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The month that was:
December was a disappointing end to a great year. The Dow went down by about 5%, the S&P 500 went down by about 2.4%, and the Nasdaq went up by about 0.6%. The Dow went down 10 days in a row, its longest losing streak since 1974.
On December 18th, the Fed cut interest rates for the third time this year, to between 4.25% and 4.5%. But the Fed also said that it now expects only two rate cuts in 2025 instead of four, because inflation is not coming down as fast as hoped. The S&P 500 fell almost 3% that day, and the Dow dropped more than 1,100 points. One bright spot was Broadcom, which went up about 43% in December because of strong demand for its AI chips, and became worth more than $1 trillion.
Looking back at 2024:
2024 was another great year for the stock market. The S&P 500 went up about 23%, the Nasdaq went up about 29%, and the Dow went up about 13%. Together with 2023, this was the S&P 500's best two years in a row since the late 1990s. The S&P 500 closed at a record high 57 times this year. Once again, the biggest gains came from giant tech companies. Nvidia went up about 171% and Palantir went up about 340%.
Here are the most important lessons I learned this year:
1. A high dividend is not enough. I lost money on Pfizer twice this year. Pfizer pays a big dividend, but its sales were shrinking. Companies with growing dividends are usually better investments than companies with high dividends that aren't growing, which is the same idea I wrote about in my very first newsletters.
2. A dividend cut is a warning sign. Celanese cut its dividend in November, and its stock kept falling after I bought it.
3. Taking profits is okay. I sold Trex in May for a gain of about 58%, and Snowflake this month for a gain of about 28%.
4. Don't panic. In August, the market had one of its scariest days in years, and it recovered within two weeks.
Buys -
Bought 5 IESC at $213.45
IES Holdings is an electrical contractor. It installs the wiring and electrical systems in buildings, including data centers that run AI. Building more data centers means more work for companies like IES. IES is very profitable and growing fast, so I started a new position.
Bought 5 MLI at $80.85
Mueller Industries makes copper pipes and fittings used in plumbing, heating, and air conditioning. It is a very well managed company with strong profits and almost no debt. I started a new position.
Bought 10 SAIC at $115.53
Science Applications International Corporation, or SAIC, provides technology services to the U.S. government, including the military and NASA. Government contracts usually last many years, which makes SAIC's business steady. I started a new position.
Bought 5 NVO at $86.00
Novo Nordisk makes Ozempic and Wegovy, the popular diabetes and weight loss drugs. On December 20th, Novo shared results from a test of its next weight loss drug that were not as good as investors hoped, and the stock fell about 20% in one day. Novo is still a leader in a very fast-growing market, so I used the drop to start a new position.
Sells -
Sold 9 SNOW at $164.50
I bought Snowflake last month at $128.70, and it jumped after strong earnings. I sold my shares for a profit of about 28%.
Sold 15 PII at $57.50
Polaris kept going down because people are buying fewer off-road vehicles and boats. I sold my shares for a loss of about 29%. This was my biggest loss of the year.
Sold 24 PINS at $29.86
Pinterest never recovered from its weak forecast in November, and I sold my shares for a loss of about 13%.
Sold 10 SWK at $79.47
SWK has not recovered, and I sold some of my shares for a loss of about 9%.
Sold 40 NKE at $74.95
Sold 12 TREX at $71.05
Sold 4 CROX at $107.05
I also sold my Nike and Trex shares to raise cash, and I sold my Crocs shares for a small profit after only a few weeks.
Buys and Sells -
Bought 3 HSY at $174.72
Sold 15 HSY at $175.62
On December 9th, there were reports that Mondelez, the company that makes Oreos, wanted to buy Hershey, and Hershey's stock jumped. I sold some shares into the jump, bought a few back two days later, and sold more at the end of the month. Overall, I sold 15 shares for a loss of about 7%.
Bought 1 CE at $74.16
Sold 6 CE at $70.97
Celanese kept going down after its dividend cut. I sold all of my shares for a loss of about 20%.
Bought 5 MU at $86.74
Sold 15 MU at $84.33
Micron reported earnings on December 18th and gave a weak forecast, because sales of memory chips for regular computers and phones are slowing down. The stock fell about 16% the next day. I sold my shares for a loss of about 8%.
Bought 5 DG at $74.36
Sold 5 DG at $75.46
Bought 1 KLAC at $633.13
Sold 1 KLAC at $628.00
Bought 5 LRCX at $71.77
Sold 5 LRCX at $71.66
Bought 3 UBER at $61.57
Sold 3 UBER at $61.06
I also made a few short-term trades in Dollar General, two chip equipment companies called KLA and Lam Research, and Uber. These trades ended with almost no profit or loss. I am still learning that short-term trades take a lot of effort for very little reward.
Thanks for reading my newsletter, and Happy New Year!