If your alma mater or favorite college team did not make the tournament on Selection Sunday, we’ve got another option for you!

Even if you don’t like or follow college basketball, we think you’ll enjoy what we pioneered and have put together.

My Portfolio Guide, LLC was the first investment firm to publish a March Madness investing bracket where we share our picks and match them up against each other.  We break down and assign each of the four “regions” with an asset class and then pick teams (stocks) that we think have the best chance at doing well relative to others. 

Not only is this “exercise” a way for us to share our ideas from a macro perspective, but it offers a fun platform to dig into a couple specific investments and themes we are following or excited about in the year ahead.

Click here or below to see or enlarge the entire bracket for 2024. 

Our Final Four Investing Bracket slots 48 positions against each other and we mainly want to show why we see one investment doing better than another over the course of the next year. One caveat to keep in mind is that while there are 48 total investments within our bracket, it does not mean we like them all; some are there for illustrative purposes or to discuss a certain theme playing out in the stock market. Lastly, the way these are initially “seeded” does not reflect our current confidence in them. For example, a #1 seeded investment could lose right out of the gate just as a #12 could potentially win it all. In other words, these investments (or “teams”) are ranked and seeded on a number of factors but one of the main drivers is how hot they recently performed within the past few months or recent year.

Large Cap

What you’ll find as part of this exercise and bracket we produce, is really a way of explaining some current market themes and ideas we like as well as some we think are either done or fizzling out. Last year we had ConocoPhillips (COP) coming out of the Large Cap region and winning it all. While it did not beat the S&P 500 it turned in a solid rolling 12-month return of +26%. It had to contend with two themes we picked that still remain in this years bracket (unlike COP). The advent of AI (Artificial Intelligence) and Cybersecurity stocks dominated and we still think they are here to stay but of course much frothier at these levels after some astonishing growth. The main theme you’ll see in this part of the bracket, as well as our overall winner, is that while AI and all the buzz around it is not done, there will be a broadening out of market leadership. We’re even starting to see some gradual cooling off from the proverbial “Magnificent Seven”. Hardly anyone has talked about Apple (AAPL) slowly bleeding -10% YTD or underperforming the S&P 500 by 19% over a rolling 12 month period. Market darling Nvidia (NVDA) continues its tear but eventually meets up with another tech and AI leader in juggernaut Microsoft (MSFT) and eventually gets knocked off (more on that later). We still like Energy this year and that is especially so with it being one of the most beaten down economic sectors from 2023. Speaking of sectors that have overheated, (Tech/AI) and ones that have lagged (Energy and Defense), you’ll see some early round matchups with a few newcomers to the Big Dance.

#5 seed Targa Resources (TRGP) knocks out #11 Charter Communications (CHTR). CHTR is dirt cheap right now and has a lot of promise but over the course of this year the nod goes to TRGP before it loses to NVDA. Targa may not win it all this year but watch for this Houston based company to be a winner over the next decade. Along with a strong balance sheet TRGP’s new natural gas processing plant in the Permian Basin is now fully operational and will also benefit from Western Europe being in the earlier stages of finding more LNG alternatives therefore boosting demand for natural gas. 

Another energy play in our Large Cap region comes from #9 EOG Resources (EOG), also based out of Houston.  Don’t let the fact that EOG came to be as a result from an Enron merger in back 1999…they’re not going under! EOG is poised to breakout and trades at bargain valuation of about nine times earnings (relative to the S&P at 23 times earnings and a touch under the overall energy sector of 12 times earnings). In our bracket EOG knocks out a newcomer and the only Healthcare stock in that of #7 Cencora (COR). If you want to see the prettiest chart ever, pull one up for COR over five years. That said, it loses early in round one simply due to us believing it’s close to full valuation and due for a breather. Lastly, lost in EOG’s wake is one of our favorite all-time core stocks in Costco (COST). Remember just because it loses early here does not mean you shouldn’t own this world class company. Without digging into COST specifics, just go there with the intent of buying toilet paper, water, or some peanuts and then ask yourself why you also left buying a tent, an outdoor furniture set and got your tires replaced while you were shopping!

