Here are our 4 best stocks — and 4 worst stocks — of the first quarter
Traders work on the floor of the New York Stock Exchange during morning trading on March 22, 2023 in New York City.
Michael M. Santiago | Getty Images News | Getty Images
The S&P 500 concluded a topsy-turvy — yet winning — first quarter of 2023 on Friday, overcoming a shock to the U.S. banking system in March to rise around 7%. The tech-heavy Nasdaq Composite proved to be the real standout, soaring nearly 17%. The 30-stock Dow Jones Industrial Average, meanwhile, eked out a roughly 0.4% gain.
Stocks’ rip-roaring January eased in February, with all three major Wall Street indexes finishing lower in that month. Then came the failure of three U.S. banks within days of each other starting March 8, which spooked investors and further stoked recession fears. The S&P 500 briefly went negative for the year on March 15, a rough session defined by banking concerns spreading to Europe. But as the bank crisis stabilized over the past two weeks, the averages more than bounced back.
Here’s a look at the best and worst performers in the Club’s 36-stock portfolio for the first quarter, beginning with the top four gainers.
Tech stocks lead the way
Nvidia CEO Jensen Huang speaks at a press conference on Jan. 7, 2018.
MANDEL NGAN | AFP | Getty Images
Nvidia (NVDA) captured the first-quarter crown, soaring an astounding 90% over the three-month period. The chipmaker is not only the Club’s best-performing holding, but the biggest winner in the entire S&P 500.
- The driving force behind Nvidia’s move: artificial intelligence. The AI buzz sparked by ChatGPT in late 2022 intensified throughout the first quarter, so it’s no surprise that investors flocked toward the company whose technology — both on the hardware and software side — is at the heart of the trend.
- Nvidia’s fourth-quarter earnings, in late February, only enhanced its shine. It reported better-than-expected results along with strong forward guidance, including quarter-over-quarter growth fueled by its data center and gaming segments.
- The strength in data center captures the tangible impact AI adoption has for Nvidia. Investors also took solace in the fact the gaming inventory correction that plagued the company in recent quarters is largely in the rearview mirror at this point. That’s another important reason why Nvidia’s stock did so well.
Nvidia’s stock performance year to date.
Meta Platforms (META) finished in second place in both the Club’s portfolio and the S&P 500 overall, climbing 76.1%.
- CEO Mark Zuckerberg dubbed 2023 the “year of efficiency” for the Instagram and Facebook parent. So far, management’s actions have lived up to the billing. Meta in March announced plans to cut 10,000 jobs, on top of 11,000-plus layoffs disclosed in November.
- Crucially, the social media giant also lowered its 2023 expense outlook for the second time this year. It now stands between $86 billion to $92 billion, down from the $89 billion-to-$95 billion range issued in February.
- Meta’s initial 2023 expense guidance of $96 billion and $101 billion flabbergasted Wall Street in late October, causing a huge sell-off in the already downtrodden stock. Now, investors are thrilled that Zuckerberg and Co. got serious about better aligned expenses with slower revenue growth.
Meta’s stock performance year to date.
Advanced Micro Devices (AMD) had the third-best performance in the first quarter, with shares advancing just over 51.3%.
- On Jan. 31, AMD CEO Lisa Su called the bottom in the chipmaker’s beleaguered PC business, saying the first quarter should be the trough with growth returning in the second quarter and into the rest of the year. That important statement gave investors confidence the chip inventory glut that crushed the company — and industry peers alike — last year was nearing an end.
- All signs also continue to point to AMD taking share from chief rival Intel (INTC) in the data center processor market. Su said AMD expects more share growth to occur in the third and fourth quarters, along with an overall improvement in the data center market.
- AMD also is seen as another winner in AI adoption, which has helped lift sentiment around the stock in the first quarter. In the second half of this year, AMD is expected to launch its next-generation supercomputer processor, which can be used for large language model applications. (ChatGPT is one example of a large language model, though it was trained on a Microsoft-built supercomputer that used Nvidia chips).
Advanced Micro Device’s stock performance year to date.
Checking in fourth was Salesforce (CRM), which saw its stock price climb 50.7% in the first quarter.
- The enterprise software maker’s stellar earnings report and guidance March 1 cemented investors’ warming attitude toward the company. Salesforce surged 11.5% the following day, one of its best single-session gains in a decade, because it was clear significant profitability improvements were underway.
