McGowanGroup Wealth Management
Q2 2024 Client Update
The 2024 Magic Carpet Ride So Far
The rewards for dedication to great high cash flow assets at bargain prices are coming to fruition in the portfolios. The Q1 equity rally to new highs corresponded to the Federal Reserve updated projections of potentially 3 interest rate cuts during 2024 along with an increase in economic growth projections.
The projected Fed Funds target rate for 2027 has been estimated at 2.6%, but these numbers can change. This figure represents the intention to consistently lower rates for the next 3 years. As the competing discount rate decreases, the net present value of future earnings increases corresponding to increased equity values so far in 2024.
Artificial Intelligence (AI) Supercycle?
Non-farm business sector labor productivity increased 3.2% in the fourth quarter of 2023, according to the U.S. Bureau of Labor Statistics, representing a significant improvement.
Recent productivity gains corresponded to profit gains during the 1990s driven by the Personal Computer (PC) revolution and internet adoption. For evidence that AI advances correspond to efficiency gains, productivity and profit reports should be closely watched.
Know What You Own
Energy Infrastructure
At this writing, the S&P Energy Select Sector Index has pulled ahead of the S&P 500 Index. The rally appears to have broadened from a focus on technology companies to other bargains.
At the end of 2023, Recurrent Advisors estimated that Energy Infrastructure companies are trading at about 6 times cash flow. Of that estimated 16%, 8% roughly represents current dividends and direct share buybacks of about 8%. The resulting increase in assets under control per share would equate to about 40% over a 5-year period in addition to the cash dividends.
Global High Yield
Our four primary high yield managers continue with gains after delivering an impressive 2023. The current yield, equally weighted is above 9%. While that is an impressive cash dividend, the estimated discount to par value under control per share, is over 10%. The resulting appreciation potential during declining interest rates could be quite impressive assuming bonds drift back towards par values.
Blue Chip Additions
The McGowanGroup Asset Management Investment Committee successfully added Nuclear assets, Utility assets, Pharmaceuticals, and AI related technology assets during 2023 dips. Our Next Steps? Financial market rallies provide the opportunity to raise tactical safety for future resilience especially as valuation targets are harvested.
Team Update Highlights
Financial Planning Models: Harrison Smith has evolved our planning process to include financial projection models to test portfolios with cash flows under multiple scenarios. The benefits include advanced decision making and allocation planning.
Tax Season Mastery: Vanessa Avila has already provided your CPA with the tax forms needed to file returns through our secure portal. If you have changed CPAs or have not yet provided us with their contact information, please let us know.
Headline Round Up
*Newly Listed DJT Trumps the Stock Market This Week!
*Cheeseburgers, French Fries, and Doughnuts? Krispy Kreme surges on announced McDonald’s partnership!
*Artificial Intelligence (AI) Superstars Get Million Dollar Compensation Packages as Competition Grows Fierce!
*Merck Spikes to All Time High on Latest Treatment Approval.
*North Texas Home Price Appreciation Lags National Index Year over Year at 2.89% for Dallas vs. 6.59% for 20 City Average.
*Wuhan China Computer Lab Allegedly a Front for Cyberattacks?
*2023 a Record Year for CEO Pay. How much?
*U.S. Justice Department Sues Apple for Exploiting Illegal Monopoly!
*FTC Lawsuit Against Albertson/Kroger Merger Claims Walmart is Not a Traditional Grocery Store?
*New Leadership at Boeing, But Has Stock Reached an Inflection Point?
Skid Row
*Electric Vehicle (EV) Slowdown While EV Startups Struggle and a Fisker Fire Sale?!
*Lucid Gets $1B from Saudi Arabia’s Public Investment Fund. Will Lucid last 6 months?
*Chinese EV Automaker BYD Set to Unleash Several Models Starting at $20,000 Worldwide Undercutting Industry.
*Grapevine, Texas Based Gamestop Plummets on Q4 Sales Drop.
Dow Jones Industrial Average Index (12/29/2023 – 03/28/2024)
– Courtesy of Bloomberg LP
Invesco QQQ Trust Series 1 (03/29/2021 – 03/28/2024)
– Courtesy of Bloomberg LP
Energy Select Sector SPDR Fund & SPDR Standard & Poor’s 500 Exchange Traded Fund Trust (12/29/2023 – 03/28/2024)
– Courtesy of Bloomberg LP
Gold Spot Price Per Ounce (03/29/2009 – 03/28/2024)
– Courtesy of Bloomberg LP
SPDR Standard & Poor’s 500 Exchange Traded Fund Trust (01/01/1993 – 12/31/1999)
– Courtesy of Bloomberg LP
NetWorth Radio’s Texas Business Leadership Series: Spencer McGowan Interviews Brad Olsen and Oliver Doolin from Recurrent Advisors in Houston!
Prior to co-founding Recurrent, Brad was most recently the lead MLP portfolio manager for BP Capital Fund Advisors (BPCFA). Under Brad’s leadership, MLP AUM more than doubled (excluding the impact of appreciation).
From 2011 to 2015, Brad led Midstream Research for Tudor, Pickering, Holt & Co. (TPH & Co.), where he was recognized as the top all-around stock picker in the US by the Financial Times in 2013, and the top energy stock picker in the US by Starmine in 2014. Under Olsen’s leadership, the TPH & Co. midstream team was recognized in the WSJ’s “Best on the Street” poll as well as by Institutional Investor Magazine.
Brad also has experience as an investment analyst at Eagle Global Advisors in Houston, where he was part of a 3-person team that grew midstream/MLP AUM from $300mm to over $1bn from 2008 through 2011. He has also worked in investment roles at Millennium International, a large global hedge fund, and Strome Investment Management, an energy-focused hedge fund based in Santa Monica, CA. He began his career in the UBS Investment Banking Global Energy Group in Houston.
Brad earned a BA in Philosophy, Political Science, and Slavic Studies from Rice University in Houston.
Brad resides in Houston with his wife and four children. Brad was nearly fluent in Russian, but is very rusty.
Client Portfolio Manager / Energy Specialist
Oliver has spent over a decade specializing in natural resources, oil & gas, and MLP institutional equity research, most recently at Heikkinen Energy Advisors in Houston. Prior to joining Heikkinen, Oliver served in both research and business development roles at energy-focused investment banks, including 6 years as a Vice President at Tudor, Pickering, Holt & Co (TPH) in Houston, where he specialized in exploration and production (E&P), oilfield services (OFS) and midstream MLP companies.
Oliver began his career as a research analyst covering E&P and Oilfield Service companies for both TPH and Howard Weil, respectively.
Oliver holds a BS with dual concentrations in Finance and Legal Studies (Tulane University) as well as an MS in Accounting from the A.B. Freeman School of Business at Tulane University.
Oliver, originally from south Louisiana, is an avid outdoorsmen and runner. He resides with his wife and two children in Houston.
Profit Report
1.Q1 2024 Best and Worst Performances in the Financial Markets!
2. The McGowanGroup Wealth Management’s (MGWM) solutions toolbox for astute client questions.