Back to a beaten down sector that could see some revival is #8 Lockheed Martin (LMT) squaring off against Aerospace & Defense rival #10 Raytheon (RTX). While they both lose to the broad market for now with just buying the S&P 500 index (SPLG), these two long-term values will likely do well regardless of who wins the election come this November, or if and when we eventually see the long-awaited/overdue recession. 

Another new and hot “team” comes by way of  #6 Texas Roadhouse (TXRH) knocking out one of the other fading members of the Magnificent Seven in #12 Tesla (TSLA). If you’ve never eaten at a Texas Roadhouse, give it a try and see for yourself what’s cooking over there. TSLA, however, is not dead and if you liked it at $381/share you should be loving it in the $163/share level it trades at now. Did you know their new Cybertruck is believed to have a 2 million reservation count with up to a four year waitlist for some buyers on that model? This is simply a maturing company and we would not bet against them to be stuck on the side of the road forever.

In summation, you hopefully can see that part of our main theme in this region of the bracket is that fundamentals and valuations will start to matter again. Yes, we still have the AI behemoths of NVDA and MSFT emerging victorious, but you will see a broadening out of the recent stock market rally (led by less than seven major stocks) to the other 493 that make up the S&P 500 index. When, not if, we get a decent market correction this year, watch for this to play out further with a change in leadership.

What a nice segway into the asset class and winner of our entire bracket…

Small and Mid Cap

Every year there is a “Cinderella” team that makes some noise, knocks off one of the big boys and captures the nation’s heart. By nature it’s a college that is small and unknown like the Saint Peter’s University Peacocks out of Jersey City a couple years ago or a more known entity like San Diego State that found itself in the championship ultimately getting trounced by a larger repeat customer like UConn (sort of like our beloved TCU team in football that made a miracle run only to run into a Georgia powerhouse). 

With regard to investing and asset class leadership, what most people don’t know is that small and mid sized companies on the whole outperform their larger counterparts over the long-term. Large Cap has been the only show in town over the past 15 years for the most part, but would you be surprised to learn that their smaller rivals have won out over the past 20 to 30 years? We think that story is coming back… but with a slight twist.

Every year a smaller “mid major” college seems to make a run or upset a more established powerhouse. What’s more with our narrative this year is that unlike in basketball, the odds of a small company outperforming a larger one in the stock market, is actually higher this year and happens frequently.  While more volatile, Small and Mid Caps tend to bounce back the fastest after a bear market but also get trounced harder initially, which is why we’re overweight Small cap this year but with the twist being the style it’s in (value over growth).

We’ll start by diving right into not only our Small/Mid Cap region winner but also the overall champion in our 2024 bracket… #4 First Trust SMID Cap Rising Dividend Achievers ETF (SDVY). This exchange traded fund starts with the universe of US small and mid cap stocks but narrows them down to only include those that paid a dividend in the trailing 12-month period greater than the one, three, and five years prior. By virtue of this screening process the fund only has about an 8% exposure to Technology and is currently overweight Financials, Industrials, and Consumer Discretionary (29%, 26%, and 16% respectively). That’s exactly why we like it and if you’re of the opinion the market is overvalued, you’ll want to be positioned in something like this with an approximate price to earnings ratio of 11 times. 

Both overall #5 Small (SPSM) and #3 Mid Cap (SPMD) indexes lose to SDVY but also take out a few dark horses and new entrants along the way. The only returning player from last year’s bracket is #6 First Trust NASDAQ Cybersecurity ETF (CIBR) which has had a monster run since we first wrote about it. CIBR beat the S&P 500 last year (+39% to +32% over a rolling 12 months) and we still love it long-term. Our only concern (going back to the current richness of the market) is that it’s already had a nice run so in the short-term it’s due to rest a bit and loses to #2 Devon Energy (DVN). With Devon Energy you get an oil and gas company trading at only eight times earnings and yields a healthy 5.08% dividend. 