- Salesforce shares were up more than 20% year to date before that earnings print, amid a broader rotation into the tech stocks that struggled in 2022, and on hopes that the five activist investors with stakes in the company could bring about margin expansion. The actual report confirmed CEO Marc Benioff is delivering on what investors care about — becoming more profitable and managing dilution with an enhanced buyback.
- Salesforce expects an adjusting operating margin of 27% in fiscal 2024, much better than analysts’ 22.8% estimate. Its share repurchase authorization increased to $20 billion, doubling the $10 billion buyback program first announced last year.
Salesforce’s year to date stock performance.
What’s the common denominator among the winners? These four stocks were beaten up last year as the Federal Reserve got aggressive with interest-rate hikes, crushing stocks with premium valuations and causing slowdowns in each business due to economic uncertainty. But as the calendar turned, investors realized they were far too negative on these tech stocks and regained appreciation of their secular growth stories.
Within this group, there are some additional overlaps. Some are self-help stories, such as Meta and Salesforce. Both companies put their cost structures under the microscope and found ways to reduce expenses. Layoffs are never easy, but the two companies did what was necessary to fix their business models. Stocks of other companies that “took their medicine” have done well in 2023 too.
Others top performers are business-cycle related. For both semiconductors companies, inventory gluts in the industries they sell into punished those stocks in 2022. For AMD, it was PC chips, and for Nvidia it was gaming GPUs. The gluts were so severe that it forced both companies to take big charges on their inventory. But after a couple of quarters of working the excess inventory down, both AMD and Nvidia expect the first quarter to represent the trough of those respective businesses.
First quarter laggards
A Halliburton oil well fielder works on a well head at a fracking rig site January 27, 2016 near Stillwater, Oklahoma.
J. Pat Carter | Getty Images
Halliburton (HAL) shares fell 19.6% in the first quarter, making the oilfield services firm the Club’s worst-performing stock in the period.
- Halliburton’s weakness is tied to factors outside the company’s control — specifically, the roughly 6% decline in West Texas Intermediate crude prices in the first quarter. Keep in mind Halliburton shares also soared 55% in the fourth quarter, so the stock entered the new year vulnerable to profit taking.
- Fundamentally, Halliburton offered investors a lot to like in the first three months of the year. In late January, it raised its dividend by a third to $0.16 per share and announced the resumption of its stock buyback program. It also reported better-than-expected fourth quarter numbers and a robust full-year outlook, with CEO Jeff Miller saying customer spending is expected to grow by at least 15% in 2023. He also indicated Halliburton continues to have pricing power.
Halliburton’s stock performance year to date.
Devon Energy (DVN) was second from the bottom, with shares falling 17.7% in the first quarter.
- Similar to Halliburton, the overall oil market weighed on Devon’s stock price in period.
- But unlike Halliburton, Devon in February rankled investors with its fourth-quarter results and 2023 outlook, which featured higher-than-expected capital expenditures and lower-than-anticipated production projections. That’s a double whammy of disappointment.
Devon Energy’s stock performance year to date.
The third-worst performing Club stock in the first quarter was Johnson & Johnson (JNJ), which saw its stock price decline 12.3% over the three-month stretch.
- A broader rotation out of health-care stocks, one of 2022’s top sectors, contributed to Johnson & Johnson’s weakness in the first quarter. For context, the Club’s three other health stocks — Eli Lilly (LLY), Humana (HUM) and Danaher (DHR) — also ended the quarter in the red.
- However, concerns about J&J’s ongoing talc litigation resurfaced in the quarter following an unfavorable court ruling on the drugmaker’s strategy to resolve the claims. That ruling, handed down Jan. 30 by a U.S. appeals court, has proven to be an additional overhang on J&J shares.
- Despite the stock struggles, J&J’s most recent quarterly results, issued in late January, showed healthy growth and solid free cash flow generation.
Johnson & Johnson’s stock performance year to date.
Honeywell International (HON) rounds out our list as the fourth-worst performer in the first quarter, falling 10.8%.
- Honeywell’s strong 2022 did not extend to the first three months of this year. It didn’t take long for sentiment to sour on Honeywell, either. On Jan. 4, UBS double-downgraded the industrial conglomerate, taking its rating to sell from buy.
