hello everybody it’s Jeff and Ron here once again with another episode of the
sense of things and today we’re going to kick things off by talking a little bit about sector
performance in 2024 uh we’re going to talk a little bit about uh the next seven after
the the the mag seven um who who’s the next ones behind there that could kind
of potentially take leadership uh we’re going to talk about some PE Trends today and we’re
also going to talk about some Revenue supp Rises so stay tuned we’ll be right back in a
second hey everybody welcome to the show Ron how are you doing buddy good morning Jeff good
Casual Chat and Weather Talk
good good we are definitely in the heart of the winter that is for sure yeah I I was going to
say man you’re wearing a sweater it looks like so uh it’s it’s in the 30s here most of the mornings
and then by mid late uh morning uh it it starts to warm up but uh I was up in Sedona last weekend
and I think the wind chill the first night we were there was in the teens yeah yeah it felt like when
it’s warmer in Texas than Arizona this is not a good thing well don’t forget sedona’s up in the
mountains too but you know it’s kind of like uh ice needles going through your skin like you know
what I haven’t had that in three years I don’t miss it hey it’s a dry cold Ron come on I think
I know I said this in a podcast about a year ago people don’t understand that actually Phoenix has
Surfing ski shops nobody understands that they have lakes you could do a lot of water sports a
lot of people have pontoon boats and if you want skiing you just go two two and a half hours North
to the north yeah it’s not Colorado Utah skiing but you could go skiing it’s skiing and there’s
snow yeah and Flagstaff and stuff like that so I Flagstaff gets about 120 inches of snow a year
that’s two hours for me yeah we have no spot in Texas that has consistent snow I will tell
you that Dallas had some two weeks ago oh yeah I’m saying consistent snow I you know where you could
actually ski um skiing down a hill that’s full of rocks and stuff is not what I consider skiing so
well considering where you are in Texas because Texas is its own country on its own isn’t like
some kind of a rivalry do you guys even consider yourself in the same state it’s like LA and San
Francisco one is SoCal one is northcal they don’t even recognize each other yeah pretty much I mean
you know you have Texas you basically have four regions you have Dallas Fort Worth you have
Houston you have San Antonio and then you have Austin in the middle and the the scary thing is
over the years since I’ve lived here which is now going on 14 years San Antonio and Austin just keep
getting closer together and at some point in time I would expect that we become like this gigantic
super Metroplex area U because they’re they’re just getting closer on either side interesting
yeah you know the geographies around the US are pretty interesting yeah well and I mean you know
Texas I could drive from here in any direction and it would take me a minimum of seven hours to
get out of the state yeah well when I drove across country I didn’t get out of Texas one day I went
T Paso yeah that’s hilarious I know I hear you all right so let’s kick it off here uh you know I was
Sector Performance in 2024
rooting around and kind of doing some things and and uh this is a picture that I got to remember
2530 years ago I think this may be from the 30s or the 40s yep and this well actually you know what
it’s a little yeah it’s a little bit later that’s actually a 1967 Chevy pickup truck so it’s after
67 well I’m impressed that you would know that C10 baby okay all right maybe okay all right uh
but you know what it’s interesting I thought about this obviously whoever this person was
or whoever he works for um and I always love to look at things like this obviously if transported
tires before look at how these tires are stacked in the truck almost like a web yep so this way
you know these tires are going to fall out even probably the ones on the end there maybe a big
bump I don’t know but look how these things are stacked in there this has been done once or twice
before absolutely with no rope or anything like that to hold them in but here’s the crazy thing
uh you’re not lifting that car up on a jack until these tires come off that’s precisely correct so
I just gota feel like because on pickup trucks the spare tire is right under where he’s sitting there
and he ain’t getting that out which is GNA be a problem no and I just kind of feel like there are
some days you just kind of feel like this where you think you got everything managed you think
you got everything stacked up you think that you got everything organized and then all of a sudden
out of the blue you hit a nail you know just I had a feeling like this about a week ago and I
saw this picture and I don’t know why it’s kind of like going to the museum not I’m like I’m an AR
guy but you just stare at a picture and you’re just like yeah I I feel you brother I get it I
feel you I feel you so anyway I thought I’d share it I didn’t have any fun pop culture I
don’t think I could one up the pillow fighting championship from last no dude that was that’s
awesome I went and watched a couple of those and I still don’t get it but okay so you saw
so so you saw what the ferocity of fluff was all about yeah the the the master of disastrous pillow
fluff whatever yeah all right so did he go through those taglines again on some of the videos you saw
actually I watched the the championship and that’s where all like three of those ones you shared were
in there unbelievable all right well pharaoh of fluff the I hear you all right moving on to some
Market Trends and Predictions
good St serious stuff here so this was actually end of year we’ve shown this chart handful of
times throughout the 12 18 months this is as of the year end and I bring this up as part of my
thesis for 2025 and Beyond at least 2026 too you know you’re always looking for lagging uh sectors
