VIDEO: IPO Momentum Could Impact These 3 Holdings

In today’s Portfolio video, Chris Versace discusses the items and events that the Portfolio will be focusing on this week as we wait for the outcome of Monday's meeting between President Trump, Ukrainian President Zelensky and European leaders. 

He discusses why we’ll be focusing on demand-related comments as well as those for tariffs and margins as retailer earnings crest this week. Chris also discusses the strong tone of the IPO market and what its continued strength could mean for three Portfolio holdings. Finally, he also explains why the next few weeks of investor conferences could prove to be important for the market. 

Transcript

CHRIS VERSACE: Hey, folks, Chris Versace here. It is Monday, August 18th. And as you've probably seen, the market is little changed, as we begin the second half of the current quarter.

Volume's a little lighter than usual, which I think we can chalk up to a little bit given the time of year that it is, the last two weeks of August, the last of summer vacations, kids getting ready to go back to school, that sort of thing. But I also think that some are waiting to see what the outcome of the Trump, Zelenskyy, European leaders meeting is in Washington and what that could mean for what's next on the Ukraine-Russia front. But because we're off to a slow start of the week, I think that event in Washington is understandably going to take center stage, at least until we start to see retailer earnings resume later this week.

And, yes, as we talked about in Friday's roundup, it is a very big week on the retail front, Walmart, Home Depot, Target, almost everything in between, including our own TJX companies. Now, we've talked a little bit about the bifurcated consumer. And what we mean by that is, on the one hand, we see consumers trading down, trying to stretch those disposable spending dollars that they do have.

Probably the best example of this is the monthly sales reports that we get from Costco. We size that up against the July retail sales report, most recently last week. And there's little question that Costco continues to take share.

We do see TJX benefiting from that as well. And we'll get confirmation of that we believe when they report later this week. Remember, last week, we nudged up our TJX price target slightly. And based on what we learned from the company about its second half of the year outlook, we will revisit that price target most likely once again.

Now, that's the trade down side of it. The other side of it, if we listen to the airlines, their bookings for the back half of the year are very vibrant, so we'll continue to evaluate other data points on that front. But that seems to be positive for our shares, we think, of American Express. But, again, we're going to continue to monitor overall spending by the consumer.

As such, what we hear this week will be very important for us. Remember, too, that the consumer, directly or indirectly, is about 2/3 of the economy. So to the extent that we hear a lot more enthusiasm about consumer spending in the remainder of the year, which contains the holiday shopping season, that could be good news for the economy.

To the extent the aggregate signals suggest that the consumer isn't pulling back more than expected, that could be a potential headwind for the economy. So, again, a very big week, and if we really wanted to lump it in there, what we will be paying most attention to, outside of the demand side, will be what these companies have to say about their margins in the back half of the year. Reason being, till now, it appears that companies have been willing to take the tariff impact on the chin.

But past a certain point, they're probably not likely to do that. So, most notably, what are they going to say about pricing and margins to the extent they signal that they're going to pass more of the tariff pain through, that would likely be another tailwind, unfortunately, for inflation pressures. So, again, we'll want to be paying close attention to that.

And, in particular, what does Walmart have to say on that or Target? Because if memory serves, both of them kind of indicated that they were looking to hold the line on prices. So, again, we're going to want to pay attention to what they say on prices and margins for the back half of the year.

As we move through that wave of retailer earnings and collect all those data points, remember that Thursday and Friday are going to be two very important days for the market. Thursday, we have the flash August PMI. And what that tells us about the pace of employment, tariffs, and inflation, that's going to be very important for the market in general.

But it's also going to be the last data point and arguably the most fresh one before Fed Chair Powell speaks on Friday at Jackson Hole. Now, the Fed Chair may tip his hand on monetary policy. He may say something, but he does not have to.

But, remember, one way or another, the market will be leaning into what he does have to say. And if he doesn't say anything, the market could come away a little disappointed. But rest assured, we will be listening on Friday, breaking it all down.

And, really, we laid out our expectations in the weekly roundup on Friday. So I'm not going to bore you with those details here. But suffice to say that, if we look at the data, it's understandable if Powell leans a little less dovish than the market might be expecting.

But let's turn real quick to one or two other things that I want to talk about in today's video. First is on the investment banking front. Boy, that activity in the first half of August has been rather brisk. And at its current pace, August remains on track to see IPO activity matching the strength that we saw in July.

July raised about 5.2 billion across 29 IPOs. And the pipeline, halfway through the current quarter, it also appears pretty robust between now and the balance of 2025, including potential IPOs from Klarna and StubHub likely to join the mix. Now, that activity, of course, is very supportive of our shares of Morgan Stanley and Bank of America. And if we see that expected strength continue, it may give us a reason, especially if we see a pickup in M&A activity, to revisit our price targets for both Morgan Stanley and Bank of America shares.

As that IPO activity heats up, we will also be watching new filings as it relates to, you know, the investment portfolio over at SuRo Capital. If the company has more opportunities down the line to monetize more of those investments, well, boy, that really bodes very well for further dividends down the line. And, remember, we continue to look at SuRo from a total return perspective.

But, again, as it relates to SuRo, you know that we're more interested in picking up some additional shares for the portfolio to increase our size to that dividend stream. And that is still even after we picked up more shares of ServiceNow this morning, as I talked in that alert. Other stocks that we still have on our shopping list, Axon, Waste Management, and, at the right price, perhaps some additional shares of Palantir as well.

Now, with just TJX reporting this week, you can expect us to do a lot more connecting the dots, as we like to say, as we go through all of these retailer earnings but also as we start to shift gears away from those earnings towards another wave of investor conferences. Now, we've got ones from Citi, Deutsche Bank, and, of course, Goldman Sachs coming up in the next few weeks. And in our minds, these upcoming events and what the management teams have to say are going to be important for a few reasons.

One, what are they telling us on the demand front, just given the timing of these conferences? We're going to be somewhere between a little over halfway and 2/3 of the way through the current quarter. So what they have to say about demand strength and relative to their guidance, do they become increasingly comfortable with their guidance? Is there room to take their guidance higher? That will be something that we're watching.

But also, two, what do they have to say tariffs, impact to trade deals, and margins? And how does that tie back to the second half of the year EPS expectations for the companies? And, remember, we've made a big deal about looking at second-half EPS expectations compared to the first half for the S&P 500. Why?

Well, because they have marched almost steadily lower since the end of March until the last few weeks, as more and more companies have reported. So during these investor conferences, we'll be taking our pencil to paper, as we like to say, and revisiting those expectations for the market, kind of asking the question, the declines that we've seen in those consensus EPS expectations for the S&P 500, for the second half of the year compared to the first half of the year, are those justified based on what the management teams are saying? Or were those expectations lowered, perhaps to give management teams another opportunity to walk over and deliver beat and raise quarters?

So that will be something that we're kind of puzzling through over the next few weeks. The answers will help us determine really what's next for the market on a sustained basis. So we're going to have a lot to talk about, not just this week, but next week, the following week as well.

So, my friends, please be sure to check your emails, your alerts. We're going to have a lot of stuff coming at you over the next couple of weeks, even though it tends to be one of the slower times of the year. And, of course, if we make any moves with the portfolio, we want to make sure that you are right there with us.

And, remember, before we get out of here today, we do have our next set of portfolio office hours in the forum, 4:00 PM to 5:00 PM Eastern. You bring your questions, as I like to say. I will bring the answers, and I hope to see you there. Thanks for watching.