In case you haven’t noticed, the S&P 500 (INDEXSP: .INX) index has quietly risen 25% since hitting its 52-week low in mid-October.
Meanwhile, the tech-heavy NASDAQ Composite Index (INDEXNASDAQ: .IXIC) is on the verge of hitting a 52-week high, clocking a near-35% gain over the same timeframe.
What happened, you may ask.
Well, as we said in the past, stock market rebounds often happen this way — when you least expect it.
That’s why, at the Smart All Stars Portfolio, we have never wavered from our stance that the US stock market is worth your time.
The portfolio continued to study the business behind the stock and commit to buying stocks every month.
Well, allow me to share three stock tales to whet your appetite.
ChatGPT and the rise of Generative AI
The emergence of ChatGPT has been heralded as the iPhone moment of artificial intelligence (AI) by Nvidia (NASDAQ: NVDA) CEO Jensen Huang.
Microsoft (NASDAQ: MSFT) has been one of the key beneficiaries, having partnered and invested in OpenAI back in 2019.
Today, the Redmond tech giant is enjoying its day in the sun.
The Smart All Stars Portfolio, too, has benefited from Microsoft’s stock price rise, clocking a return of 68%, excluding dividends.
Here’s the thing: the portfolio actually invested in shares back in May 2020, a little more than three years ago.
In terms of annualised returns, Microsoft has delivered almost 19% per year in capital gains, almost three times above the Straits Times Index’s (SGX: ^STI) long-term annual return of 6.5% per year.
Here’s another thing: we, along with many others in the tech world, didn’t foresee ChatGPT becoming as popular as it has become today.
Instead, what we always believed was that innovative companies have a knack for surprising on the upside, often delivering results that are beyond our imaginations.
The lesson here?
You don’t have to be perfect in every prediction.
But you can shift the odds to your side by investing in innovative companies and letting them work their magic.
The little tractor that could
Tractor Supply (NASDAQ: TSCO) is an abnormality in the US stock market.
The Brentwood-based company bills itself as the largest rural lifestyle retailer in the US, serving the needs of farmers, ranchers, gardeners, pet owners or simply those who enjoy living life out there.
Since making its debut in the Smart All Stars Portfolio in July 2020, Tractor Supply has generated 51% in capital gains or an annualised return of about 15.2% per year.
Not bad at all for a relatively unknown retailer.
Here’s the thing: Tractor Supply has been one of the unexpected beneficiaries of the pandemic, experiencing a surge in revenue and profits as people stayed home.
Buoyed by higher demand, the company doubled down, adding large garden centres around its existing store while tapping on its historical strengths in customer service and its loyal customer base numbering over 28 million members.
Members accounted for three-quarters of all its sales, an unappreciated source of recurring revenue.
Here’s another thing: we picked Tractor Supply back in April 2017 in our old service. The returns since then have been almost 250% or 22.6% per year.
It goes to show that winners have a knack for winning, and you don’t always have to search for the next big thing for your investment to be successful.
Meta’s Premature Obituary
Meta Platforms (NASDAQ: META) was a hot mess.
Last year, the social network company couldn’t get anything right, with users reportedly fleeing, the business suffering from the twin threat of TikTok and Apple’s (NASDAQ: AAPL) new user data framework.
Or at least, that’s what the financial press would have you believe.
At the Smart All Stars Portfolio, we never gave up on Mark Zuckerberg and his crew. As shares declined, we preferred to look at the facts and watch how the company responded.
To be fair, it was not always a comfortable ride.
Ultimately, we had the conviction to hold on to the shares.
We are glad we did so since shares are up over 208% since hitting its bottom in November 2022.
Mind you, our stance was not based on blind belief.
Our conviction was built having studied the business and its leaders since its initial public offering in 2012.
It’s over a decade’s worth of accumulated knowledge, demonstrated in our will to not give up easily on some of the best winners out there.
Get Smart: The eventual bull run
So, what should we learn from Meta’s sharp rebound?
Fickle investors give up too easily on a company when the news swirling around the business is uniformly bad. As Smart Investors, we did not shy away from the bad news and sought to find the truth amid the deafening noise from the horde of pessimists.
As time has shown, it was wrong to ignore Meta, just like it is wrong to ignore the US stock market today.
Now, we’re not predicting a massive bull run here.
But we are prepared for whatever happens because we’re staying invested, and have continued buying even when the rest have thrown in the towel.
We will benefit even more when stock markets decide to go on a bull run.
In time, we believe our steady discipline in buying stocks every month will turn out to be right. The best part about these simple moves is that they are accessible to any investor out there.
If you’re wondering about how you can leverage AI in your investment portfolio, and how it can boost your portfolio, good news! We just released an urgent Special Free Report to cover everything you need to know about AI and its implications for investors. Find out which listed companies are actively using AI to power their businesses and what you should do to prepare for the AI boom. Click here to download your free report now.
Disclosure: Chin Hui Leong owns shares of Apple, Meta, Microsoft and Tractor Supply.