and one of the amazing things is is that you know it’s been 14 years since utilities actually led
the way and typically if you take a look at really bad years right utilities may do well because
people are looking for safety here it is last year the S&P even though the majority of the move was
still by 10 stocks utilities outperform barely the tech sector and I think this is interesting
because you don’t see health care which is really my number one sector going into the next 18 to 24
months um you know it’s just underperformed um you know really uh three four times out of The Last
5 Years and I think we’re good to go there but but energy you know other than two two two good
years in a row energy is still in the bottom four for basically the last 15 years I don’t know if
anything stands out to you or what you’re you know and I think that’s interesting because everybody
thinks oh my God you know with President Trump coming in they’re going to reduce regulations and
drill baby drill and all that well look at like when he was in office the last time I mean it was
the worst performing sector and I think largely because we did so much to reduce uh the cost of
oil that it gets to the point where profitability goes away yeah yeah well not only that but um you
know with the recent sanctions to Russia oil has spiked in the last week correct but again
at the end of the day uh why I I have always had a tough time and I really don’t recommend
it for clients you invest in companies that are pegged to a commodity yeah you know it’s you know
Exon Chevron kico Phillips go oxidal P go right down the line of all those companies they may
have Rock Solid balance sheets but if oil goes down 10 bucks a barrel doesn’t matter how good
their balance sheets are yeah yeah well and I mean you know the other part of it is the way
I look at it and the way I’m playing the oil thing is okay what industries are going to benefit from
reduced oil you know industrial companies are going to do that I mean you know anything in
that world that makes that uses oil it’s going to go down you know cost of input’s going to go down
significantly um the scary thing is even in the health care sector it’s gonna help out immensely
so I I would be looking to the industries that could really benefit from all of this
and I don’t think utilities are going to benefit quite frankly I mean maybe lower cost input on
the the NAT gas side of it but you know Nat gas is only like 25% of our production or the our
uh electricity production in the utility space well don’t forget with the utilities a lot of
that is driven by the data centers and the AI or the anticipation of it so maybe they’re a
little ahead of their skis too but yeah kind of talking about market performance um you know we
were talking about the top seven stocks because in 2023 the top 10 stocks were responsible for 70% of
the S&P move you know here we are on the next seven and these are all recognizable companies
as far as how well they’ve done obviously broadcom was the tremendous winner last year following the
AI and everything else and even broadcom has been an aggregation of several chip companies over the
last I don’t know 10 years or so but you got Exon Mobile in there they’re the biggest in the world
and uh look at their performance they were only up 6.7% so you know I think this is just interesting
to look at it I quote unquote borrowed uh the this slide uh you he’s got to site your
sources but you know I think these type of this type of information is important for people to
understand well and interesting that yeah it it’s interesting I I didn’t think Burke B was anywhere
close to that Burkshire hathway was anywhere close to that size and it’s amazing how that company has
grown but also with h birkshire it’s also a litmus test the canary in the cold mine for the consumer
because of the aggregation of all those companies and who theyve and it actually has done pretty
good and one of the main reasons why as we’ve talked about dadum the consumer still spending
yeah absolutely gotcha okay so uh kind of going from one end to the other I I saw this and again
Bankruptcies and Economic Stress
I’m borrowing this slide and uh I thought this was interesting for uh this was the highest level last
year in 15 years highest amount of bankruptcies filed and I remember doing it in midye 2024 and in
midy year we were talking about the highest amount so far uh for six months in almost 20 years so it
slowed down a little bit in the second half but also 2010 that was coming out of the 2008 um and
2009 debacle yeah look we went through bankrupt big you know name bankruptcies last week and uh
this is something to keep an eye eye on no doubt about it uh you know nobody wishes or hopes for
this but you know what is this telling us yeah we’ll have to kind of keep an eye on it well
and I mean you saw Big Lots go out I mean which I I always considered kind of a crappy play I
mean honestly I’m not a big fan of it U every time we’ve gone in there we just kind of went in went
yeah and walked away but I mean I think that’s telling and if you look at the stock performance
of like the dollar stores and everything else um I think it’s telling that the bottom end of the
economy is just stressed beyond belief at this point you know it I don’t think it’s rolled up
yet into the middle class but certainly the the bottom end of the you know the earnings economy
is getting stressed massively and even dollar stores it’s not you know I think their margins
are getting compressed because of costs but uh you know I think their consumer it’s they’re getting
stretched too yeah absolutely so kind of looking at earnings I wanted to start with PE and I I
PE Trends and Revenue Surprises
love this chart that I borrowed again uh fa set always does a great job at you know consolidating
a lot of really good uh earnings information and we’re going to go through some of their slides but
basically there’s always a reversion to the mean yeah you take a look at where it was uh 10 years
ago and uh the PE Ratio uh basically uh was you can see the market was undervalued and eventually
