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Traders work on the floor of the New York Stock Exchange during morning trading on March 22, 2023 in New York City.
Michael M. Santiago | Getty Images News | Getty Images

The S&P 500 concluded a topsy-turvy — yet winning — first quarter of 2023 on Friday, overcoming a shock to the U.S. banking system in March to rise around 7%. The tech-heavy Nasdaq Composite proved to be the real standout, soaring nearly 17%. The 30-stock Dow Jones Industrial Average, meanwhile, eked out a roughly 0.4% gain.

Stocks’ rip-roaring January eased in February, with all three major Wall Street indexes finishing lower in that month. Then came the failure of three U.S. banks within days of each other starting March 8, which spooked investors and further stoked recession fears. The S&P 500 briefly went negative for the year on March 15, a rough session defined by banking concerns spreading to Europe. But as the bank crisis stabilized over the past two weeks, the averages more than bounced back.

Here’s a look at the best and worst performers in the Club’s 36-stock portfolio for the first quarter, beginning with the top four gainers.

Tech stocks lead the way

Nvidia CEO Jensen Huang speaks at a press conference on Jan. 7, 2018.
MANDEL NGAN | AFP | Getty Images

Nvidia (NVDA) captured the first-quarter crown, soaring an astounding 90% over the three-month period. The chipmaker is not only the Club’s best-performing holding, but the biggest winner in the entire S&P 500.

  • The driving force behind Nvidia’s move: artificial intelligence. The AI buzz sparked by ChatGPT in late 2022 intensified throughout the first quarter, so it’s no surprise that investors flocked toward the company whose technology — both on the hardware and software side — is at the heart of the trend.
  • Nvidia’s fourth-quarter earnings, in late February, only enhanced its shine. It reported better-than-expected results along with strong forward guidance, including quarter-over-quarter growth fueled by its data center and gaming segments.
  • The strength in data center captures the tangible impact AI adoption has for Nvidia. Investors also took solace in the fact the gaming inventory correction that plagued the company in recent quarters is largely in the rearview mirror at this point. That’s another important reason why Nvidia’s stock did so well.
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Nvidia’s stock performance year to date.

Meta Platforms (META) finished in second place in both the Club’s portfolio and the S&P 500 overall, climbing 76.1%.

  • CEO Mark Zuckerberg dubbed 2023 the “year of efficiency” for the Instagram and Facebook parent. So far, management’s actions have lived up to the billing. Meta in March announced plans to cut 10,000 jobs, on top of 11,000-plus layoffs disclosed in November.
  • Crucially, the social media giant also lowered its 2023 expense outlook for the second time this year. It now stands between $86 billion to $92 billion, down from the $89 billion-to-$95 billion range issued in February.
  • Meta’s initial 2023 expense guidance of $96 billion and $101 billion flabbergasted Wall Street in late October, causing a huge sell-off in the already downtrodden stock. Now, investors are thrilled that Zuckerberg and Co. got serious about better aligned expenses with slower revenue growth.
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Meta’s stock performance year to date.

Advanced Micro Devices (AMD) had the third-best performance in the first quarter, with shares advancing just over 51.3%.

  • On Jan. 31, AMD CEO Lisa Su called the bottom in the chipmaker’s beleaguered PC business, saying the first quarter should be the trough with growth returning in the second quarter and into the rest of the year. That important statement gave investors confidence the chip inventory glut that crushed the company — and industry peers alike — last year was nearing an end.
  • All signs also continue to point to AMD taking share from chief rival Intel (INTC) in the data center processor market. Su said AMD expects more share growth to occur in the third and fourth quarters, along with an overall improvement in the data center market.
  • AMD also is seen as another winner in AI adoption, which has helped lift sentiment around the stock in the first quarter. In the second half of this year, AMD is expected to launch its next-generation supercomputer processor, which can be used for large language model applications. (ChatGPT is one example of a large language model, though it was trained on a Microsoft-built supercomputer that used Nvidia chips).
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Advanced Micro Device’s stock performance year to date.

Checking in fourth was Salesforce (CRM), which saw its stock price climb 50.7% in the first quarter.

  • The enterprise software maker’s stellar earnings report and guidance March 1 cemented investors’ warming attitude toward the company. Salesforce surged 11.5% the following day, one of its best single-session gains in a decade, because it was clear significant profitability improvements were underway.
  • Salesforce shares were up more than 20% year to date before that earnings print, amid a broader rotation into the tech stocks that struggled in 2022, and on hopes that the five activist investors with stakes in the company could bring about margin expansion. The actual report confirmed CEO Marc Benioff is delivering on what investors care about — becoming more profitable and managing dilution with an enhanced buyback.
  • Salesforce expects an adjusting operating margin of 27% in fiscal 2024, much better than analysts’ 22.8% estimate. Its share repurchase authorization increased to $20 billion, doubling the $10 billion buyback program first announced last year.
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Salesforce’s year to date stock performance.

