Shesa's JANUARY 2025 Investment Blog

 By Shesa Nayak

Wishing all my blog readers a WONDERFUL NEW YEAR - 2025!! May this year bring joy, happiness and prosperity with your investment!!  

U.S. Stock Market Update 

We saw two consecutive years (2023, 2024) of great stock market. For 2024, NASDAQ soared 28.64%, S&P 500 was up 23.31% and DOW gained 12.88%. The new year started with a lackluster note but Friday, January 3, was a great day for the stock market. We may see further momentum starting Monday once institutional investors are back from vacation. However, let’s recap how did 2024 go. 

Recap of 2024: The stock market picked up starting January 17, 2024 till April early April with the hope that there will be several rate cuts by Federal Reserve. However, that optimism failed and re-inflation risk scared the investors causing market to slide till first week of August before picking up in the end of August. The month of September started on a bad note but reignited and rallied to end one of the best September for the stock market. Again, market  picked up and did slide before the election. Then came election, Donald Trump was elected as the 47th president of USA on November 5. Since then the Trump rally started and the market zoomed never seen in last 100 years. The presidential inauguration will take place on January 20 for Donald Trump to become 47th president. We saw some pullbacks in December  as the last four trading sessions were negative. Thus, the year ended in a negative note but overall the market was very good. So, the biggest question is “will the stock market lose grip in 2025?” -or- “Can Donald Trump’s 2.0 make the stock market great again?”. Well, I will share my views later.  

On Dec 18, The Federal Open Market Committee (FOMC) cut its overnight borrowing rate to a target range of 4.25%-4.5%, back to the level where it was in December 2022. The DOW was down for 10th day in a row, the longest decline since 1974. Just to remind the readers, earlier FED had cut 0.5% in September and 0.25% in November. The FED said they will cut two times in 2025 instead of four times they predicted in September. I am not surprised because FED has the history of making wrong forecasts and wrong decisions.

The most important question is, what is in the store for stock market in 2025? Can we see another good year for the stock market? Or we have to brace for the downfall? Well, I will share my thoughts but before that let’s take a glance at the stock market index.

	2024
Indexes	Open 1/2/24	Close TUE 12/30/24	Change in 2024	% Change in 2024
DOW	37,689.50	42,544.22	4,854.72	12.88
S&P 500	4,769.83	5,881.63	1,111.80	23.31
NASDAQ	15011.35	19,310.79	4,299.44	28.64
Russel 2000	2,012.75	2,230.16	217.41	10.80
SOX (Semi)	4,023.04	4,979.93	956.89	23.79

Economy News

• Interest Rate: 4.50 - 4.75%. 
• GDP: Q3: 3.1%; Annual GDP: 2.7%
• Inflation:   June: 2.7%
• Unemployment: 4.2%
• Retail Sales: Retail sales were up 0.7% in November 2024, above forecasts of 0.5%.
• PCE: 2.3% 
• Consumer Confidence: 74 in Dec
• U.S Crude Oil: $73.96 a barrel
• U.S Treasury Yield%: 2 yr: 4.28, 5 yr: 4.41, 10 yr: 4.60, 30 yr: 4.81. 
• US Mortgage Rate: The 30-year fixed 7.01% based on Bankrate.com

How should we design our Investment Framework?

I shared a list of stocks during my last investment meet. I am a growth investor, so my investment is more tuned toward technology stocks. One thing I wanted further emphasize is that AI trend should continue in 2025. However, I expect shift from chip to AI software (Cloud, Machine Learning, AI DB etc.). So, the investment should be tuned towards that. But every investor should  have their own investment framework based on the the following factors:

• What is the investment objective? What I want to achieve from investing? Setting the right expectation(s) is key.
• How much risk one can take
• How much money is in disposal for investing
• What is the job situation, 
• The liabilities near term and long term viz. kids education, marriage, family obligation etc.
• How much RISK one can take, and so on..

Based on the above question one should design his/her own investment framework based according to the comfort level. Always investment should be made based on our own research irrespective of who said, where we read, where we hear are all secondary. 

How the Year 2025 may come into play?

