Editor’s Note: Before Fadel Lawandy joined Chapman University, he was co-founder of HW Capital Partners, a portfolio manager at Morgan Stanley Smith Barney and an executive in Wells Fargo’s financial and mortgage departments. The Business Journal’s annual list of the fastest-growing publicly traded companies as ranked by revenue begins on page 30.
I recently launched the Chapman University OC25 and CA100 indices, which are calculated by S&P Dow Jones Indices using the same market cap weighted formulation used to compute the S&P 500 Index.
The Chapman University OC25 and CA100 indices were created for the purpose of providing a local view of the equities market in tracking the performance of some of the largest companies domiciled in both Orange County (Ticker: CUOC25) and California (Ticker: CUCA100).
It won’t come as a surprise to anyone that the year-to-date total return on the Chapman University CA100 is an impressive 34.3%.
Like the S&P 500, the CUCA100 index total return is overwhelmingly influenced by the same California based companies, namely Apple, Alphabet (Google), Nvidia and Meta (Facebook).
The OC Stock Story
While there is not much to say about the CUCA100 compared to the S&P 500, the Chapman University OC25 most certainly delivers the unique story here.
At first blush, the CUOC25 year to date return, as of the end of September, of 6.3% seems to be underwhelming when compared to the S&P 500 total return of 11.7%.
Yet, I would like to make the case for why the return on the CUOC25 is a much meaningful return than that of the S&P 500.
Of the S&P 500 return of 11.7% YTD, 11% of which has been generated aggregately, in what is dubbed as an AI bubble, by the top weighted (by market capitalization) companies Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla.
The remaining 496 securities that constitute the S&P 500 have generated aggregately an anemic 0.7% year-to-date.
The return of the S&P 500 is significantly overwhelmed by the performance of seven technology companies rendering the S&P 500 returns for the year deceptive.
In contrast, the Chapman University OC25 index is significantly more balanced as seen in the accompanying table. The aggregate market cap of the leaders versus laggards is much more balanced at $85.5 billion versus $95 billion respectively.
Moreover, one might argue that the leaders and laggards are more representative of the overall economy. The index’s leaders represent a more diverse group of companies in healthcare, real estate, technology, fast-casual dining, and EV manufacturing.
$1B Market Caps
In our index, most of the companies top a billion-dollar market cap. We also included companies that while they have their headquarters officially located outside of Orange County, they have significant ties here such as Tri Pointe Homes Inc. and Western Digital Corp.
Leading the index constituents with an impressive YTD return of 72% is Aliso Viejo-based Glaukos Corp., which develops therapies for the treatment of retinal disease, glaucoma and corneal disease. The appreciation in the stock to this point seems to be driven by a growth play on the company.
Tri Point Homes, a national home builder with a unique value propositions of different price point for its customers, returned year to date a respectful 47% return suggesting the market is rewarding the company for strong financials.
Western Digital’s stock also had a surprisingly great year generating a year-to-date return of 45% as Wall Street and analysts’ bit on the company’s NAND business.
Newport Beach’s Chipotle Mexican Grill rounds up the top 4 leaders in the CUOC25 with a year-to-date return of 32%. Chipotle’s return has been driven by double digits revenue growth, expanding store footprint, and the company’s ability to successfully pass cost increases to its customers.
As for the index laggards, leading the pack with a tied year to date drop in price of 41% are Orange’s Alignment Health Care Inc. and Irvine’s Masimo Corp. Alignment was penalized early in the year for what Wall Street deemed unfavorable results for the 4th quarter and full year earnings.
On the other hand, Masimo, a maker of patient monitoring technologies, the downward trend is reflective of the meaningful drop in revenue in what the company categorizes as transitory delays in large orders as customers work through their existing inventory.
Irvine’s Pacific Premier Bancorp comes in third, with a drop in value year to date of 31%, due to investors’ continued concerns about banks. More specifically to Pacific Premier, the downturn appears to be the consequence of ongoing concern about the bank’s concentration ratios and loan portfolio.
Rounding up the bottom four at a year-to-date return of negative 27% is Irvine’s Vizio Holding Corp. The stock dropped in value as Wall Steet anticipated a continued decline in device sales and such anticipation appears to be supported by the year-over-year decline in revenues.
I think by this point it is evident that the CUOC25 index return of 6.3% is more reflective of Orange County and the national marketplace.
P.S. A friendly reminder. Nothing in this Leader Board constitutes investment advice. You should always consult a properly licensed and credential professional prior to making any investment decisions. Afterall, I am just a finance professor.
