VIDEO: How Our Moves in 2 Positions Demonstrate Portfolio Strategy

In today’s Daily Rundown video, Chris Versace explains why the Pro Portfolio will be focusing on company investor presentations this week and what’s said about EPS growth prospects for the current quarter and 2H 2025. 

We’ll also be listening for comments about demand growth and potential tailwinds as we revisit existing position price targets and evaluate new candidates for the Portfolio.

Chris uses our moves on Tuesday in the shares of Marvell MRVL and Elastic ESTC to showcase how we leverage those two strategies to make decisions for the Portfolio. 

Transcript

CHRIS VERSACE: Hey, everyone, Chris Versace. It is Tuesday, June 3 and stocks are once again mixed as we wait for the deluge of May economic data to continue this week. Remember, tomorrow we have the May service PMI, the ADP employment change report. And what we learn in those will set the groundwork for Friday's May employment report and the May CPI/PPI reports next week.

In short, we're going to get a lot of data, and I think it's going to tell us much more about the real vector and velocity of the economy, what inflation pressures are doing, what the Fed is likely to do, or as we think, and apparently the OECD as well, not do. I do think that this data over the next couple of days, it's going to give us a much better sense of how accurate that upward revision we saw in the Atlanta Fed GDP Now's model yesterday.

Remember, it went from around 3.8% to 4.6% for the current quarter, a very hot number. And if it sticks, we can really push back on any sense that the Fed is going to do anything near term. But on the flip side, early this morning, the OECD cut its global GDP forecast, citing the impact of tariffs, and it dialed back its GDP expectation for the US as a result.

Now, while we wait for all of this to unfold, what are we going to do? We're not going to sit on our hands. No. Rather, we've got the next wave of investor conferences kicking off today. We'll have more tomorrow, Thursday, and a whole fresh assortment of them next week. So what we're going to be doing is parsing management comments. And we talked about a little bit of this as to why in our opening comments with you this morning.

First and foremost, we are going to want to assess market expectations for EPS growth in the second half of the year compared to the first half, but also take a look at what those prospects are on a year-over-year basis, not just for the market, but for our portfolio holdings and any contenders that we are currently examining. Why would we do this?

Well, remember, we want to be owners of companies that are driving superior EPS growth because that tends to drive multiple expansion and valuation. At the same time, we also want to be owners of companies that are benefiting from demonstrative tailwinds across the shifting landscapes. And you've heard me talk about these before, but it bears repeating, across the economy, technology, psychographics, and any type of regulatory mandates that we might see, because we want to identify companies that are benefiting from structural change.

And when we listen to these presentations across these various investor conferences this week, next week, we'll be listening not only for comments about EPS growth, but what are managements seeing in the current quarter? What do they expect for the back half of the year in terms of demand growth?

And we'll have to balance that across, of course, what they have to say about potential tailwinds, tariffs, trade, inflation. Now, as I sit back and think about this two-pronged strategy of superior earnings growth and demonstrative tailwinds, I have to say that we had two great examples of them earlier today. And what did we do in those examples? Well, we picked up more shares of them.

I'm of course, referring to Elastic and Marvell. Both of those companies reported last week. Both traded off. And we shared that we would be sitting on the sidelines waiting for them to settle out. And we did. And the reason why we opted wasn't just the settling out happened in both of those shares, but when we look back on both, we could see two things.

First and foremost, both are benefiting in different ways from the AI demand growth. Elastic continued adoption in the enterprise. That's pushing on their margins, on their EPS growth. Very simple.

With Marvell, obviously, AI and data center growth, but also the demand follow through on what that means for networks and infrastructure and incremental capital spending. We've talked quite a bit about that, but the point is the thesis remains intact.

Now, that's the demand side. But on the EPS growth side for both of these positions, we set the table by saying that in the second half of the year compared to the first half, the S&P 500 is going to grow its earnings around 8.5%. But that could move lower. Well, with Marvell, after last week's earnings, the market sees second half earnings growing 17% faster, higher, stronger, call it what you will, compared to the first half of this year.

When we look at Elastic, that's a much more demonstrative 57%, again, second half of the year compared to the first half of the year. So with both, not only is there the demand ramp, but there are things that are unfolding in the margin profile. Elastic, the ramp of AI, and the benefit there. With Marvell, the maturing of its custom silicon business. And the company is having an event on June 17 to dig much more into that. And I think that's going to be positively received by Wall Street.

So our plan is to continue to stick to the strategies that work, including these two-pronged methods that I just described. And we're going to continue to use them to cut through the noise during market volatility, using pullbacks in the market to our advantage. In other words, folks, for us at the Pro Portfolio, despite all else that is going on, it is simply going to be business as usual.

And on a kind of reassuring note, I can share with you that we have already, just two days into the current week, collected a good number of signals that we'll be sharing with you as it relates to AI and AI adoption. And I suspect that as we move through this week, we'll be getting more than a few more that we can throw on that pile to share with you on Saturday.

So remember, we are in this for the long term. We're going to continue to heed our signals. We're going to continue to follow the data. In other words, we're going to do what you expect us to do. And we'll be communicating our latest thoughts and any moves with the portfolio with you in a very, very timely fashion.

So even though it's Tuesday and we've got a couple days to go and a lot more data to chew through, a lot more conferences, please be sure to check your emails, your alerts as we digest these conferences and presentations, like the one from Axon that's going to happen later today and again on Thursday. As we chew through those comments, revisit price targets, maybe ratings, we're going to communicate those thoughts. And we want to make sure that you get them. So please, please, please be sure to check your emails and your alerts. And thanks for watching.

At the time of publication, TheStreet Pro Portfolio was long MRVL and ESTC.