CWS Market Review – December 31, 2023
The 2023 investing year is on the books!
This was a good year for Wall Street. The stock market rode out the last of a long line of interest-rate hikes from the Federal Reserve. The labor market remained strong, and inflation appears to be fading. At least, for now.
The stock market did well in 2023, but returns were very uneven. This was an odd year. About 70% of the stocks in the S&P 500 lagged the index in 2023. Growth outpaced Value, and the large-cap tech sector did especially well. The Nasdaq gained more than 43%, and the Nasdaq 100 was up over 53%. All eyes seemed to be focused on the “Magnificent Seven” (AMZN, AAPL, GOOG, NVDA, META, MSFT and TSLA).
I’m pleased to say that the 2023 Buy List performed well, especially without holding any of the Mag 7. For the year, our Buy List gained 25.12%. Including dividends, we were up 26.58%. For the year, the S&P 500 gained 24.23%. Including dividends, the index was up 26.29%. That means we just slightly beat the stock market, but we did it with a lot less risk.
For the 18 years of the Buy List, the S&P 500 with dividends is up 447.04%, while our Buy List is up 573.30%.
In 2023, the Buy List had a “beta” of 0.9394.
Here’s a look at our Buy List versus the S&P 500 throughout the year (this doesn’t include dividends).
Trex was our top-performing stock last year, with a gain of 95.58%. FICO was our second-biggest winner, with a gain of 94.46%. FICO was our biggest winner in 2022, while TREX was #1 in 2020 and 2021.
Hershey was our biggest loser in 2023. The chocolatier lost 19.49%. Stepan was our worst stock for most of the year, but a late-year rally pushed it to a loss of only 11.19%.
Our new buys gave us a big lift in 2023. Celanese was up 51.97%, and Intuit rallied 60.59%. Middleby gained 9.91%, while Polaris lost 6.17% and Cencora gained 23.94%.
What about last year’s sells? It was a mixed bag. Zoetis gained 34.68% in 2023. That was followed by Sherwin-Williams at 32.42%. Ross Stores gained 19.23%. Church and Dwight was up 17.31%, and Reynolds Consumer Products lost 10.47%.
Trex and Stepan will leave us after four years on the Buy List. Danaher was a member for the last seven years, and it was an outstanding performer. During that time, Danaher nearly tripled for us, and that doesn’t include the Veralto spinoff.
I always strive to be as transparent as possible when discussing our track record. Here’s a breakdown of how our Buy List performed in 2023. For tracking purposes, I assume the Buy List is a $1 million portfolio and that all 25 stocks are equally weighted at the start of the year.
For Veralto, shareholders of Danaher got one share of VLTO for each three shares of DHR they owned.
Here’s the data behind the dividend-adjusted returns. I’ve listed each stock’s beginning price, ending price and dividend-adjusted starting price.
In the chart above, I used Danaher’s starting price adjusted for the VLTO spinoff. I didn’t include Veralto’s small dividend paid in December. In terms of our tracking portfolio, it was a negligible amount.
Now let’s turn to this year’s Buy List. Here’s what the portfolio looks like for this year.
It’s locked and sealed, and I can’t make any changes for 12 months.
Here are the five new buys with their starting Buy Below prices:
American Water Works ($140)
Amphenol ($110)
Farmer Mac ($200)
McGrath RentCorp ($130)
Rollins ($50)
The six sells are:
Carrier Global
Danaher
Middleby
Stepan
Trex
Veralto
In terms of market value, Thermo Fisher remains our biggest stock at $205 billion. Abbott Labs is second at $191 billion. Eleven of the 25 stocks have market values between $15 billion and $50 billion. Miller Industries is still our smallest stock at $484 million.
FICO and Fiserv are the only two stocks that don’t pay dividends.
Twenty-one of our 25 stocks are on the normal March/June/September/December reporting cycle. Intuit, SAIC and Heico are on the January/April/July/October cycle. FactSet is the only one that follows February/May/August/December.
This issue was dedicated to track-record info, but I’ll have more to say about our new buys and all the stocks on the 2024 Buy List in upcoming issues. The stock market will be closed on Monday, but the trading year starts bright and early on Tuesday morning. On Friday, we’ll get the December jobs report.
I want to wish everyone a happy, healthy and profitable new year!
– Eddy