Low on Cash, Big on Credit, AI's Everywhere, Europe Toughens Up & More News for Investing
Let's scan through the headlines for the stories of the week that speak to our Pro Portfolio holdings.
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TheStreet Pro Portfolio's Chris Versace used his Covid slump to dive into the stories of the past week that speak to the portfolio's investments, including reports on the cash-strapped consumer, how retirement housing needs an upgrade, the latest cybersecurity risks and why artificial intelligence is now a part of nearly everything. In addition, as Pres. Donald Trump makes moves on Ukraine and Russia, we look at why Europe could boost defense spending and ... the latest trends in housing and building materials in the U.S.
Aging Population, Homebuilding & Building Materials
A selection of lucky baby boomers seemingly have won the housing market, but they haven’t met their final boss just yet—the elusive retirement home. The generation is aging into worn infrastructure, and it appears that senior homes are ill-equipped to deal with the incoming class… If the current rate of development stays the same, just 191,000 new housing units will be added by 2030—short of the 560,000 needed to usher in the aging population, data service NIC MAP tells the Journal. Read more here
Senior housing has been one of the biggest disappointments for commercial real-estate investors. Now thanks to millions of aging baby boomers, that may be about to change. The oldest boomers turn 80 in less than a year. And by 2030, the U.S. population 80 years and older is expected to increase by more than four million people to 18.8 million. History suggests that a growing number of people conclude at that milestone age they can no longer live comfortably or safely at home and seek a senior facility. Read more here
Position: None
Bullpen: WellTower WELL
Artificial Intelligence
In a survey of 2,300 IT decision makers that IBM released in December, 47% say they’re already seeing ROI from their AI investments, and 33% say they’re breaking even on AI. Only 14% say they’re losing money, and 66% of companies plan to increase their AI investments compared to 5% that plan to decrease it. Read more here
While the middle market is experiencing a surge in the integration of AI and generative AI technology, 60% of companies feel they lack the vision and a plan for AI, according to the Microsoft 2024 Work Trend Index. Further, in the recent RSM Middle Market AI Survey: U.S. and Canada, 67% of organizations using generative AI report they need outside help to get the most out of the tool. With the growth and potential of AI solutions, CEOs and boards have a significant opportunity to shape the most beneficial AI strategies and use cases and help identify where investments should be focused. Read more here
To learn more about the ROI of AI in HR, we carried out survey research with 600 HR leaders and qualitative interviews with 20, all of whom are at least piloting AI-driven tools and technology for HR. A quarter of respondents (25%) are in this phase, while 40% said they are implementing AI, 25% are actively operating it and 10% are optimizing its use (the highest level of maturity). Read more here
Since its integration, Ava Cado has shortened the time it takes for a candidate to complete their application and start the job from 12 days to four days. The system has nearly doubled Chipotle’s application flow and increased its candidate application completion rate to more than 85% from approximately 50% prior. Read more here
Position: Alphabet GOOGL, Elastic ESTC, Meta META, Microsoft MSFT, ServiceNow NOW
Artificial Intelligence, Cybersecurity
The era of “agentic” artificial intelligence has arrived, and businesses can no longer afford to overlook its transformative potential. AI agents operate independently, making decisions and taking actions based on their programming. Gartner predicts that by 2028, 15% of day-to-day business decisions will be made completely autonomously by AI agents. However, as these systems become more widely accepted, their integration into critical operations as well as excessive agency—deep access to systems, data, functionalities, and permissions—make them appealing targets for cybercrime. Read more here
Position: Elastic, First Trust Nasdaq Cybersecurity ETF CIBR, Microsoft
Artificial Intelligence, Digital Infrastructure
The European Union pledged to mobilize 200 billion euros, equivalent to $206.15 billion, to invest in artificial intelligence as the bloc seeks to catch up with the U.S. and China in the race to train the most complex models. European Commission President Ursula von der Leyen said the bloc wants to supercharge its ability to compete with the U.S. and China in AI. The plan–dubbed InvestAI–includes a new 20 billion-euro fund for so-called AI gigafactories, facilities that rely on powerful chips to train the most complex AI models. Read more here
Position: Marvell MRVL, Nvidia NVDA
Cash-Strapped Consumer
Americans are opening credit cards and racking up larger balances, pushing the country's credit card debt to a new record high. High interest rates, stubborn inflation and continued consumer spending are among the factors that have lifted collective credit card debt to an all-time high of $1.21 trillion, according to a New York Fed report. That's up from $986 billion two years ago. Read more here
But in recent days, economic data have shown that inflation has proven stubborn and the Fed is struggling to tackle the“last mile” of its quest to get inflation back to 2%, the benchmark that signals price increases are under control. One of the villains of the story is higher egg prices, an everyday item in many households that has become the poster child for the higher costs that American families face. Read more here
As of January, US cattle herds had shrunk 1% from the year before – hitting a 64-year low, according to government data.“On top of all that, demand is still strong,” Camberato told The Post. “When you mix lower supply with high demand, prices go up. It’s that simple.” Read more here
More than half of those informed consumers — 57%, to be exact — think these tariffs will hit their wallets hard. They’re not only worried about the big picture economy (though 40% are concerned about that, too). They’re worried about their own bottom line. That’s because 78% of those consumers anticipate higher prices and 75% expect product shortages. Read more here
