VIDEO: Looking Past U.S.-Iran to the Market’s Next Potential Challenge

March 26 (10:58)

In today’s Pro Portfolio video, Chris Versace talks about how the Portfolio is digesting U.S.-Iran-related headlines, including growing signs of pricing pressures and supply constraints. In doing so, he explains what we're watching on the peace plan front, and what could lead the Portfolio to renew its recent cautious positioning.

Along the way, Chris discusses a few Bullpen considerations and one or two holdings that could be candidates for some prudent portfolio action.

We also spend some time comparing the shares of SuRo Capital (SSSS) to the Fundrise Innovation Fund (VCX), which has a very similar strategy but trades at a significantly higher price-to-net asset per share valuation.

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

Transcript

CHRIS VERSACE: Hey, folks, Chris Versace. It is Thursday, March 26. And as you can see, I'm in yet another new place. Luckily enough, I can say to you that past a certain point, this will be the place that you'll be seeing me come from on a rather regular basis. More details on that.

And as the process happens, I look forward to sharing with you the learnings and the insights that we get on the home repair and remodel market, everything from pricing pressure to lead times and other things. I think it'll be invaluable as we contemplate some things for the portfolio a few months down the line.

But near term, as in today, the market is once again under pressure. Obviously, we're seeing renewed questions about the prospects for a US-Iran peace plan and the path to that. We've seen the market like this before, trading day-to-day based on the latest headlines. We will keep our collective wits about us and proceed carefully, using pullbacks in the marketplace and potentially oversold conditions to either pick up more shares in existing positions or perhaps make a move not just by adding another stock or two to the bullpen, but maybe even calling something else up into the portfolio.

But if you remember the alert that I shared with you about two weeks ago, six charts that really depicted consensus expectations for the S&P 500 for 2026 and the first half of the year, I will share with you that I am reading some reports that there are others on Wall Street who think that the earnings season is going to be just fine. And I have to scratch my head a little bit about that, because we've already started to see some warnings. We talked about Honeywell recently. We talked about FedEx and their increasing weekly surcharges, the USPS and their price increase, as well as others that we were seeing and sharing in our string of opening comments over the last several days.

Well, to that, as I was getting ready for today's video, I was just scanning some of the headlines. Well, what are we seeing? Titan global chemical supplies lifting prices of plastics and polymers used in everything from auto parts to toys. We're seeing Titan supplies of helium due to the conflict in the Middle East. We talked about this potential, and now we are starting to see it. We also saw that H&M warned that the war is having a "significant impact," quote, unquote, from its perspective on consumer spending.

So as we sit back and think about this, we understand that the market is really focused on near term, very near term, on this potential peace plan, when it might emerge. Our thinking is that the longer it takes to get to this peace plan-- that word duration, that's right-- the longer it takes to get to the peace plan, the more likely the market is not going to just look through this as a short-term blip.

Now, if we do get a peace plan in the next day or two, the odds that the market will do just that, they are there. But again, the longer this goes on-- and remember the comment from this morning's opening comments. Trump shared with his advisors he thinks this is going to go on for weeks. Also, remember too that when this conflict first started, the time window was four to six weeks.

Well, we're bumping up on four. Add in a couple of weeks. Could it be six weeks? Certainly possible. Mm, that would put us right in the mouth of the March quarter earnings season.

So if that is what happens, or it's even later than that, then I suspect that the market will remain anxious, nervous. Call it full of fear, depending on where the VIX is or the CNN Fear & Greed Index. It's going to mean that we're going to want to tread carefully, because the flow through of all of this is likely to impact quarterly results for the March quarter and guidance for the second quarter of the year.

And again, if we don't have real seeds of a peace plan coming together by that point, odds are the market-- well, it's going to meet those-- at least those initial earnings reports, potentially with a knee-jerk reaction. It's going to be volatile. So we are going to want to continue to remain on the cautious path. But I will also say that as we move closer, even though we did some buying earlier in the week, we may want to get just a scooch, a wee bit more defensive, again, depending on what happens between the US and Iran in the coming days.

