Year-End Jitters

It’s A Great Time To Re-Evaluate The Portfolio

Two Sell Alerts… And Staying The Course On Two Others

This is Porter & Co.’s Complete Investor (formerly The Big Secret On Wall Street), our flagship publication that we publish every Thursday at 4 pm ET. We regularly provide to our paid-up subscribers a full report on a stock recommendation, and also an extensive review of the current portfolio, like this one… At the end of this week’s issue, paid-up subscribers can find our Top 3 Best Buys, three current portfolio picks that are at an attractive buy price.  Every week in Complete Investor, we provide analysis for non-paid subscribers. If you’re not yet a paid subscriber, to access the full paid issue, the portfolio, and all of our Complete Investor insights and recommendations, please click here.

The market fluctuates at year end for various reasons. 

At first, the market faces tax-loss selling. Investors unload their worst-performing stocks to book losses that can help offset any gains they might have elsewhere in order to reduce their tax burden. After that phenomenon has faded, a new and very different dynamic unfolds. As New Year’s Eve approaches, institutional investors sell their winners – because they need the cash to help their hunt for the laggards that could become next year’s winners.

The winners this year, of course, are concentrated in anything exposed to artificial intelligence (“AI”). This year-end sell-off for profit taking might have sent AI shares falling a bit, but that’s the full extent of it. Some actual cracks in the fundamentals of these companies began to emerge. Investors have lost confidence in AI leader OpenAI after recent public commentary from CEO Sam Altman that made him look less than ready for prime time. Then there was a leaked internal OpenAI company memo in which Altman acknowledged that the most recent version of the company’s ChatGPT offering is lagging behind Google’s Gemini… and that he sees “rough vibes” ahead. 

Since it burst onto the world stage in November 2022, analysts have viewed OpenAI as a key cog in the AI machine. And given the apparently interconnected financing web of major players like OpenAI with Oracle (ORCL) and Nvidia (NVDA), this has spooked investors. Five-year credit default swaps for Oracle have gone from only 35 basis points in July to 125 basis points today – a sure sign of concern about Oracle’s level of debt. That represents the highest debt costs for the company since 2022. And Oracle stock has followed lower, down over 20% so far in November.

Share-price declines have been broader than just Oracle. Even after a recent bounce-back, Morgan Stanley’s index of AI stocks is down 10% from its mid-October high. As a benchmark, we can look to the Russell 2000, a more representative measure of various sectors spanning the market… it is up a little less than 1% over that same time. That shows a shift in the market – a rare time when the broader market is up and the hyperscalers are down – something it feels like investors haven’t seen for a while. 

That shift in dynamic has to a large degree been driven by fundamentals – as doubt has grown about the future of AI, while the big players in that domain have boosted debt levels. It serves as a reminder that investors should always be re-evaluating their portfolios for changes in the fundamentals. That’s even more true when there is a trend change at the top of the market, coupled with the annual tradition of year-end portfolio rotation. 

This is a good time to take a hard look at portfolio holdings and think about capital allocation for 2026. In this latest update of Complete Investor, we are making some changes to that end. We provide updates on four stocks with actionable points worth highlighting. One of these is a litigation-finance company still looking for closure on a significant legal battle. Another is a big winner in a fast-growing segment of consumer products that is battling overall consumer sluggishness. There is also an energy-drink winner that hit a bump in the road on its last earnings report – but that we believe has a good year ahead. And then there is a subprime lender continuing to navigate a very difficult industry environment. 

In two of these cases, we continue to like the stocks and see real investment opportunities going forward. But in the others, we post sell alerts. Plus, we’re making changes to our Short Portfolio at the end of this week’s issue.

Change is afoot in the market this time of year, so let’s dig into the stocks and look ahead at what’s next.