What’s the common denominator among the winners? These four stocks were beaten up last year as the Federal Reserve got aggressive with interest-rate hikes, crushing stocks with premium valuations and causing slowdowns in each business due to economic uncertainty. But as the calendar turned, investors realized they were far too negative on these tech stocks and regained appreciation of their secular growth stories.

Within this group, there are some additional overlaps. Some are self-help stories, such as Meta and Salesforce. Both companies put their cost structures under the microscope and found ways to reduce expenses. Layoffs are never easy, but the two companies did what was necessary to fix their business models. Stocks of other companies that “took their medicine” have done well in 2023 too.

Others top performers are business-cycle related. For both semiconductors companies, inventory gluts in the industries they sell into punished those stocks in 2022. For AMD, it was PC chips, and for Nvidia it was gaming GPUs. The gluts were so severe that it forced both companies to take big charges on their inventory. But after a couple of quarters of working the excess inventory down, both AMD and Nvidia expect the first quarter to represent the trough of those respective businesses.

First quarter laggards

A Halliburton oil well fielder works on a well head at a fracking rig site January 27, 2016 near Stillwater, Oklahoma.
J. Pat Carter | Getty Images

Halliburton (HAL) shares fell 19.6% in the first quarter, making the oilfield services firm the Club’s worst-performing stock in the period.

  • Halliburton’s weakness is tied to factors outside the company’s control — specifically, the roughly 6% decline in West Texas Intermediate crude prices in the first quarter. Keep in mind Halliburton shares also soared 55% in the fourth quarter, so the stock entered the new year vulnerable to profit taking.
  • Fundamentally, Halliburton offered investors a lot to like in the first three months of the year. In late January, it raised its dividend by a third to $0.16 per share and announced the resumption of its stock buyback program. It also reported better-than-expected fourth quarter numbers and a robust full-year outlook, with CEO Jeff Miller saying customer spending is expected to grow by at least 15% in 2023. He also indicated Halliburton continues to have pricing power.
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Halliburton’s stock performance year to date.

Devon Energy (DVN) was second from the bottom, with shares falling 17.7% in the first quarter.

  • Similar to Halliburton, the overall oil market weighed on Devon’s stock price in period.
  • But unlike Halliburton, Devon in February rankled investors with its fourth-quarter results and 2023 outlook, which featured higher-than-expected capital expenditures and lower-than-anticipated production projections. That’s a double whammy of disappointment.
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Devon Energy’s stock performance year to date.

The third-worst performing Club stock in the first quarter was Johnson & Johnson (JNJ), which saw its stock price decline 12.3% over the three-month stretch.

  • A broader rotation out of health-care stocks, one of 2022’s top sectors, contributed to Johnson & Johnson’s weakness in the first quarter. For context, the Club’s three other health stocks — Eli Lilly (LLY), Humana (HUM) and Danaher (DHR) — also ended the quarter in the red.
  • However, concerns about J&J’s ongoing talc litigation resurfaced in the quarter following an unfavorable court ruling on the drugmaker’s strategy to resolve the claims. That ruling, handed down Jan. 30 by a U.S. appeals court, has proven to be an additional overhang on J&J shares.
  • Despite the stock struggles, J&J’s most recent quarterly results, issued in late January, showed healthy growth and solid free cash flow generation.
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Johnson & Johnson’s stock performance year to date.

Honeywell International (HON) rounds out our list as the fourth-worst performer in the first quarter, falling 10.8%.

  • Honeywell’s strong 2022 did not extend to the first three months of this year. It didn’t take long for sentiment to sour on Honeywell, either. On Jan. 4, UBS double-downgraded the industrial conglomerate, taking its rating to sell from buy.
  • It’s been tough sledding for the stock since, with Honeywell’s uninspiring fourth-quarter earnings print in early February unable to shake off the malaise. The company’s sizable aerospace unit remains especially well-positioned, but it’s not getting a ton of love from Wall Street.
  • Compounding matters for Honeywell is an upcoming CEO transition, which was announced March 14. President and COO Vimal Kapur is set to replace Darius Adamczyk on June 1. Adamczyk will remain executive chairman.
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Honeywell’s year to date stock performance.

What is the common denominator among the laggards? It’s pretty simple to see. These four stocks all outperformed the S&P 500 by a wide margin last year. The total return (including dividends) on Halliburton was 75% and Devon’s was 52%. Johnson & Johnson and Honeywell both delivered around 5% compared with the S&P 500’s total return of about minus 18%. As the old saying goes, one key to investing is buying low and selling high. That’s what the market did to a lot of stocks in the first quarter. It sold off what investors “hid in” last year to buy what got crushed and historically does better when there is light at the end of the Fed tightening cycle.

(See here for a full list of the stocks in Jim Cramer’s Charitable Trust.)

As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade.

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