The market has delivered a robust performance in the six weeks since our last CNBC Investing Club Monthly Meeting, with major indices like the S&P 500 and Nasdaq reaching new record highs. Through Tuesday’s close, the S&P 500 had climbed 6.7%, while the Nasdaq surged an impressive 10.6%. Despite a brief period of volatility earlier this month, influenced by geopolitical tensions impacting oil prices and bond yields, it has been an exceptionally favorable period for equity investors. Out of our 33 portfolio holdings, only nine experienced declines, while nine others posted double-digit gains, with one stock nearly doubling its value.
As we gear up for our upcoming May meeting livestream, scheduled for Wednesday at noon ET, let’s delve into the top and bottom performers from the past month and a half.
**Top Performers**
**Arm Holdings: Up 97.9%**
Wall Street continues to propel Arm Holdings to unprecedented heights, driven by escalating demand for its central processing units (CPUs). This surge is largely attributed to the burgeoning era of agentic artificial intelligence, where Arm’s CPU designs are proving exceptionally well-suited. Their cost-effectiveness, lower energy consumption, and ability to deliver rapid responses to complex queries make them ideal for running sophisticated AI models.
The recent quarterly earnings report from fellow portfolio holding Nvidia provided a significant catalyst. Arm shares experienced a substantial uplift following management’s announcement that Arm-based Vera CPUs, along with their Grace predecessors, are projected to generate $20 billion in revenue this year. This forecast is a significant boon for Arm’s lucrative royalty business. We initiated our position in Arm on April 20th, shortly after our last monthly meeting, at approximately $173. We strategically trimmed our holdings twice, adhering to our practice of realizing profits on parabolic price movements. Arm shares closed at a record $321 on Tuesday.
**CrowdStrike: Up 60.6%, Palo Alto Networks: Up 53.8%**
The cybersecurity sector has witnessed a remarkable turnaround, with both CrowdStrike and Palo Alto Networks demonstrating significant upward momentum. These stocks have consistently climbed in recent weeks as the market appears to be discounting the narrative that artificial intelligence poses a fundamental threat to the cybersecurity industry. A steady stream of price target increases from Wall Street analysts has bolstered confidence in these names. Last week alone saw a flurry of firms revising their targets higher for both CrowdStrike and Palo Alto Networks. We mirrored this sentiment on May 18th, raising our price target for CrowdStrike to $650 from $500 and for Palo Alto Networks to $255 from $200. We will be re-evaluating our positions after next week’s earnings reports, as both stocks have already surpassed these revised targets.
However, both CrowdStrike and Palo Alto Networks gave back some of their gains on Wednesday, trading lower in sympathy with their peer Zscaler. Zscaler’s stock was significantly impacted, dropping 30% following a weaker-than-expected guidance. While it’s understandable for investors to consider profit-taking on CrowdStrike and Palo Alto given their substantial rallies, Zscaler’s challenges appear to be more company-specific rather than an industry-wide indictment. CrowdStrike remains our preferred cybersecurity holding.
**Qunity Electronics: Up 25.3%**
Qunity, a key provider of materials essential for chip manufacturing and other electronics, delivered an exceptional earnings report that sent its stock soaring. We consider Qunity’s quarterly performance to be the standout within the entire semiconductor sector. Management raised its full-year guidance for both top and bottom lines, underscoring the company’s strong growth trajectory. We view Qunity as an under-the-radar play on the AI revolution, especially given its recent spin-off from Club holding DuPont late last year.
**Bottom Performers**
**Meta Platforms: Down 9.5%**
The bulk of Meta’s losses occurred in the wake of its late April quarterly earnings release. While the parent company of Facebook and Instagram exceeded top and bottom-line expectations, investors reacted negatively to management’s decision to further increase investments in generative AI. Meta reaffirmed its full-year total expense guidance but notably raised its capital expenditures outlook by $10 billion at the midpoint. The market’s aversion to Meta’s increased spending is exacerbated by its lack of a public cloud infrastructure, unlike its hyperscaler peers Amazon, Alphabet, and Microsoft. Despite this, it was still an impressive quarter for Meta, reporting its strongest revenue growth in five years. We believe the selling pressure was a short-sighted reaction.
**Home Depot: Down 7.9%**
This home improvement titan continues to face headwinds from persistently high mortgage rates. Our patience with this stock has yielded minimal rewards, and frankly, we regret our initial investment. Home Depot was envisioned as a beneficiary of potential interest rate cuts from the Federal Reserve, a scenario that has yet to materialize. With rising energy prices and elevated bond yields, the crucial question remains whether Federal Reserve Chairman Kevin Warsh will be able to accommodate President Trump’s desire for rate reductions. We did, however, find some solace in Home Depot achieving same-store sales growth parity with Lowe’s this quarter. Earlier this month, we reduced our price target on Home Depot to $360 from $420 following a rather uninspiring quarterly performance.
**Capital One: Down 7.1%**
A lackluster quarterly report in April led to a significant decline in Capital One’s stock price. We maintain our conviction in Capital One’s ongoing transformation narrative, primarily driven by its acquisition of Discover last year. However, the anticipated benefits from this substantial $35 billion deal are taking longer than initially projected to materialize. The broader weakness observed in the financial sector, fueled by concerns regarding consumer health and the overall economic outlook, has also contributed to the stock’s underperformance. It’s worth noting that not all financial institutions have struggled; our holding Goldman Sachs has seen its shares rise over 10% since our last monthly meeting, bolstered by its involvement in advising on what is expected to be the largest initial public offering in history, led by SpaceX.
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