Speaking of another energy company that we’ve owned before in some portfolios is #7 EQT Corporation (EQT) and it’s recently been hit a bit which makes it somewhat appealing relative to where it was in 2023. In our bracket it beats out #9 Realty Income Corporation (O) but we don’t see either setting the world on fire in the next year; longer-term however, is a different story. One other company that is not on too many radars is tiny little #11 Terran Orbital (LLAP) which manufactures satellites for the aerospace and defense industry. Lockheed Martin was looking to acquire LLAP for just $1/share but we’re thinking this deal may not materialize whether by way of a corporate “poison pill” and perhaps (hopefully) a better offer from a different suitor. 

Another laggard that made all sorts of headlines in Maui last year was #12 Hawaiian Electric (HE). After the horrific fires and tragedy that struck the island, this utility company was punished from $43/share down to its current level in the $11/share range. Albeit a gamble, this is one of those stocks that is building a base and no further news on lawsuits have been circulating so we could see this coming back in a hurry at some point. Management has been making the right moves in suspending their dividend and once the dust settles, HE could be a bargain at these levels.

Two companies towards the bottom of the pile are #8 C.H. Robinson Worldwide (CHRW) and #10 Newmont Corporation (NEM). Each is down -23% and -26% so they’ve clearly limped into the tournament but have long-term promise. Neither is quite ready for any analyst upgrades but in the case of CHRW there will be an eventual recovery with a global trade rebound and benefits to their future bottom line from cost improvements to their operations after the pandemic. As for NEM, this gold miner has also cut its dividend and is trying to improve the balance sheet. The entire sector has not glittered like the actual metal it mines with gold hitting all-time highs while the mining stocks show a massive disconnect with that performance. Long story short, it’s too early to buy this company but we’re getting closer. 

Lastly, why is #1 seed Teradyne (TER) getting knocked out? This company manufactures industrial robots and automated test equipment for semiconductor, telecom, and industrial markets, but has some conflicting growth stories. Their growth projections were perhaps too lofty which is ultimately how the stock has been punished being down -16% over the past two years. We think this stock still has headwinds in front of it and would not touch it for the coming year but look to open a position if it dips back down in the mid $80/share range (currently trading at about $103/share).

International

Let’s now move on to other parts of the world… 

There is an old saying that when “America sneezes the rest of the world catches a cold” and we think that analogy is playing true to form. We actually see this more so with what has happened to #12 China (MCHI) and if there is one area that My Portfolio Guide, LLC missed the mark last year, it was here. While we absolutely nailed being bullish on the U.S. after a brutal 2022, the following year simply never materialized with China and how we thought coming out of the pandemic the second largest economy in the world join the party. Additionally, amounting to what we would call a potential value trap exists in #6 Emerging Markets (SPEM) as it’s still heavily weighted towards China at about 27% of the market. 

One emerging market that we do like, long-term especially, is #3 India (FLIN). Over the past 20 years India’s stock market has beat both its emerging market peers as well as the S&P 500 index. They have substantial headwinds right now though but are making the right moves to get back on track with the easing of regulatory burdens, creating tax incentives and rebates, and investing in infrastructure.

#8 Vietnam (VNM) and #10 Poland (EPOL) both get knocked out early by India this year with Vietnam still being perhaps too closely impacted by China’s woes. Two countries not “catching the China cold”, could be #5 Japan (EWJ) and #1 seed Greece (GREK). Greece handily outperformed a blazing US stock market and still has some value in it. We have Greece advancing in our bracket and could easily see it win it all but are taking a perhaps safer bet with #4 Mexico (EWW) landing in the Elite Eight. 

We threw in two individual companies #7 Shell (SHEL) doing battle with #9 Nestle (NSRGY) but will say as a wealth manager we now avoid whenever possible making bets on individual stocks in this area. Betting on the right asset class or area of the world is usually going to bode better for you and also avoids having a collection of stocks that one has to follow. Our last note on this region of the bracket comes by way of a political and cultural shift we may be seeing in real time right now. Watch closely for #2 Argentina (ARGT) as this country is going through massive change right now with newly elected president Javier Milei. He has sent to his Congress a series of packages that would radically transform the country. Since his election win ARGT has climbed considerably and while it will be volatile, as it always has been, if things turn around that country could see substantial growth and is much cheaper than our domestic stock choices here. 