- It’s been tough sledding for the stock since, with Honeywell’s uninspiring fourth-quarter earnings print in early February unable to shake off the malaise. The company’s sizable aerospace unit remains especially well-positioned, but it’s not getting a ton of love from Wall Street.
- Compounding matters for Honeywell is an upcoming CEO transition, which was announced March 14. President and COO Vimal Kapur is set to replace Darius Adamczyk on June 1. Adamczyk will remain executive chairman.
Honeywell’s year to date stock performance.
What is the common denominator among the laggards? It’s pretty simple to see. These four stocks all outperformed the S&P 500 by a wide margin last year. The total return (including dividends) on Halliburton was 75% and Devon’s was 52%. Johnson & Johnson and Honeywell both delivered around 5% compared with the S&P 500’s total return of about minus 18%. As the old saying goes, one key to investing is buying low and selling high. That’s what the market did to a lot of stocks in the first quarter. It sold off what investors “hid in” last year to buy what got crushed and historically does better when there is light at the end of the Fed tightening cycle.
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Isuzu is excited to announce the development of all-new, zero-emission Isuzu class 6 & 7 F series trucks utilizing an Accelera by Cummins battery-electric powertrain for both the US and Canada. They’re so excited, in fact, that they’re announcing it two years ahead of time!
I don’t want to be too hard on Isuzu here. They have a long history of building bulletproof diesel engines and solid, dependable trucks that are so easy to drive that even novices can confidently wheel the (relatively) compact cabovers around tight urban cityscapes. Besides, it will basically look like a 2024 F series, above, but be electric.
That said, “Pictures of the truck will come at a later date. Any questions, please let me know,” makes it tough to share in Isuzu’s excitement. The official press release is short on specs, too, so while we know that the upcoming electric F series will be bowered by Accelera’s “next generation” lithium iron phosphate (LFP) battery technology, we don’t have any information about battery size, power, or expected range.
We do, however, have quotes – and I’ve included both of them for you. First this one …
With the start of production of our Isuzu class 5 N-Series EV coming this summer and with the future addition of the Isuzu battery electric class 6 & 7 truck, we will be able to provide zero emission solutions across our product line-up. This will also improve the breadth of our overall offerings providing customers the ability to choose the product and propulsion system that best fits their needs.
Shaun Skinner; Executive Officer, Isuzu Motors Limited
… and then this one ….
Partnership and collaboration is critical to supporting customers through the energy transition. Together with Isuzu, and our joint commitment to innovation, we will provide customers with safe, reliable zero-emissions solutions.
Amy Davis; President, Accelera by Cummins
… once that “later date” rolls around and we get some pictures and specs, we’ll let you know. In the meantime, Isuzu says it plans to have the new electric version of its F series truck available for customers by 2026. No pricing was given in the press release.
Elektrek’s Jo’s Take
2026, you might notice, is still two years away. I would think that’s more than enough time to put together some specs and a rendering or two.
At the very least, however, it seems like someone at Isuzu is getting on board with medium-duty EVs – and the collaboration with Cummins (once considered an arch-rival level competitor to the “Duramax” branded Isuzu diesels that appeared in GM’s pickups throughout the late 90s and early 00s) seems to imply that the company is open to exploring new ways to stay relevant in the rapidly changing commercial truck space. All of that feels like extremely positive news, but that’s just my opinion, what’s yours?
Scroll on down to the comments and let us know whether you think the Cummins/Isuzu collaboration is newsworthy on its own, or if we really could have held out for some more information.
SOURCE: ISUZU.
UPDATE: per an email received at 9:26AM CST 14MAY2024, I can expect to receive pictures of the truck, “later this year.” (Really.)
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According to credit card data, only about 2% of the Tesla owners who used Full Self-Driving in the free month trial ended up buying it after.
Starting in March, Tesla offered a month of free trial of its Full Self-Driving (FSD) package to all its owners in North America.
At the same time, the automaker slashed the cost of the package from $12,000 to $8,000 or $99 per month for the subscription model. Interestingly, that goes against what Elon Musk said. The CEO previously said that Tesla would keep increasing the price of the FSD package as it gets better.
Yet, Tesla slashed the price just as it released the new v12 version of the system, which is a significant step forward.
The automaker tried to increase the take rate of FSD with the new version by making more people try it with the free trial, and then tempting them to buy or subscribe to it with the price reduction.
However, some data indicates that Tesla wasn’t really successful with the strategy.
