Market Moves

Stocks closed slightly higher in a trading session that featured slightly more selling than buying. The S&P 500 (SPX) and Nasdaq 100 (NDX) closed with a two-tenths percent increase, while the Dow Jones Industrial Average (DJX) and the Russell 2000 (RUT) managed half that amount.

These lackluster moves are a bit surprising considering two data points that came to light today. First, the results of the recent Black-Friday through Cyber-Monday weekend broke all time highs with a 20% increase over last year's totals. Second, unemployment claims came in well below the forecast to notch the third lowest reading in the past four years.

Reading these two data points, one might expect to see a healthy consumer-driven economy powering stocks higher on such news. To be sure, the picture over a longer time frame looks exactly like that. However the close-up view may tell a different story.

Consider the chart below, which compares the S&P 500 with an equal-weighted portfolio of the top five seasonal-hiring companies in 2019, including Target Corporation (TGT), United Parcel Service, Inc. (UPS), Macy's, Inc. (M), Kohls Corporation (KSS), and, Inc. (AMZN). Since August when these companies began hiring, investors have remained unimpressed as the share prices lag the broad market average by 10% in one quarter. Chart readers might be given to wonder if these companies may have over-recruited. 

Chart showing the performance of the top seasonal hiring companies vs. the market

Social Media Companies Maintain Battle for User Attention

2020 figures to be a wild and woolly election year, with the battle for political allegiance taking deliberate shape on the social media platforms first and foremost. With that in mind, it might be prudent for investors to consider which companies appear to be having the most success in that arena.

With Alphabet Inc. (GOOG) controlling YouTube and Microsoft Corporation (MSFT) controlling LinkedIn, the four companies shown in the chart below are worth comparing. If market valuation is any indication of such things, this chart declares Facebook, Inc. (FB) the winner and Twitter, Inc. (TWTR) the loser.

Chart showing the performance of social media battles

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A Highly Paid CEO may Hurt Shareholders

Being overconfident and accepting overly optimistic sales projections thus leading to problems with over-staffed payrolls is only one of the ways a CEO can mismanage a company's resources. Board members may understand that they take a risk when they agree to high compensation packages tied less to performance and stock price than simple salaries and bonuses, but shareholders seem to be even more aware of it.

Consider the following chart which compares the share performance of the companies that have the top ten highest-paid (not including stock and options) CEOs among publicly traded companies. This list includes J2 Global, Inc. (JCOM), Palo Alto Networks, Inc. (PANW), Discovery, Inc. (DISCA), The Estee Lauder Companies Inc. (EL), Tesla, Inc. (TSLA), T-Mobile US, Inc. (TMUS), The Walt Disney Company (DIS), PTC Inc. (PTC) and Oracle Corporation (ORCL) which has two entries on the list. To be sure these CEOs have had success most of us would dream of; however, while the average growth company has doubled in value over the past five years, these companies have lagged behind that performance.

Chart showing the performance of the companies with the highest-paid CEOs

The Bottom Line

Stocks inched higher on lackluster results despite great news from retail sales reports and reduced unemployment claims. Social media companies will battle for a stronger consumer base in the year to come, and companies with over-compensated CEOs may not perform so well if the past five years are any indication.

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