As I said in my opening remark we saw two wonderful years of BULL market. The question is, whether the market is running hot? Probably “yes” in some areas. However, we also know that we're not at a euphoric peak. There are some stocks which got really hot but overall we are certainly not in euphoric phase. Why so? Because the unemployment rate has ticked up higher to 4.2% and the Federal reserve bias toward interest rate cuts tells us that it's concerned about high rates choking the market. We also find that consumers spending has been good but not crazy like post-pandemic. The University of Michigan's consumer sentiment survey reveals that consumers are simply feeling "middle of the road" right now. So, we are at a healthy midpoint. And that's exactly what we want to see heading in 2025 which is good for the stock market. Here are some of the political changes which could potentially help the market to go further up.

• Positives
• Tax Cuts: Trump plans to cut the corporate Tax to 15% for companies manufacture in U.S otherwise Tax rate remains at 21%
• Deregulations: Reducing unnecessary rules and regulation will facilitate easy for business to operate and also reducing abundant administrative time and cost 
• Mergers & Accusations: One of the worst nightmare during Biden administration was that they made life miserable for the corporate world on mergers and acquisitions. We can expect the M&A could double in 2025.
• Wars may stop: Russia/Ukraine, Israel/Lebanon wars are expected to come to an end during Trump. If so, it should be helpful for economy due to reduced debt
• DOGE: The newly formed Department of Government Efficiency lead by Elon Musk and Vivek Ramasamy are expected to reduce government spending and increase government savings. With that said, politicians may not be easy to handle, so we have to see how DOGE act to succeed.
• Political stability: Trump 2.0 is anticipated to bring more political stability, hence  more investors confidence in the stock market unless cracks appear within republican party. As we know market likes certainty/stability.
• Better Earnings, Revenue and GDP in 2025: Analysts are expecting about 15% earnings, 5.8% Rev growth and about 3% GDP growth for 2025
• Negatives
• Tariff: Since Trump administration may impose tariff not only on China but also many other countries. Hence, the cost of goods may increase, particularly agricultural and industrial products and possibly higher inflation. 
• Tax Cut may increase inflation due to higher liquidity 
• Eradication of illegal immigrants may increase labor cost and thus inflation: pls note, in 2023 alone, illegal immigration cost U.S. taxpayers $150.7B (size of Ukraine’s economy).
• Less Rate Cuts: Fed may not cut rates as anticipated, if there will be re-inflation

Some prediction/speculation for 2025

I would not like to predict but I will say I can speculate based on my research. 

• Stock Market should continue to do well in 2025 due to the positives mentioned above. However, we should be prepared for lots of volatility during 2025.
• AI momentum should continue, but we may see shift from chip to AI Software services. AI has a long way to go but not necessarily the same AI stocks will do well. 
• Inflation may put dent on FED rate cuts. I expect the inflation should remain between 2-3%. FED has already reduced the rate cut expectations from 4 cuts to 2 cuts. 
• Expect Mergers/Accusations to double. Watch Biotech and Financial sector
• Small Cap and MidCap stock should do better because of Trump policy for make in America, strong dollar, deregulations etc., unless there is re-inflation. 
• Consumer Spending should continue due to higher consumer confidence and better economy
• Technology hiring may continue to struggle due to AI, watch for xAI 
• Expect some big IPOs in 2025. Elon Musk’s SpaceX may go public? It may be the biggest IPO in history with $350B valuation at this time. SPaceX shares are privately trading around $185. Databrics (cloud data platform), Strip (Digital Payment), StubHub (Tickets) etc. are also expected to go public.
• Watch out for Quantum Computing stocks - the next growth area. They were on fire in the later part of 2024 and may continue to do so, but there may be enormous volatility.
• Trump 2.0 may replicate Trump 1.0? Last time stock market has gone up from Nov 2016 till March 2017 then there were some consolidation during March, April and May 2017. I think it may play similar way this time as well. 
• Crypto may consolidate and then go up again but one must be extremely careful. These are extremely volatile. I would not put more than 2-3% of my portfolio.
• Oil may get further cheaper because Trump will allow much more drilling
• Stocks valuations are at the pick S&P 500 has P/E of 22+, but good stocks may remain expensive.
• Despite the expectations of good stock market, be prepared for higher volatility. NVDA, APPL and MSFT may cross $4T market cap and TSLA may go past $2T by end of 2025.
• Let’s not forget that we are still in BULL market. Since 1930, after better-than-usual gains in NOV/DEC, the S&P 500 has posted a median 3% gain the Q1 of next year. It has happened more than two-thirds of the time 
• I see this bull market shooting another leg higher through mid-summer 2025. Possibly similar to what we experienced in 2024. But I do NOT expect that market will up on a straight line. We may see some scary pullbacks now and then. 
• I am expecting about 15-20% growth for Nasdaq due to the positive factors that I indicated earlier. We may see further momentum in the market from this week as institutional investors and traders return from vacation. 

