Our theme of Capex Cycle Stocks – which includes heavy equipment makers, electrical systems suppliers, automation solutions providers, and semiconductor fabrication equipment players – has gained about 6% year-to-date, underperforming the broader S&P 500, which remains up by 10% over the same period. Within our theme, Lam Research
LRCX
Now, DE stock has shown strong gains of 35% from levels of $270 in early January 2021 to around $365 now, vs. an increase of about 10% for the S&P 500 over this roughly 3-year period. However, the increase in DE stock has been far from consistent. Returns for the stock were 27% in 2021, 25% in 2022, and -15% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 9% in 2023 – indicating that DE underperformed the S&P in 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Industrials sector including UNP, UPS, and HON, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could DE face a similar situation as it did in 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?
Support authors and subscribe to content
This is premium stuff. Subscribe to read the entire article.