VIDEO: Let’s Review 6 Holdings We Exited in 2025: What Went Right and Wrong

In today’s Pro Portfolio video, Chris Versace reviews some of the positions we shed in 2025, discussing our reasons for exiting when we did. We stand by three of the six decisions we made, review our rationale for two others, and note the one that we should have held onto, and the lesson learned.

Chris also reminds you that Wednesday, December 30, the Pro Portfolio will start the process of reconstituting its EPS Diplomats model strategy, and that we continue to watch the position size of Bank of America (BAC) .

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At the time of publication, TheStreet Pro Portfolio was long BAC.

Transcript

CHRIS VERSACE: Hey, everyone. Chris Versace, Tuesday, December 30. Getting closer to the end of the year, keeping our eyes vigilant for the Santa Claus rally, and, of course, waiting around today to get the latest Fed minutes.

Now, I got to be honest with you. Given the economic data we've gotten since the Fed's last policy meeting, my view is that the minutes aren't going to have a lot of surprises, but we'll see. We'll take a litmus test of what those Fed heads had to say, what their expectations were ahead of the data, and maybe try and read into how those expectations might have shifted given what we saw with the subsequent inflation data and, of course, employment data.

But as we barrel towards the end of December, I wanted to do something a little different in today's video. I wanted to talk kind of looking back at about 5 transactions that we had in 2025 and where they stand now, really trying to break down what went right, where did we go wrong, as we reflect on 2025 and get ready for 2026. So with that said, back in January 2025, we exited the shares of Builders FirstSource at 140-ish. Stock as last I looked was around 103.

So while we lost money on the trade, it was a prudent move to exit Builder when we did. Now, let's remember. We were coming into 2025 thinking that the Fed would probably be a little more aggressive in lowering interest rates. Turned out they were not.

Obviously, the employment market worsened, as we saw, not just through the summer, late summer, but as with more recent data. That's why we've remained on the sidelines, not just with Builders FirstSource, but as you saw with our more recent notes on the housing market, we're likely to remain very cautious on the sidelines with housing into 2026, probably at least the first half of 2026. And even though we could see a more dovish Fed emerge, we do want to see a more vibrant employment market. That will be a key signal for us to circle back to some potential housing plays.

Another one, this was in February-- we exited Trade Desk at 72. It is now at 38. Remember that we first were turned on to the shares of Trade Desk as another way to play the accelerating shift towards digital advertising.

A couple of things happened. Remember, the competitive landscape really shifted as we saw Amazon, Netflix, and Apple move in a more demonstrative way into digital advertising. So when we saw that, we kind of said, well, the landscape is changing. These companies have larger, more diversified business models.

They can be more effective and competitive, especially with Amazon, as they look to monetize not just their online shopping platforms but also some of their other services, notably Prime Video. So that led us to exit Trade Desk. That was another prudent move even though we lost some money on that.

Let's talk about 3 others. Lockheed Martin-- back in March, we had some concerns, one about F-35 slippage but also what the trade-- I guess you'd call it trade war and tariffs would have on that. We exited at 442. Stock is at 488.

Now, as we sit here, yeah, there are some geopolitical tensions out there, potentially China-Taiwan, Venezuela. But we're also starting to see things cool a little bit potentially regarding Ukraine and Russia. So we're going to pay attention to this.

We don't really have a lot of exposure on the defense side. We do have Palantir, which is more on the software side. We do have Axon Public Safety.

But we don't have anything really on the true defense side. So we'll keep tabs on Lockheed Martin and others. But remember, with Lockheed, we really want to understand the revised timetable for the F-35 and what that could mean over the next several years and how it may or may not be impacted by the accelerated use of drone adoption in the military.

Let's talk about Elastic. We exited that at 73, stocks at 77. A little concern on our part about AI adoption, but I would also argue that we shuffled the board a little bit and made some other moves, picking up additional shares of companies that, in our view, are better positioned.

Does that mean Elastic is a bad company? No, it doesn't. They will benefit from AI adoption, and I do think that they have some solutions for companies that are struggling with the siloization, if you will, of their data. And that makes it an impediment to AI adoption. So let's just call it enterprise search.

So it could be interesting. Could they be a potential takeout candidate at some point? It is possible.