My Strategy for 2025

First of all, I do NOT know the future but I can just share my view. Secondly, these days market changes very fast, so these strategies may change depending on the market situation. 

• It’s better to remain invested as market should continue to rise. But we should continue to see volatility and pullbacks, big boys may play games, so mentally we should be prepared for any Flash Crash.
• Remember we can’t win on everything, but majority of gain comes from a handful of stocks. So, we need to strategize accordingly.
• Buy on dips. Buy strong stocks. Stay the course with the bull market. Trim on the up.
• Let’s NOT forget to hedge/insure our portfolio a little bit for the pullback or any scary move down, particularly now that market have gone up significantly
• Remember we may do everything right but still lose money because of non-controllable factors viz. unknown events, bad earnings, macroeconomic factors etc
• Not to act on panic rather always have some cash on sidelines to take advantage of volatility. Always remember to keep emotions under control (Greed & Fear) that drive Wall Street. Panic is never a strategy, coincidentally, but never be over confident!
• If situation changes, we MUST be able to quickly re-adjust our portfolio and change strategy. Not to keep holding and getting emotional.
• Long term investment is good strategy, but a Core vs. Trading Portfolio is better for good ROI - reinvest profit on stock with better potential
• Portfolio diversification into best stock in the strong sectors at the right time is extremely critical for better ROI. Risk taking and experienced investors can add small options , but it’s very risky!
• A time may come when the market euphoria may ultimately fade as the investors may get concerned about the new change, policies etc. etc. and market may pullback or get to a correction. So, be watchful!! 

A quick glance to my Personal Investment in 2024

In brief, I am happy the way my portfolio worked in 2024. I always see some scope to do better and cut down the mistakes. As I said during my last investment meet, stock market may do well but we may still lose because of some of the factors which is not our control. The last few trading sessions were not very favorable for the market and so also to my own portfolio. Having said that, I am glad to pick some good stocks and beat both S&P 500 and more importantly NASDAQ nicely! But learning never comes to an end and it's important to keep learning to beat the market, though we may not succeed always!

Some stocks performed very well for me in 2024

Tesla (TSLA) was the overall champion despite pullbacks at the end of the year. Broadcom (AVGO), Nvidia (NVDA), IONQ, META, SoundHound (SOUN), TQQQ, SOXL, Palantir (PLTR), Aurora (AUR), Riggeti Computing (RGTI), Salesforce (CRM), SMCI, FNGU, Zillow (Z), Apple (AAPL), Amazon (AMZN) and of course not to forget Carvana (CVNA). Some of the stocks above are not in my blog portfolio but they did exceedingly well. I did not add those because many could be highly volatile and risky and hence got cautious. Having said that, it was not a secret, most of these stocks were discussed in my Investment Meet and possibly in my WhatsApp group.  

Please note Palantir (PLTR) was the best performing stock of S&P 500 for 2024 and returned 340.5%, NVIDIA was number 3 in the rank with 171.2% return.

Some stocks(Worst Performers): Mostly all the green energy stocks were kind of disaster PLUG, Luminar (LAZR), Fisker. Others: SAVA, Micron (MU), Intel (INTC)

Some Growth stocks to watch for 2025

• Broadcom (AVGO)
• Tesla (TSLA)
• Nvidia (NVDA)
• Salesforce (CRM)
• Facebook (META)
• SuperMicro (SMCI)
• Snowflake (SNOW)
• Coinbase (COIN)
• MongoDB (MDB)
• Destiny Tech 100 (DXYZ)
• Zillow (Z)
• Redfin (RDFN)
• MicroSector Fang (FNGU)

Some of the Small Cap stocks that I am really looking into are indicated below. Many of these may have huge potential, These stocks have performed exceptionally well later last year but expected to continue to do well. However, these stock are extremely volatile. Hence, anyone can’t take volatility must avoid. Here is my preferred small cap stocks:

• IONQ Inc (IONQ)
• SoundHound (SOUN)
• Rigetti Computing (RGTI)
• Recursion Pharmaceutical (RXRX) => Included in my this month’s Blog portfolio.
• Aurora Innovation (AUR)
• Adaptive BioTech (ADPT)

Below small cap stocks did not do well in 2024 but I see huge potential if they succeed. More importantly  I like these stocks because they are trading at a very reasonable price:

• Enovix (ENVX): Company is going to provide further updates this month.
• QuantumScape (QS)

My final thoughts about 2025

There are many positives and negatives for this year 2025. The Street has already given a clear indications that it’s excited about the future. There are some euphoria in certain part of the stock market but it’s not overblown. The deregulation, tax cut for corporate America would be extremely positive for the economy coincidentally it may also cause some inflation. As a matter of fact, we may not see too many rate cuts. Let’s remember that risk increases proportionately as stock market increases. So, it’s always better to be careful and have some cash on the sidelines to take advantage of any pullback. What so ever it is, in the current era of investing, we should always be ready to deal with volatility. Too much of exuberance may be detrimental to the portfolio but not being invested could cause even bigger risks for investment. But let’s not forget, “how much we make is one thing, but how much we keep is the most important thing..”. When an investment does not work, the worst case is ZERO, but when it works how high the return goes is another important point. Market will become volatile now and then and hedging has to be part of the strategy. I am not a fortune teller but I will not be surprised to see another good year for stock market and NASDAQ to go past 7,000 points, another 15-20%. This is just my guess work, not a forecast. Identifying the good stocks, accumulating and trimming has to be part of the on-going strategy. Emotion is never a strategy. Because we do NOT know the unknowns. We must do our due diligence - knowledge and experience dealing with the stock market. The strategy that worked before may not work in 2025. Furthermore, it would be extremely important to change the strategy depending upon the stock market situation - adaptability and flexibility will be key to the success.  

S&P 500 Earnings projections for 2024-2025

Q4 2024 (projected): 7.5%, revenue growth of 4.7%

Q1 2025 (projected): 12.7%, revenue growth of 5.3%

Q2 2025 (projected): 11.9%, revenue growth of 5.5%

FY 2024 (projected): earnings 9.4%, Revenue growth: 5.1%

FY 2025 (projected): earnings 14.8%, Revenue growth: 5.7%

Valuation: The forward 12-month P/E ratio for the S&P 500 is 22.2. This P/E ratio is above the 5-year average of 19.6, and above the 10-year average 18.1.

Stock Market TOP sectors for 2025

Sector	YTD Performance in %age
Energy (this was worst performer last year)	1.95
Utilities	1.84
Communication Services	1.44
Information Technology	1.42
Consumer Discretionary	1.13
Healthcare	1.0
Materials (Worst)	-1.11

Please note that none of the sector is red Year to Date. You can click below link to view complete sectorial performances:

https://www.barchart.com/stocks/sectors/rankings?timeFrame=Ytd

Source: barchart.com

Now let me discuss this month’s stock picks for my Blog Portfolio. As you may be aware, I added this stock on Thursday, 1/2/25, as a blog update and said to provide detailed information in my blog. The stock is already up 15% in last few days. 

Recursion Pharmaceuticals (RXRX)

Recursion Pharmaceuticals is an Artificial intelligence (AI)-based drug developer using technology developed in collaboration with partner Nvidia (NVDA). It engages in the decoding biology by integrating technological innovations across biology, chemistry, automation, data science, and engineering to modernize drug discovery and development. By leveraging technology at every step of the process, the company accelerate the development of high potential drug candidates once they have validated their potential.

The company uses AI and machine learning to decode biological data. Currently the company has more than 60 petabytes of proprietary  biological, chemical, & patient-centric data. RXRX has created a proprietary technology known as “RecursionOS” to improve the drug discovery and development process. This technology leverages the humongous data lake to analyze up to 2.2 million unique biological experiments per week using one of the fastest AI supercomputer. Recursion applies AI and ML algorithms to that data lake to detect patterns in the data, which the company hopes can be used to cost-effectively identify new drug candidates. 

