This edition of Market Factors starts with an attempt to profit from a potential broadening of U.S. market leadership. We move on to a new-ish investment idea - electrical equipment - that I am likely to revisit. The diversion is an interesting new music catalogue index that measures profitability for big artists.
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Buying the new leaders
Scotiabank strategist Hugo Ste-Marie thinks leadership in the U.S. market might be broadening out from megacap tech stocks, so I took a look to see if we can make any money from this potential trend.
The chart below recreates Mr. Ste-Marie’s analysis in a slightly different way. Mr. Ste-Marie compared the performance of the Magnificent Seven versus the remaining 493 companies in the S&P 500. I divided the megacap-dominated, conventional market cap weighted S&P 500 by the equal weighted S&P 500 index that minimizes the effects of megacap returns.
The Scotiabank strategist highlights November fourth as the recent peak for megacap tech versus the rest of the index. I looked at the top performing stocks from November fourth until now to uncover new, potentially sustainable market leadership.
The top performing stock for the period was DRAM memory maker Sandisk Corp. (up 99 per cent), which managed to double. This company, along with its competitor Western Digital Corp (41 per cent), which was in 10th place, are AI-adjacent and won’t be much help if market leadership is changing. The same is true of Micron Technology Inc. (53 per cent) in fifth place and Lam Research Corp (35 per cent, 14th place).
Discount shopping is one clear trend in the performance data. Dollar General Corp. (up 54 per cent) was the fourth best performer and Dollar Tree Inc. (36 per cent) was 12th. Carvana Co. (53 per cent), which provides a platform for used car sales, had the sixth best return. Southwest Airlines Co. (46 per cent) finished in eighth place and also fits the low-cost theme. Expedia Group Inc. (36 per cent) was in 11th place.
Huntington Ingalls Industries (30 per cent, 19th place) will be an interesting one to follow. It is the largest builder of U.S. military ships and fits the karma-challenged investment theme I outlined last week.
Freeport McMoRan Inc. (52 per cent, seventh place) benefited from record copper prices and that might be a sustainable investment theme we can play with Canadian miners like HudBay Minerals and Lundin Mining.
The labour market remains the biggest economic risk in the U.S. and the closely followed initial jobless claims, on a seasonally unadjusted basis, have been steadily climbing week by week. This might make discount stores an interesting idea for further research.
Defence stocks remain a viable theme, whether through Huntington Ingalls Industries or other dominant players like Northrop Grumman or L3Harris Technologies Inc.
The nuclear power plant of Flamanville, north-western FranceLOU BENOIST/AFP/Getty Images
Investing themes
Transform your portfolio
In Monday’s Market Factors I reported S&P Global’s prediction that global electricity demand in 2040 will require the equivalent of 650 new nuclear power plants per year. The direct way to play this would be to invest in uranium, natural gas, wind turbines or (heaven forbid) coal.
The indirect - or picks and shovels way - to invest in the theme is to own the equipment necessary to carry this new power. Citi analyst Bella Tian recently wrote that the U.S. transformer market is set to grow by eight to ten per cent per year to 2030 thanks to data centre demand and new renewable power projects.
U.S. demand for transformers is higher than Europe’s four to six per cent rate because of an aging installed base requiring replacement. Two-thirds of U.S. transformers must be imported and tariffs have temporarily reduced demand.
A joint venture of ABB and Hitachi, based in Mexico, and Siemens operations in Mexico account for a large share of transformer imports.
For broader electrical equipment, China is home to the largest exporters. Ms. Tian has buy ratings on Hong Kong-traded Wasion Holdings Ltd., Dongfang electric Corp. and Shanghai Electric Group.
David Bowie performs on July 1, 2002 in ParisBERTRAND GUAY/AFP/Getty Images
Diversions
Which music artist catalogue generates the most money?
Billboard is building a Music Finance index, ranking the music catalogues that are generating the most money. This interests me. The new index measures the price of a catalogue versus its trailing 12-month revenue.
The outline of the index includes some novel observations. It mentions, for instance, that new catalogues depreciate quickly (termed as a “decay curve”) until they hit a sustainable rate of revenue generation.
Recent classic music catalogue sales like Pink Floyd’s US$400-million deal in 2024 reminded me of the genius of David Bowie. Mr. Bowie was the first major artist to use financial engineering to make himself a ridiculous amount of money. In 1997, he securitized the future revenue of his catalogue for US$55-million that went directly into his pocket.
I have mixed feelings about Mr. Bowie’s music career. Broadly I think he wrote three or four of the best songs in rock history and a lot of dreck while wearing really cool costumes. (The Motorhead cover of Heroes is spectacular by the way). But he was undeniably brilliant, as his early understanding of the power of the internet exemplified in 1999.
The essentials
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Globe Investor highlights
Tim Shufelt has some thoughts on why investors don’t need to fear 2026, while billionaire Ken Fisher has just released his outlook for the year
Jamie McGeever points out that U.S. inflation is stronger than it looks on the surface
Using a sector rotation strategy worked out very well for this accountant’s TFSA
Quick Hits
Caterpillar Inc. is a surprisingly large player in the data centre and electrical power sector through its turbine operations and energy control and storage systems business. Citi analyst Kyle Menges raised his annual data centre revenue projections from U$11-billion in 2030 to roughly U$15-billion.
I asked the Google AI to list the most-searched investing terms so far in 2026. I wanted an idea as to what’s top of mind for the average investor. AI is still the focus for search, as Ai monetization, agentic AI and autonomous systems were popular terms. The nuclear renaissance is also a focus as small modular reactors were a big subject for search. Precious metals, both gold and silver, were also popular. The companies most investigated globally were Nvidia Corp., AMD, Microsoft Corp., Constellation Energy, Agnico Eagle and Rolls Royce. Search terms are often a sign of froth. Eventually, sophisticated investors begin selling into the bids from investors using Google to pick popular stocks.
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