12/14/25
S&P 500: 6827
Nasdaq: 23,195
10 Year Treasury: 4.1%
David R. Snyder, CFA
This year I have been short consumer cyclical (especially retailers), oil (other than refiners), and employment agencies along with other specific researched names and have been overweight in healthcare and technology as well as industrials. I closed out most of my shorts in energy in October and some discretionary in December. I have been adding some discretionary but still consider it a trade. I did buy a few of the dollar store names when they were depressed earlier this year and they have actually outperformed Walmart (WMT 112) and Costco (COST 874).
S&P 500 earnings are expected to grow about 15% or more in 2026 which has caused investors to be very bullish for 2026. However, when S&P 500 earnings grow 15% or more the stock market has a mixed record of performance. The S&P 500 had subpar or negative returns in 1984, 1994, 2002, 2011 and 2018 when S&P 500 earnings grew 15% or more.
My biggest out of consensus call is that tech stocks will not outperform the S&P 500 over the next 10 years or at least not be big outperformer. It is very rare for the best performing sector of one decade to be the best performing sector in the following decade. Tech has significantly outperformed since the fall of 2012 and especially since 2016.
My investing strategy is more value oriented but also buy growth stocks that are reasonably priced and buy higher priced growth stocks that fall out of favor on a tactical basis. Thus, I was able to buy Crowdstrike (CRWD 520) after its faulty software update caused its stock to drop in half and purchase Reddit (RDDT 238) when its stock also was halved as a result of fears that it would be vulnerable to losing traffic from Google and other AI search tools. But I really like stocks that have divisions with spinoff potential to recognize the full potential of the company’s parts. I purchased Western Digital (WDC 182) last fall and its’s spinoff Sandisk (SNDK 233) has soared 564% since its debut in February while WDC has increased 303%. I didn’t capture all of the gains as I sold in the early fall. Likewise, Expedia (EXPE 267) last year was getting no value for its Vrbo division even though Vrbo’s competitors such as Airbnb (ABNB 126) were valued very highly. EXPE has more than doubled since May of 2024 as this division was recognized. Natera (NTRA 231) in late 2022 was trading with a negative value for its most valuable division, its residual molecular disease unit. NTRA has soared over fivefold since then.
I also prefer value names that have low risk, high dividends and optionality. Thus Gilead (GILD 121) was trading in the $60’s and $70’s a couple of years ago with a stable 5% dividend yield and numerous shots on goal with its drug development pipeline. The stock has almost doubled. The same for IBM (IBM 312) which had a low P/E and a 5% dividend, with upside potential from its hybrid cloud and AI strategy as well its quantum computing division. The stock has more than doubled over the last two years. Now they all don’t work out as I have a loss in Teleflex (TFX 131) even though they just sold a division at a good price and the rest of the company is undervalued.
One of the most insane valuation discrepancies occurred earlier this year when Costco whose earnings growth will likely be high single digits or 10% at best over the next few years was trading with a 50 P/E while Johnson & Johnson (JNJ 206) with also a high single digit earnings per share growth profile was trading at a 14 P/E and a 3.5% dividend yield. JNJ ‘s main division, pharmaceuticals, has been one of the best drug companies fundamentally in the past, growing at high single digit rates and is expected to continue that growth through the rest of the decade. And JNJ is more recession proof than COST. JNJ has advanced 42% this year while COST has declined 5%.
Full Disclosure: I own several of the securities mentioned positively. None have been purchased within the last month. The opinions merely represent the opinion of the author as CIO of Journey 1 Advisors, LLC and intended to inform the readers about our investment philosophy and strategy. The contents of this report are based on sources believed to be reliable. It is not intended for circulation. It is not intended to offer investment advice, or to recommend the purchase or sale of any securities or investment product. Investment advice is only given after a client has signed an investment advisory agreement with Journey 1 Advisors, LLC and will be subject to the terms and conditions therein. Your decision to buy or sell a security should be based upon your personal investment objectives and should be made only after evaluating the stock’s expected performance and risk.