The automation, simulation, and machine learning, AI technologies - all these combined hold the potential to decode “human data” in a manner which has not been done in the industry. In future, potentially the company can find cure  for most of the diseases using this technology and more importantly it can reduce the time and cost significantly for new drug discovery and development. 

Just to give som perspective, in 2021, global spending on healthcare reached astronomical $9.8  trillion based on World economic forum. On an average, it takes about $900 million and 13.5 years to develop a successful drug and bring to the market. Hence, it’s astronomically expensive  and time consuming for the firms to push drugs into the final line. This is where Recursion’s technology can be a new AI backbone of the entire pharma industry.  Just to let you know that this technology is still in its early stages and no drugs have been fully developed through RecursionOS. Most of the drugs are in early phases. So….

Why do I like RXRX?

The emergence of radical technological innovations has created the opportunity to envision new approaches to discovering therapeutics more efficiently and at scale. Recursion is pioneering the integration of these technological innovations across biology, chemistry, automation, data science, and engineering to modernize drug discovery and development. In order to do this, RXRX has partnered with Nvidia and using one of the fastest Super computer for drug discovery.  It has created a platform for drug discovery and development known as RecursionOS. It uses this platform for three important business models:

• Internal drug development: Recursion is leveraging its own AI software to identify and develop new drugs. 
• AI software sales:  It sells its RecursionOS platform to other pharmaceutical and tech companies to help them jointly identify and develop new drugs. 
• Data sales: Recursion is selling its proprietary data to other pharma and tech companies to help them train their own AI drug discovery models. As I said before, the company has more than 60 petabytes of proprietary  biological, chemical, & patient-centric data.

Pipelines and Results

Recently, the company bought Exscientia another AI-enabled drug company and that  position Recursion as the leader of the AI-enabled drug discovery and development space. It has more than 10 clinical and preclinical programs in the internal pipeline, more than 10 partnered programs. The good news is that Recursion's technology has already started showing promising results. One of the most promising prospects is REC-994, which could become the first oral therapy for treating symptomatic cerebral cavernous malformation (CCM), a brain hemorrhaging condition that currently lacks any approved treatments. Another drug REC-617 has also shown encouraging results, with a recent phase-1 interim study demonstrating positive patient responses and good tolerability in treating advanced solid tumors. The company is also testing REC-4881 in familial adenomatous polyposis (a rare condition that leads to colorectal cancer) and advanced cancers. The biotech expects to post data for both trials sometime this year. Though, the company still doesn't have a single drug on the market but it’s able to generate revenues which is fantastic. The company has over $450M in upfront and realized milestone payments received from partners to date. It also has $427 million in cash. 

It has a long list of early stage drug pipeline . You can view it here:

https://www.recursion.com/pipeline

Partnership: 

Recursion has partnered with many big pharmaceutical companies viz. Roche & Genentech, Bayer, Takeda pharmaceutical, and with Nvidia to create a foundational model for advance AI-powered drug discovery. The two companies Recursion and Roche are jointly using the RecursionOS platform for therapeutic discovery for which Roche pays Recursion for using its platform. But if these two companies discover any drug then Recursion gets royalties on those drug sales. Those royalties could be huge money down the road. In addition, the major firms are not only partnering with Recursion but both Bayer and Nvidia have invested $50 million in Recursion in exchange for equity in the company. 

My View

I think this company has tremendous future potential. At the current price, it looks like a huge opportunity for the long-term investors. The stock is currently trading at $7.80. The stock had 52-week high of $15.74, so there is a 50% discount from its 52-weeks high. About 70% of the stocks are hold by institutions which is a very good sign as so many institutional investors are showing interest. 

Strategy: As a strategy, I don’t buy any stock at once because nobody can predict the top or bottom of a stock. Particularly, small biotech stocks are extremely volatile. Hence, my strategy is to keep accumulating in small quantities and build the portfolio for longterm patiently. And when there is bump, it’s extremely important to take some chips out of the table to book some profits and mitigate risks. The whole process needs a lot of patience and discipline. That’s my investment framework. As Trump administration will resume office, we will see lots of mergers and accusations due to deregulations. That may further enhance the potential of such promising biotech companies. 