the market came up to the PE through quote unquote multiple expansion then we hit covid and then you
know people didn’t believe that the market was undervalued the market just took off and pees
have constantly been on a chase ever since until 2022 and then at that point what we saw was the
market just took off after there so one of two things is going to happen or maybe one of maybe
both either the Market’s going to come down to the PE the PE is going to come up to the market
or they’re going to meet somewhere in the middle yeah obviously if you just take a look at history
there’s no way things can continue at the pace they are yeah and I mean I I think it’s I don’t
think the the Market’s going to come down to the PE I think there will be that blend in between but
you know I I the way I’m looking at things right now I mean you know everybody has this Rosy view
I I think we’re going to struggle a little bit in the beginnings of this year you know we got a lot
of we got a lot of you know excitement after the election but you know now reality hits a little
bit and the market has run so much that I think it’s going to be a bit of a struggle the beginning
of this year yeah I’ll try to find the chart but it was interesting kind of looking at stock
Almanac which always has you know great analytics for both of us they were talking about the first
quarter of a new presidential Administration is typically a down quarter yeah and we were looking
for a rocky first half anyway so we could stumble out of the gate and I think we’re going to know
more day one next week after the inauguration we shall see yeah and and on our next show that we do
actually I’m gonna talk about that a little bit of some of what I consider the market moving events
going into the inauguration so stay tuned for that next show yep and this is also a fact set Source
here I’m not going to go through all of this but I thought it was interesting if we just take a look
at the following revenue is growing slower than earnings and typically it’s the other way around
and this just stood out to me because everybody wants Topline growth but the most important thing
is earnings growth because that’s how you invest you’re not investing on on money that Revenue
you spend earnings that you make after it after expenses I I gotta I got to watch this because
this is a bit of a conundrum to me it doesn’t really connect the dots and make much sense
but you know already the you know the financials came out pretty good uh already this week we’ll
have to see where Tech and Manufacturing is but just thought I’d bring this up and then
that again riding the coiles of that this these are the revenue Surprises by sector and then I’m
going to do earnings and we just take a look here you know uh Consumer Staples this is interesting
again people people are spending they’re consuming in technology yeah but I mean you know Staples
okay you got to have toilet paper you got to have toothpaste and stuff like that so I mean it’s not
like discretionary they’re going out and buying just crazy stuff I mean this is stuff that you
have to have yeah and look and if you take a look right we were just talking about it energy you
know doesn’t show any type of potential Revenue surprise I know my health care is in there but
I’m looking at a second half of the year on Health Care utilities wait a minute wasn’t utilities the
number one sector last year and they’re showing a 0% chance of a revenue uh surprise I don’t know
just some of these things I really want to look at here I mean because even if you just kind of
take a look at um you know even on this side too uh they’re looking at a negative it just
doesn’t make much sense uh but then we just for our last slide here kind of on earning surprises
again you know we had the revenue and now we have the earnings and I just think this is just very
interesting you know over here on the right hand side you know look at that droing energy yeah well
I mean once again I mean you know everybody thinks oh well this is going to be a boon for the energy
business it will in some aspects but you know initially what you’re going to see and I think
some of the some of the stuff that going to happen on Monday I mean the president’s going to sign a
bunch of executive orders which I’m not a big fan of but I mean yes that’ll happen where it
kind of unleashes the energy sector but you know in the end that ends up pushing the price down and
that’s the part that they get to spend you know if you if you drop Revenue your earnings are going
to go down and and I I totally agree with that expectation and I know your gas prices in Texas
are pretty cheap it’s come down here is next to California Arizona is one of the highest in the
country and our gas has been down steadily over the last year so we’ll have to see what happens
but again energy also we have to see how the winter is because it’s not just gas it’s natural
gas it’s natural gas and everything else yeah and it seems like this year was a it it’s turning out
to be a much colder winter across the country I mean we’ve been pretty temperate here in Texas I
mean we’ve had you know it’s it’s cold it’s cool for us but I mean for the rest of the country they
probably be wearing shorts you know walking around because I mean we started the day at 37 we’ll be
at 68 I think by the end of the day so you know it’s it’s not been horrible this winter is what
I would say right next week supposed to be I gotcha well cool well thank you for all that
Conclusion and Subscription Reminder
Ron thanks for putting that together and folks we do these shows for you so if you uh want to
make sure that you don’t miss any of them make sure you subscribe to the channel and hit that
little button wherever you’re at and you will not miss any of these as they come out because
I’m guessing we’re probably going to be putting out a few more this year as we pivot around what’s
going on in the market so thanks a lot and we will see you guys back here the very next time