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Small Caps: A Kickoff, Not a Blowoff

For the past several months, small-caps have greatly outperformed large-caps.  Many observers have derided it as a “blow off” of excess that will soon reverse, but researchers at the Leuthold Group disagree.  Instead, they point out that similar periods of “extreme strength” have kicked off periods of multi-year leadership by small-caps.   The chart below, from The Leuthold Group, shows that in every one of the 7 prior instances of a 25% total-return differential between the 6‑month returns of the Russell 2000 small-cap index and the S&P 500 large-cap index, the dominance of the small-caps continued for another 2 to 10 years.  Thus, they argue that the surge in small-caps is more likely to be a “Kickoff” than a “Blow off”. Best regards,   Womack Investment Advisers, Inc.   WOMACK INVESTMENT ADVISERS, INC. Oklahoma / Main Office: 1366 E. 15th Street - Edmond, OK  73013 California Office: 4660 La Jolla Village Dr., Ste. 100 - San Diego, CA 92122 Phone (405) 340-1717 - Toll Free (877)
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Amazon's Web Services (AWS) Division Captures Nearly One-Third of the Entire Cloud Computing Market

Jeff Bezos announced he is stepping down as CEO of Amazon, and that his replacement will be Andy Jassy, currently CEO of Amazon’s Web Services (AWS) division.  Although all consumers know Amazon is THE behemoth in global e‑commerce, it would no doubt be shocking to most to learn that AWS is the biggest profit center of the entire company.   Amazon’s most recent numbers revealed 2020 revenue of $386 billion.  While AWS made up only 12% of that revenue number, AWS’ very comfortable profit margins meant it made up almost 60% of Amazon’s total operating profit!  Under Jassy’s leadership AWS has become the clear global market leader, having captured almost one-third of the entire cloud computing market, and is more than 50% larger than second place Azure from Microsoft. (Chart from chartr.co) ( Sources:   All index- and returns-data from Yahoo Finance; news from Reuters, Barron’s, Wall St. Journal, Bloomberg.com, ft.com, guggenheimpartners.com, zerohedge.com, ritholtz.com, markit.com, finan

Innovations Can Be Difficult To Value

  Throughout history, inventions and new ways of doing things have changed the world: The magnetic compass, which was invented in the 12 th century, helped people navigate the world. The printing press, which was invented in the 1400s, made it possible to mass produce books,  democratizing knowledge. Electricity and electric lights changed the rhythms of everyday life in the late 1800s. Currency, which was first used in the ninth century, eventually led to monetary systems, banking, and credit cards. It would have been difficult to understand or estimate the long-term value of these innovations. It’s possible some of today’s innovations could have similar impact. One is machine learning. Machine learning uses algorithms to turn a data set into a model that can improve our understanding of a topic. For example, machine learning is being applied to: Scientific research . Researchers at the Massachusetts Institute of Technology (MIT) “…have now developed a machine-learning algo

Flipside to The Market

  Way back, when radio disk jockeys played 45-rpm vinyl singles, the A-side of a disk was the song the record company was promoting and the other side – the flip side – held a song that sometimes had an equal or greater impact. For instance, the flip side of Queen’s We Are the Champions was We Will Rock You . When it comes to the economy and financial markets, flip sides can have significant impact, too. For example: Stock market performance . Last week, major stock indices in the United States – the Standard & Poor’s 500, the Dow Jones Industrial, and the Nasdaq Composite – finished at record highs. That was happy news for investors. The flip side : Concern that share prices may not be sustainable. “The long, long bull market since 2009 has finally matured into a fully-fledged epic bubble. Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior…this bubble will burst in due time…,” wrote asset manager Jeremy Gr

Apple Posts Its Biggest Quarter Ever

  Amidst all the drama and non-stop news coverage this week surrounding the war between the Reddit WallStreetBets crowd and several hedge funds over GameStop and a handful of other heavily-shorted stocks, Apple posted its biggest quarter ever – and hardly anyone noticed.  Apple reported it brought in $111 billion of revenue in the final quarter of 2020.  The Services business, which includes Apple Music, the App Store, Apple Pay, Apple TV, iCloud and more, was a bright spot for Apple, growing 24% year-over-year, but it was actually robust sales in China that really helped Apple's revenue over the top to its first-ever $100-billion-plus quarter. Best regards, Womack Investment Advisers, Inc.   WOMACK INVESTMENT ADVISERS, INC. Oklahoma / Main Office: 1366 E. 15th Street - Edmond, OK  73013  California Office: 4660 La Jolla Village Dr., Ste. 100 - San Diego, CA 92122 Phone (405) 340-1717 - Toll Free (877) 340-1717   Website:   www.womackadvisers.com

How Warren Buffett’s uphill battle against the S&P 500 is changing

    Warren Buffett during an interview with CNBC’s Becky Quick on February 24, 2020. It turned out to be another year during which the billionaire investor shied away from game-changing acquisitions in a pricey market even after a sudden market cash and as his company holds a massive cash balance. Gerald Miller | CNBC   Warren Buffett’s Berkshire Hathaway made some big purchases in 2020, but the biggest Buffett buy speaks to the big challenge the company will continue to face: there was nothing it could find at a better price than its own shares. Berkshire bought back more than $18 billion in its own shares last year, through October, almost twice as much as Buffett spent on his next biggest acquisition, the $10 billion natural gas assets transaction with Dominion Energy, which including the debt acquired, was the largest acquisition since 2016. Taken at his word — which he has earned — that he won’t do a share repurchase just to prop up the stock, the big buyback was a

There's a New Addition to the Airport Security Team

  Dogs may be some of the world’s most effective disease detectives. In January, before COVID-19 was known to have arrived on our shores, NPR wrote about the dogs’ ability to smell disease. The host of Medical Monday interviewed Maria Goodavage, author of Doctor Dogs: How Our Best Friends Are Becoming Our Best Medicine , who said:   “With ovarian cancer, there's not much great testing for early detection. I heard about these dogs at the University of Pennsylvania Veterinary Working Dog Center that are able to smell ovarian cancer. They're able to detect it as early as stage one. We're not even talking tumors here. They're able to detect ovarian cancer in one drop of plasma from a woman with ovarian cancer.” Doctor dogs also are being trained to detect the novel coronavirus. Reuters reported, “A study recently found dogs can identify infected individuals with 85 percent to 100 percent accuracy and rule out infection with 92 percent to 99 percent accuracy.” Airp