Bonds and Alternatives

We’ll wrap up here with our last section because at this point you’re either in a coma or barely hanging on. The most boring but perhaps important region is here with Bonds and Alternatives. We opened last year by reminding readers that “defense wins championships” and while this often is true in so many sports, it’s the pitch that too many financial advisors wish to come through on but it’s simply easier said than done. 

Here’s the rub on this area of the bracket; on one hand, as a savvy and disciplined investor you should own something safe and boring to mitigate the drawdowns of what goes on with your equity allocations. Historically that has always been something like #11 seed Bonds (SPAB) with some of its counterparts like #10 Corporate Bonds (SPIB), shorter-term Treasury bond instruments as held in #8 (GOVT), or conversely going longer in maturity with #12 (SPTL). None of that worked out in 2022 with the worst bond market year in history, yet now we find ourselves with short-term treasuries yielding north of 5%. That’s bulletproof money…and one can make a case to park a decent portion of your allocation here while we figure out if this stock market is really going to burst or if the bulls are still dancing in 2024. 

Speaking of interest rates, we’ll hear from the Fed on March 20^th but all the tea leaves show another pause in rates being lowered. That’s a far cry from where we started the year with the market baking into the cake about six to seven rate cuts; watch as we maybe could only get a few. The theme for 2024 is not going to be higher rates but rather “higher for longer” as the powers to be try to wrangle down inflation concerns. Lastly, when will that first rate cut be? Current odds for the May 1^st meeting only have us at a 6.4% chance and the following meeting on June 12^th it finally gets us to north of a coin flip at 58.8% odds. Then we have the election coming and who knows how the levers will be pulled leading up to that part of our year…

Before we wrap up the winner of this region and Final Four candidate in #2 Gold (GLD), what’s been historically an anchor is the dollar with #6 US Dollar index (UUP). Even though gold has been hitting all-time highs, the trailer could be unhitched even further if the dollar helps out. Right now 2024 looks to be a year of diverging trends for the dollar and that also leads into another discussion of currencies, both old and new in that of crypto…

We go back to our call for investing in Gold last year, which we stuck to even through bouts of underperformance. Gold gave our portfolios the hedge we wanted it to with a 12% return over 12 rolling months but more importantly we reduced bonds over the past two years to buy that asset class and it’s paid off. Gold has returned +11% over two years versus the aggregate bond index of -10%! The following two paragraphs are exactly what we wrote last year and we’re not just being lazy in cutting and pasting them here, but rather the reason to own gold has not changed yet.

We’ve written many times before that while previously never accused of being “gold bugs”, over the past couple of years we’ve strategically built a position in the asset for a reason. We’ve historically actually been bearish of the shiny metal as it’s simply a non-yielding asset. Regurgitating some old verbiage is appropriate in this case… “Gold is traditionally a great hedge for inflation”, right? WRONG! This is a classic misnomer that experts yap about and we then cringe hearing the general investing public repeat it as investment scripture. Just because someone says something over and over doesn’t make it true!

For your knowledge there are several stretches of market history that counter traditional wisdom: From 1974 to 1980 gold increased +353% while inflation went up +67%. From 1980 to 2001 gold decreased -67% while inflation rose +126%. We’re just giving you a couple quick reference points but at best there is a weak connection if any at all between gold and inflation so tune out anyone who spouts this nonsense. All that said, there have been several reasons to hold it. We’ve advised a minimum of 5% in all portfolios with closer to 10% and even 25% in one portfolio allocation we manage. (the latter is with regard to the “Permanent Portfolio” strategy that we’ve written about and you can click here to read more if interested). 