Risks

Recursion remains years away from bringing a FDA approved drug to the market. Currently, the company generates only limited revenue through partnership milestone payments and research grants. It’s an early stage company, so obviously higher operating expenses. Small biotech companies are highly volatile and very risky. But it may be immensely rewarding as well. If this company succeeds in its AI approach to drug discovery and development then the opportunity could be astronomical. Based on my research, it seems to be one of the most-promising and best-positioned AI biotech early stage company in the world. Having said that, since it’s an early stage small biotech company, the risk averse investors who can’t take volatility and does not have patience to accumulate for longterm should stay away. 

My final thought: As I said, Recursion is one of the most-promising and best-positioned small AI biotech company. This year will be a crucial year for the company to show its potential. If it succeeds, the stock should zoom, but if it fails then the stock may also take a big hit. Hence, risk is very high but gain could be massive. Nothing happens overnight. So, it needs lots of patience to accumulate small biotech companies when they are down. We should only put that much money we are willing to lose in case the company fails. I am a growth investor and look promising companies to invest for long term. So, it perfectly fits my bill and hence I am invested and keep accumulating this stock for long run. I will trim as needed.

Shesa’s Blog Portfolio (As of JAN 05, 2025)

Equity	Suggested Price	Current Price	Suggested Date	% Change	My View  (see disclaimer)
STOCK (All prices are in USD)
AAPL	12.9	243.36	1/25/13	1787%	HOLD
META	47	604.63	11/13/13	1186%	Buy on dip
MA	77.18	521.36	12/12/13	576%	HOLD
AMZN	15.58	224.19	4/12/14	1339%	Buy on dip
SHOP	13.48	89.99	11/25/18	568%	HOLD
SPG	54.59	176.07	5/25/20	223%	HOLD
NVDA	23.9	144.47	2/13/22	504%	Buy on dip
TSLA	290.25	410.44	5/1/22	41%	Long term BUY
RDFN	8.87	7.93	4/6/23	-11%	Buy
SOXL	15.66	29.82	4/6/23	90%	HOLD
GOOG	123.25	193.13	5/21/23	57%	HOLD
PLTR	20.49	79.89	11/19/23	290%	HOLD
MSFT	376.04	423.35	1/1/24	13%	HOLD
FLNC	20.54	17.35	2/1/24	-16%	SOLD all shares on 1/22/25
PANW	142.06	183.25	3/31/24	29%	Buy on dip
SMCI	85.74	33.33	4/28/24	-61%	Accumulate - Long Term
ENVX	10.48	12.66	4/28/24	21%	Accumulate - Long Term
DELL	138.96	119.91	7/6/24	-14%	HOLD - trimmed (may Sell)
Z	51.92	74.64	8/11/24	44%	Buy - Long term
CRM	254.57	332.9	9/14/24	31%	Buy on dip
LRCX	76.16	75.11	11/11/24	-1%	Buy on dip
RXRX	6.76	7.8	1/2/25	15%	NEW ADDITION
	ETF
IHF	27.82	48.69	8/16/15	75%	HOLD
MUTUAL FUND
PRMTX	59.45	156.54	12/20/14	163%	HOLD
FSRPX	9.05	20.66	1/15/16	128%	HOLD
FSMEX	43.66	63.39	9/24/17	45%	HOLD

A few Key Economic report this week (1/5 - 1/11)

TUE, 1/7: ISM services, Job Openings

WED, 1/7: ADP Employment - private payroll

FRI, 1/10: U.S. employment report (Nonfarm Payroll)

Equity Sold since my Last Blog

Axsome Therapeutics (AXSM)

Here is my YouTube channel link:  https://www.youtube.com/channel/UCt7oLVUMG3NkJUzAVUzl4Tg

Disclaimer: This blog is meant to provide my opinion only. The information provided is to the best of my knowledge but may not be accurate. I do NOT provide any professional recommendation to buy/sell any stock, ETF, mutual fund, or any other security(s). As an investor, it’s your hard-earned money and you decide what is best for you. The above are merely my own opinions on what I do. Please contact a professional money manager to buy/sell any security. I do not charge any fees or commission by writing the blog except anything from Google AdSense. I have position(s) on whatever security I put on my blog portfolio and avoid including any security that I do not own or follow. Anyone buying or selling the equities mentioned here must do at their own risk.

Note: Click on Blog archives to read all my Blogs and updates.