Position: Amazon AMZN, Costco COST
Cybersecurity
Newspaper publishing giant Lee Enterprises has confirmed that a ransomware attack is behind ongoing disruptions impacting the group's operations for over two weeks. As a local news provider and one of the largest newspaper groups in the United States, Lee publishes 77 daily newspapers and 350 weekly and specialty publications across 26 states… In a Friday filing with the U.S. Securities and Exchange Commission (SEC), the media giant said the attack triggered a systems outage on February 3. Read more here
CISA and the FBI said attackers deploying Ghost ransomware have breached victims from multiple industry sectors across over 70 countries, including critical infrastructure organizations. Other industries impacted include healthcare, government, education, technology, manufacturing, and numerous small and medium-sized businesses. Read more here
An active campaign from a threat actor potentially linked to Russia is targeting Microsoft 365 accounts of individuals at organizations of interest using device code phishing. The targets are in the government, NGO, IT services and technology, defense, telecommunications, health, and energy/oil and gas sectors in Europe, North America, Africa, and the Middle East. Read more here
Position: Elastic, First Trust Nasdaq Cybersecurity ETF, Microsoft
Energy Pain Point
France is making a bid to catch up in the artificial intelligence race by leaning on one of its strengths: plentiful nuclear power. The French government plans Monday to pledge a gigawatt of nuclear power for a new artificial-intelligence computing project expected to cost tens of billions of dollars, according to its private-sector backers and the French government. Read more here
U.S. utility CenterPoint Energy CNP on Thursday added $500 million to its 10-year capital expenditure plan to strengthen its electricity grid to handle the surging demand for power from new data centers. Power demand from U.S. data centers is expected to nearly triple in the next three years and consume as much as 12% of the total electricity produced, according to a study by Lawrence Berkeley National Laboratory. Read more here
Source: Eaton ETN, VanEck Uranium & Nuclear ETF NLR
Homebuilding & Materials
Sentiment among the nation’s single-family homebuilders dropped to the lowest level in five months in February, largely due to concern over tariffs, which would raise their costs significantly. The National Association of Home Builders’ Housing Market Index, or HMI, dropped a sharp 5 points from January to a reading of 42. Anything below 50 is considered negative sentiment. Last February, the index stood at 48. Read more here
The growing crisis in the insurance industry may make it hard to get a mortgage in parts of the country in the coming decades, Federal Reserve Chairman Jerome Powell said on Tuesday. “If you fast-forward 10 or 15 years, there are going to be regions of the country where you can’t get a mortgage,” Read more here
Position: None
Safety & Security
Denmark will boost its defense spending to more than 3% of economic output as the nation seeks to counter an escalation in security threats from Russia. The AAA rated Nordic country will spend an additional 120 billion kroner ($17 billion) on defense through 2033, Defense Minister Troels Lund Poulsen said at a news briefing on Wednesday. Read more here
European nations talked up the possibility of raising defense spending in the face of US pressure and their exclusion from Ukraine peace talks. In statements given around an emergency summit of European leaders in Paris Monday, France proposed joint Europe-wide bonds to fund increased military expenditure, while Poland’s prime minister pushed fellow European Union nations to ramp up their defense budgets. Read more here
Position: Lockheed Martin LMT
The Strategies Behind Our Thematic Models
Aging of the Population - Capturing the demographic wave of the aging population and the changing demands it brings with it.
Artificial Intelligence – Software, chips, and related companies that facilitate the collection and analysis of large data sets and autonomous generation of solutions given non-machine language prompts.
Cash Strapped Consumer - Companies poised to benefit as consumers stretch the disposable spending dollars they do have.
CHIPs Act – Capturing the reshoring of the US semiconductor industry and the $52.7 billion poised to be spent on semiconductor manufacturing.
Cybersecurity - Companies that focus on protecting against the penetration of digital networks and the theft, ransom, corruption or destruction of data.
Data Privacy & Digital Identity - Companies providing the tools and services that verify authorized users and safeguard personal data privacy.
Digital Infrastructure & Connectivity -The buildout and upgrading of our Networks, Data Storage Facilities, and Equipment.
Digital Lifestyle - The companies behind our increasingly connected lives.
Digital Payments - This model focuses on companies benefitting from the accelerating structural adoption of digital payments and financial technology (FinTech).
Energy Pain Point - Companies poised to prosper from rising power demand.
EV Transition - Capturing the transition to EVs and related infrastructure from combustion engine vehicles.
Guilty Pleasure – Companies that produce/provide food and drink products that consumers tend to enjoy regardless of the economic environment and potential long-term health hazards associated with excessive consumption.
Homebuilding & Materials – Ranging from homebuilders to key building product companies that serve the housing market, this model looks to capture the rising demand for housing, one that should benefit as the Fed returns monetary policy to more normalized levels.
Luxury Buying Boom - Tapping into aspirational buying and affluent buyers amid rising global wealth.
Rebuilding America - Turning the focused spending on rebuilding US infrastructure into revenue and profits.
Safety & Security – Targeted exposure to companies that provide goods and services primarily to the Defense and security sectors of the economy.