Before we summarize this entire Final Four Investing Bracket, let us talk about what we don’t want to discuss but have to…Crypto currency, and specifically Bitcoin. This year we avoided covering some of the other crypto options out there (Dogecoin, Ethereum, Litecoin etc). If you are comfortable with swings of Bitcoin at $19k in 2017, $4k in 2018, $11k in 2019, $5k in 2020, $58k in 2021, $37k in 2022, $21k in 2023, and now $66k today…by all means hold it! The question is though…did you hold it through those wild swings and we’re pretty sure most of the public didn’t buy it under $10k. Sadly, this is definitely a speculative play and while it can be rewarding for those who miraculously timed one of those oscillations, the odds of a person getting it right again is miniscule. One last issue goes to how to buy it and actually getting your money back when you want it! If you’re in that latter camp consider buying one of the newly formed ETFs that mirror the price of Bitcoin like #1 seed Franklin Bitcoin ETF (EZBC). Just do us a favor and don’t take out a second mortgage on your house or dump your entire IRA Rollover into it; can we just compromise on 2% to 5% max of your Bond and Alternative allocation? 

Lastly, there are three other “alternatives” to stock and bonds that should be a part of a well designed portfolio to create a hedge allowing a portion of your portfolio to “zig when everything else zags”. In our opinion, one is ruled out due to what’s driven it higher the past year (simply being long stocks) and that is a Long/Short ETF (FTLS). Most funds like this hold the promise of doing better than the market but on up years they typically trail the S&P 500 and on down years they may beat it by a bit (if they’re nimble enough and made the right calls)…so leave them alone and save some fees! The other one is #5 Real Estate (USRT) which has had some obvious wild swings and historically done well but we believe it’s not worth adding to in 2024 more than just a small allocation for diversification purposes. Something that likely will hold up better than the stock market in a real storm is #9 IQ Hedge Multi-Strategy Tracker ETF (QAI) but we’d much rather allocate 5% to 7% in a diversified basket of commodities with #4 seeded First Trust Global Tactical Commodity Strategy Fund (FTGC). It will underperform the market over time but saved our bacon in years like 2022 when aside from gold, there was no safe place to hide or offset massive drawdowns.

Final Four Summary:

There’s a lot of calendar left in 2024. Part of why we run this exercise each year in March happens to luckily coincide with the NCAA tournament but one other reason is we avoid making too many predictions on New Year’s Day. All too many analysts have recency bias where it’s natural to place too much emphasis on what literally just happened the year prior. By this time of year we can see if themes from yesteryear are still playing out or if a new Cinderella has arrived to the Big Dance. 

For 2024, we actually hope we’re wrong but the AI trade may slow down at some point with the added and very likely pause in the Magnificent Seven. Shifting your allocation to new leadership in deeper valued stocks and countries is what this bracket is telling you to do. Let’s hope the likes of NVDA and MSFT keep rolling as the AI story is just evolving, but our Final Four champion (SDVY) will emerge as a more resilient play at some point in the future. 

We’ve been pounding the table for holding Gold for several years now starting with our first nibble at it in 2014. We then made a much more sizable allocation towards it in 2019 and one additional slice during the pandemic which has handsomely paid off buffering some of the volatility from not just stocks, but the “safe” part of your portfolio …which historically was Bonds. 

Our last Final Four candidate comes with India leading our international region but don’t be afraid to gain exposure to Mexico, Greece, and Argentina. 

The fun part of producing this article each year is that it allows us to share some of our thoughts, strategies, and the investment themes we believe will likely play out in the months ahead. It’s all done with the caveat that we may only own a handful of the 48 investments listed on our bracket. Truth be told…most experts who pick stocks are no more successful than you would be doing the same job! The real winners are the ones who are able to pick enough stocks in the right areas and maintain the proper asset allocation relative to their investment goals.

Obviously every tournament (in the case of March Madness) only has one final winner. With this exercise, however, we are able to build an intelligent portfolio that will have a number of “winners” along with some stinkers. As an investor you actually have the opportunity every year to own multiple “teams” in different “regions” (asset classes). 

Long story short, don’t fixate on the one stock that wins it all; take a look at the whole picture. 

Enjoy the rest of the tournament and check in with us next year to see if your portfolio beats this one!