YipitData accessed credit card data from about 3,500 Tesla owners who participated in the trial and found that only 50 bought or subscribed to FSD after the trial (via moomoo):
According to YipitData’s latest figures, nearly 3,500 Tesla owners trialed the company’s Full Self-Driving (FSD) service over the past month. However, only about 50 of these trials converted into FSD subscriptions or purchases, translating to a conversion rate of just under 2% as of May 5th. The data reveals a cautious approach among Tesla drivers towards paying for subscriptions to its autonomous driving technology.
In order to improve the take rate, Elon Musk also asked Tesla employees who deliver cars to give a FSD demonstration with every delivery.
Electrek’s Take
3,500 owners is a limited dataset, but it’s the best we have right now and to be honest, 2% sounds about right to me.
Despite the recent price cut, it’s still a very expensive product and the value is not clear to most people.
As I previously stated, I’ve been impressed by v12, but it doesn’t necessarily make it useful. v12 limits the speed in many areas and still makes mistakes. I think that it has value on the highway by reducing your workload and allowing you to focus more on the road, but on city streets, it is more stressful than driving without it.
Therefore, I think most people see themselves better off with Autopilot for now.
Tesla still has some work to do prove itself with FSD and increase that take-rate.
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Environment
Stellantis, Leapmotor officially launch joint venture to sell Chinese EVs in Europe this fall
One week after reporting plans for a press event launching its new joint venture, Stellantis and Leapmotor have officially begun the new business venture together. The new JV, named “Leapmotor International,” will expand to sell Chinese EVs in Europe this fall, with additional markets to follow.
Today’s event is merely a confirmation of a launch we’ve been expecting for quite some time. Last fall, European automotive conglomerate Stellantis ($STLA) took a $1.6 billion stake in Chinese OEM Leapmotor.
In addition to gaining a 20% stake in Leapmotor, Stellantis’ investment also included forming a new joint venture in which Stellantis owns a 51% stake to sell the Chinese brand’s EVs in other markets. Europe had immediately been confirmed in the JV plans, but Stellantis CEO Carlos Tavares wouldn’t rule out the US as another possible option.
This past March, the new partners announced their joint venture had been approved after Stellantis gained regulatory approval in China to continue its stake.
Last week, we followed reports that CEOs from both Leapmotor and Stellantis were preparing a press event to officially launch the Leapmotor International joint venture and divulge more specific plans for where the latter will sell the former’s Chinese-made EVs around Europe. We now have our answer.
Leapmotor Intl. to bring Chinese EVs to Europe and beyond
Per a release from Stellantis today, Leapmotor International is officially open for business following a press conference in China attended by Carlos Tavares and Jiangming Zhu, the respective CEOs. The companies shared intentions to scale quickly to bolster the value of each brand internationally.
The joint venture is headquartered in Amsterdam, Netherlands, and led by former Stellantis China executive Tianshu Xin as CEO. Carlos Tavares shared his thoughts on the joint venture and the potential Chinese EVs from Leapmotor hold in markets throughout Europe:
The creation of Leapmotor International is a great step forward in helping address the urgent global warming issue with state-of-the-art BEV models that will compete with existing Chinese brands in key markets around the world. Leveraging our existing global presence, we will soon be able to offer our customers price competitive and tech-centric electric vehicles that will exceed their expectations. Under Tianshu Xin’s leadership, they have built a compelling worldwide commercial and industrial strategy to quickly ramp-up the sales distribution channels to support Leapmotor’s robust growth and create value for both partners.
The joint venture is already laying the groundwork in Europe to bring Leapmotor’s Chinese EVs to new markets, starting with the family-friendly C10 and the T03 compact urban commuter (both pictured above).
Stellantis said it will wield its existing sales channels in Europe to launch and distribute the Chinese EVs as early as September 2024, targeting these markets first: Belgium, France, Germany, Greece, Italy, the Netherlands, Portugal, Spain, and Romania. Stellantis expects to have at least 200 points of sale throughout these markets by year’s end and over 500 by 2026.
In addition to Europe, Stellantis shared plans also to begin selling Leapmotor’s Chinese EVs in other regions before the end of the year as well:
- The Middle East & Africa
- Turkey, Israel ,and French Overseas
- India & Asia Pacific
- Australia, New Zealand, Thailand, Malaysia, and India
- South America
- Brazil and Chile
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