So while we are focusing on opportunities for the portfolio, and we've talked a little bit about IDEXX and we're continuing to do some work on there, we just added some shares of applied materials to the portfolio. We also laid out where we would look to pick up some more, depending on what happens with the shares, if they fall back towards that 50-day moving average.

I'll also share that we're quietly taking a look at Boeing shares, given an increase that we're seeing in order activity with the shares falling from around $250 to $195. That's a bit of a tease. I know, I know. We have a little bit more work to do on it to decide if we're going to first call it into the bullpen. Maybe something else, but we'll see.

If you're thinking, hmm, if these are sustained oil prices and jet fuel prices, could we see maybe a crimp in airline capital spending? Certainly possible. That's one of the things that we're going to have to wrestle with to determine, is the pullback to $195 overdone? Not yet overdone? Is there more to go? This is what we're thinking about.

But I will also share that we are also taking a look at some of the stocks that have had some tremendous runs of late. Marvell shares, they've been on a tear. Even SuRo Capital shares, very, very nice run of late, so much so that they've not only become the portfolio's biggest position. But last I looked, they're topping out around 4.7%, 4.8% of the portfolio. So as we look to get a little more cautious, we may elect to do some prudent register ringing.

But here's the thing with SuRo Capital. On the one hand, they're trading at around 1.3 times net asset value per share, which we know is going to step higher when the company reports its March quarter results. Why? Remember, the simply large, large, large capital raise and post-money valuation tied with OpenAI. That is going to give us a nice step function higher in the net asset value at SuRo Capital.

But we know this, so why am I mentioning this? Well, it's kind of interesting, right? Because in doing our homework on SuRo Capital, we did notice that a new product-- let's just call it the Funrise Growth Tech Fund, ticker symbol VCX-- arrived on the scene just a couple of weeks ago. I think March 19. And that has simply been explosive. And as I'm talking to you, it's trading around 11.8 times its net asset value per share. That's around 19.

Now, when we look at VCX's portfolio-- Anthropic, Databricks, OpenAI, Ramp, and others, about 98% of it is invested in private companies, not oh so different than SuRo Capital. And when we look at VCX, its top three holdings are about 48% of its assets. So like SuRo, VCX is going to benefit from the monetization of its private company portfolio. Again, Anthropic, Databricks, OpenAI. But so too is SuRo Capital, which also has positions in OpenAI and several others that are poised to go public this year, or 2027.

So the issue here, I think, is that, one, VCX just arrived on the scene with a splash, a marketing splash. But even after the pullback that we're seeing today, they're still trading around that 11.8 times.

Now, you can sit there and go, boy, that sounds really expensive. And arguably, it is. But that's not the argument that I want to make today. I simply want to say that when we look at the shares of SuRo Capital and as it continues to monetize its portfolio, and we look at where it's trading at its net asset value per share, boy, typically these things tend to collapse.

I would argue that VCX is likely to come in. And I think as folks look around and as the IPO market heats up, we're going to see the valuation accorded to SuRo Capital shares, that 1.3 times today, which of course, will move lower once they increase their net asset value, we're likely to see the accorded multiple move higher.

So are we inclined to exit our SuRo position? Well, we have to remain disciplined investors. And it is the biggest size-- or the biggest sized position in the portfolio. So we may elect to do so, if we opt to take a few more steps into the camp of becoming a little more defensive, subject to what we learn in the next couple of days. But given my druthers, I would rather hang on to that, especially since I think that the company will, over time, continue to declare dividends as it monetizes that portfolio.

And I can also share with you that when I was in New York earlier this week, I did spend some time with the SuRo Capital team. I can easily say that they are evaluating some very interesting prospects for their investment portfolio. I can also say that they are extremely disciplined investors, just like us.

More to come. Got a busy day as we close out the week. Stay tuned. Check your emails, your alerts. And folks, if we do make any moves with the portfolio, we want you right there with us. Thanks for watching.