Top 3 Stocks That Beat the Market Downturn (and the Bottom 3)

Stocks faced headwinds as resurgent inflation concerns, fueled by escalating oil prices, propelled Treasury yields upward – a challenging environment for the market. Early Thursday trading reflected this sentiment, with geopolitical uncertainty surrounding Iran pushing U.S. crude oil prices past the $100 per barrel mark, joining international benchmarks already trading above this critical threshold. In response, the 10-year Treasury yield climbed above 4.9%, reaching its highest point since November of the previous year. The technology-heavy Nasdaq Composite experienced the steepest decline, shedding approximately 1%, followed by more moderate losses in the S&P 500 and the Dow Jones Industrial Average.

Since our last monthly gathering on August 13th through the close of trading on Wednesday, the Dow Jones Industrial Average had led the downturn, registering a 2.7% decrease. The S&P 500 saw a 2.1% dip, while the Nasdaq Composite also fell 2.1%. As we approach our September meeting livestream, commencing at noon ET, let’s examine the key drivers behind the performance of our top and bottom three holdings over the preceding four weeks.

### Top Performers:

**Salesforce, up 21.3%**
Salesforce delivered robust revenue figures that surpassed expectations and provided an optimistic outlook, offering compelling evidence that Artificial Intelligence is a boon rather than a disruption to its core business. CEO Marc Benioff confidently dismissed concerns of a “SaaSpocalypse” as unfounded, highlighting that nine of the ten leading AI companies are now leveraging Salesforce products, with their spending on these solutions surging by an impressive 435% year-over-year. The enterprise software giant also unveiled Claudeforce, an integration that embeds Anthropic’s Claude AI directly within Salesforce customer data, empowering users to automate a wide array of tasks. After facing skepticism for much of the year regarding AI’s impact, Salesforce is finally demonstrating to investors that it is a significant beneficiary of this transformative technology. The company’s upcoming Dreamforce conference is anticipated to serve as a further catalyst for the stock, which still has ground to cover to reach its year-to-date breakeven point.

**Meta Platforms, up 9.9%**
The parent company of Facebook and Instagram has staged a remarkable comeback, transitioning from one of our weakest performers heading into the previous monthly meeting to a top contender ahead of Thursday’s session. This turnaround was largely driven by the resolution of two significant overhangs. Meta reached an $18 billion settlement with state attorneys general nationwide concerning allegations that its social media platforms negatively impact younger users. This agreement averts the risk of a protracted legal battle and potentially much larger financial penalties. Investors also exhibited growing optimism regarding Meta’s AI endeavors following the release of Muse Spark 1.3. This AI model garnered praise for its advanced capabilities and cost-effectiveness, strengthening the narrative that Meta can effectively compete with leading AI research labs. Following months of apprehension surrounding the company’s substantial investments in AI, these developments have provided investors with renewed conviction to re-evaluate the stock.

**Micron Technology, up 8.2%**
*Note: This gain is as of Wednesday’s closing price; the stock exhibits volatility and experienced a decline early Thursday.*
Micron’s stock has demonstrated a more positive trajectory since its recent slump, as the demand outlook for AI-specific memory continues its upward ascent. Bullish long-term projections from fellow Investing Club holdings, NVIDIA and Broadcom, have underscored the persistent supply constraints in the AI chip market. This translates into a positive read-through for high-bandwidth memory (HBM) and dynamic random-access memory (DRAM), areas where Micron holds significant market share. While the stock was impacted by the forced selling associated with the “Situational Awareness” unwind earlier this summer, recent industry data points have helped investors refocus on the company’s fundamental strengths. We maintain our conviction that tight memory supply coupled with surging AI demand provides Micron with considerable pricing power and a substantial runway for future growth. Consequently, we increased our position in the stock last week.

### Bottom Performers:

**TJX Companies, down 18%**
The off-price retail giant experienced a notable setback, stemming from an unusual execution miss within Marmaxx, its largest operating division. While overall revenue, earnings, and same-store sales exceeded expectations, comparable sales at the Marmaxx unit, which encompasses T.J. Maxx and Marshalls, grew by a mere 1% – falling significantly short of projections. Management acknowledged responsibility, citing an inadequate inventory mix. They have since implemented a corrective plan and reported initial signs of improvement. Several Wall Street firms downgraded the stock, expressing concerns about the potential for lingering issues and a possible erosion of TJX’s competitive edge. We utilized the market selloff to increase our stake in the company, though it is being closely monitored to ensure this misstep proves to be temporary.

**FedEx Freight, down 17.9%**
FedEx Freight continued to face challenges in the aftermath of its June spinoff. Concerns surrounding tariffs and elevated oil prices exerted pressure on transportation stocks. We do not believe this weakness reflects a fundamental deterioration in the company’s long-term prospects, and we are confident that FedEx Freight is well-positioned to capitalize on a recovery in the freight cycle. While there is an interest in acquiring additional shares of this less-than-truckload (LTL) leader, a preference exists to see oil prices stabilize first.

**Palo Alto Networks, down 15.4%**
The cybersecurity firm experienced a notable sell-off, despite reporting strong quarterly results that reinforced our thesis of AI being a significant tailwind for the cybersecurity sector. CEO Nikesh Arora highlighted that approximately $1 trillion of global cybersecurity infrastructure requires modernization to effectively address emerging AI-driven threats, underscoring the vast long-term opportunity. However, following the stock’s impressive prior run, investors opted to take profits following the earnings report. We were pleased to have tactically trimmed our position ahead of these results. The post-earnings decline presented an opportunity to signal a holding pattern, upgrading Palo Alto Networks’ rating from a “sell-on-strength 3” to a “hold 2.”

*The Charitable Trust portfolio is long AVGO, CRM, FDXF, META, MU, NVDA, PANW, TJX.*

As a subscriber to the CNBC Investing Club, you will receive a trade alert prior to any transaction made by the Club. Trades are executed in the charitable trust’s portfolio with a 45-minute delay after the alert is sent. If a stock has been discussed on CNBC television, a 72-hour waiting period is observed after the trade alert is issued before executing the trade.