It is possible. But I also think, though, like I said, that we've kind of positioned ourselves with other companies that are better rounded and have better EPS growth prospects ahead compared to Elastic. Also too, read the piece that we wrote this morning on AI agents. I think that kind of plays into what we're saying also about Microsoft, ServiceNow, Palantir, and a few others in the portfolio.

Let's talk about Universal Display. This one is going to be a little contentious, and I say that because throughout 2025, we received-- to say many would be an understatement but numerous, numerous confirmation points about the ongoing adoption of organic light emitting diode displays in not just smartphones and notebooks, tablets, but other applications as well. And if you remember that when Universal reported its September quarter results, about a few minutes before the close, the stock really took a nosedive.

And then it accelerated. And when we went through the company's earnings press release, we shared with you our thoughts that A, there was something very fishy going on here. To begin with, the company should have pre-announced their quarterly results, but remember too that they gave really conflicting views on how much visibility they have.

Yet in early September, when they appeared at an investor conference, if they had that visibility they claim, they didn't say anything about potential downside risk to the September quarter results. So that, we really flagged that as a management credibility issue. And I talked in our preview note about Apple's 2026 products that we are going to see Apple adopt organic light emitting diode displays across more of its products in 2026.

There's also the foldable iPhone that's expected in the back half of 2026, and that would be good for organic light emitting diode display demand, especially since others are likely to follow that move. But we continue to have concerns about management credibility at Universal Display. We will look for alternative ways to see if we can invest along with that accelerated adoption.

But here's the thing. I know folks were a little miffed when we exited Universal Display. We got out around just over a share price of 121.

Still today, the shares were at 119. So I don't feel that we made a erroneous mistake. If anything, we took that return capital, and we were able to move into some other areas, again, with much more robust growth prospects and better end market dynamics as well as you think about it, we were able to round out perhaps picking up some additional shares of our non-tech companies as well.

And you know, for example, we continue to like waste management. We continue to like Welltower. But let me get to the one that we missed. That would be Applied Materials.

We exited in March. 142.36 is the average exit price. Stock today, 263. So you have to say without a doubt that we missed it. But let's review why we were concerned.

Remember that there were going to be a lot of headwinds for the semiconductor capital equipment industry. Notably, the US government was trying to restrict China's access to leading edge materials. There were tariffs and other factors.

And as we sat there in March, the risk-reward kind of tipped, in our view, the wrong way. Now, should we have kept our eyes on Applied Materials in the bullpen? We probably should have.

Should we have paid attention and connected the dots to the rising demand for memory, for AI chips and strength in other end markets outside AI and data center and networking? Yes, we should have. We should have listened to the reasons why we were bullish on the shares of NVIDIA, Marvell, why we added Avago, why we liked and continue to like Qualcomm shares and others in the portfolio.

I will say that if we did have Applied Materials, the portfolio would be that much more skewed toward tech, potentially overweight in a larger degree to tech exposure. But, but, the lesson learned here is that we should continue to connect the dots in and around the portfolio, something that we strive to do.

And when we look at it, look. At the end of the day, we made the right call with Builder. We made the right call with Trade Desk.

We made the right call with Universal Display. Lockheed Martin, we missed a little bit, but we had our reasons for doing what we did. Same thing with Elastic.

The real miss for us in 2025 no question was Applied Materials. But we'll use that as a teaching moment as we move into 2026, reminding ourselves to continue to take a 365, 720 view, connecting the dots all the way up and down the food chain. And with that, my friends, I'm going to get back to creating some fresh content for today as well as working towards finishing up the December monthly roundup that we will have in your hands Friday, January 2.

Remember too, that tomorrow, Wednesday, December 31, we will put into play the first part of our reconstitution of the EPS diplomats model. That means that we will be selling the positions in the model that are not continuing on as we reconstitute and rebalance the portfolio on Friday. Friday is when we will be buying the new constituents, and if we happen to be carrying any over, we won't be selling them out and buying them back. That would just be foolish.

But we'll have a detailed alert explaining all of this to you tomorrow. And with that, my friends, please, even though it's a quiet time, continue to check your emails, your alerts. We want to make sure you're getting our latest thoughts. And as I said with tomorrow or if we happen to see Bank of America tip past 4.5% position size for the portfolio, we want to make sure that you are right there with us in making the moves that we do. Thanks for watching.