to announce that their EV autos would be able to use the Tesla EV charging network. In June, this news was followed up by similar announcements by GM, Volvo, and Rivian (RIVN). Just like Beta vs VHS, the Tesla NACS port vs the CCS (Combined Charging System) port has been an ongoing discussion. However, with these announcements, an argument can be made that NACS has taken the lead to becoming the standard. [This news also impacts the future prospects of competing EV charging companies, EVGO and CHPT ChargePoint].
LCID Lucid Group. Disclosed in a SEC filing that the Public Investment Fund of Saudi Arabia bought 266M more shares in the company through a $1.8B private placement made by subsidiary Ayar Third Investment. The purchase was made on June 22 providing Lucid with the necessary capital to keep operations moving forward.
GGR Gogoro. India’s State of Maharashtra and Gogoro to Partner On ‘Ultra Mega Project’ to Manufacture and Deploy Smart Battery Infrastructure that Would Exceed $1.5 Billion Over Eight Years.
WBX Wallbox. Announces a retail partnership with Costco as it looks to go mainstream.
ENVX Enovix. The company received a purchase order to produce battery cells for the U.S. Army. ENVX stock price is up 189% since January 4th YTD.
The Russell 3000 is reconstituted in June of each year. We have seen many de-SPACed stocks struggle in the past year leading to several of these stocks falling from the top 3000 list during the June reconstitution. These include Aeye (LIDR), App Harvest (APPH), Canoo (GOEV), Cepton (CPTN), Faraday Future (FFIE), Heliogen (HLGN), Hyzon Motors (HYZN), Lightning Emotors (ZEV), Ouster (OUST), Sunlight Financial (SUNL), and XOS Trucks (XOS).
On the other hand, a handful of our clean energy stocks have performed well or come public in the past year and are now included in the Russell 3000 as of last month. The new additions include Dragon Fly (DFLI), EOS Energy (EOSE), Livewire (LVWR), and Navitas Semi (NVTS).
Analysts Upgrades & Downgrades
FREY Freyer. Morgan Stanley upgraded the stock to an Overweight rating after having it set at Equal-Weight on 6/29/23 with a price target of $13.
EOSE Eos Energy Enterprises. Downgraded to Neutral from Buy with a $4 price target, noting the stock's surge reflecting potential funding via a Department of Energy loan.
Green Edge Portfolios
Tesla is leading the charge by more than doubling its stock price through the first six months of the year, up 112.5% YTD. Many of our Climate Tech stocks are small cap companies which is why we watch the Russell 2000 performance. The basket of clean energy ETFs moved up 5.0% this month and is now in positive territory YTD at 3.2%. The equal-weighted universe was up 12.2% for the month while the top picks was gained only 4.4%. Top picks portfolio was hurt by the Tesla EV charging news as EVGO and CHPT lost ground.
Through the first half of the year, the top performers in the Top Picks portfolio (table on the left) include INDI, LAZR, and LICY. But look at a handful of the top performers in the larger universe. NVTS, EOSE, LVWR, and AMPS all up more than 100%. EVNX was down 45% on the second day of trading in 2023, but up 189% since then. EOSE and EVNX have been purchased in the last month to be included in the active portfolio.
When looking at the general categories of the Green Edge diversified portfolio which started on April 15th, the Innovator #1 (ex-SPAC) was up 14.5% for the month while the Deployment at Scale gained 10.4%. Assuming a portfolio mix of 30% / 30% / 15% / 15% / 10% for the five categories respectively, the Green Edge portfolio is beating the S&P 500 Index 8.0% to 7.6% since the mid-April beginning.
Cryptocurrency Update
The main story in crypto is that it is Bitcoin season. BTC moved up 12.0% in June while our crypto portfolio was only up 1.9%. ETH increased 3.2% and the average change in the other seven tokens were down 13%. A key metric is the Bitcoin dominance chart which shows BTC has increased its make-up of all crypto from about 47.5% at the beginning of June to over 52% by the end.
The big news is that two of the largest financial institutions, Blackrock and Fidelity, submitted applications for a Bitcoin ETF to the SEC. None have been approved yet, but the news gave Bitcoin some energy for the move up in June.
I recently became a “Leader” on Follow! — Follow allows you to mimic portfolios inspired by some of your favorite financial voices. This is an innovation that greatly changes the investing landscape because Follow’s investment advisor looks at the trades of the creators on the platform and creates portfolios inspired by their holdings and movements. You then have the option to automatically mimic their trades.
Check out Follow and find me there — CLICK HERE
Until next time,
Efficiently Yours,
D.T.