VIDEO: Mulling New Price Targets for 2 Financial Holdings

In today’s Portfolio video, Chris Versace lays out the items we’re focusing on this week, ranging from another wave of retail earnings reports to those poised to give us fresh insight on AI and data center demand. 

That includes two Portfolio holdings, one of which could decide how the market closes out August. Chris also explains why we’re likely to revisit price targets for two of the Portfolio’s financial holdings, and how we’re going to use the seasonally weak month of September to the Portfolio’s advantage. 

Transcript

CHRIS VERSACE: Hey, everyone, Chris Versace here. It is Monday, August 25th, final week of the month and typically one that is a slow fade ahead of the Labor Day holiday weekend. But if you read Friday's weekly roundup, then you know that after last week's Jackson Hole event, the one at which Fed Chair Powell said the Fed's policy stance may, may warrant adjusting, you know then that we have another jam-packed week ahead of us.

Yeah, there's a modicum of fresh economic data, but on that front, the focus is going to be Friday's July PCE price index, which is expected to join the core CPI figure for July, and the Producer Price Index for July in ticking higher.

Of course, we're going to watch it and break it all down, but before we get there, we have another wave of retail earnings this week-- Best Buy, Kohl's, Williams-Sonoma, and others. But we also have a big wave of tech earnings, as well, particularly ones that will bring fresh insight on AI and data center demand.

Of course, we're talking about NVIDIA, the largest weighting in the S&P 500. So of course, with the company says not only for its quarter, but its outlook is going to be important. Remember, we are in the world of beat and reiterate, may not get it done.

We will want to see NVIDIA beat and raise its outlook for the back half of the year. And based on what we've heard recently from Taiwan Semiconductor, Foxconn, and other capital spending comments from big tech, the odds of that are likely. But we also have quarterly results from Marvell, as well as Dell and HP.

With Dell and HP, what are they saying about AI and data center server shipments? There'll be another fresh positive data point. And with Marvell, obviously, we're going to want to hear about how they're benefiting from AI and data center demand in general, what's the update on their custom AI chip demand business, and of course, are we starting to see the flow through of AI adoption, spurring incremental capital spending levels that will benefit its carrier infrastructure and enterprise networking business.

In addition to that, we also have another wave of investor conferences, Jefferies semiconductor, IT hardware, and communication technology summit, boy, that's a mouthful. We have the Deutsche Bank technology conference. Evercore has a semiconductor IT hardware and networking conference as well. So a tremendous amount of data points.

And remember, with these conferences, we really want to pay close attention because, again, this is the last week of August, which means that as we go through the week, companies are going to have a pretty good sense as to what the demand pattern is for the current quarter. We'll be looking for refreshed expectations, not only for the quarter but the back half of the year. And of course, we'll be bringing those insights to you as they relate to the portfolio.

We're also going to be continuing to watch for investment banking activity. And I say that because this morning we're learning that Keurig Dr. Pepper is buying JDE Peet. And it's going to wind up taking these two entities after they put them together, splitting them into two standalone companies, one focused on coffee, one focused on beverages.

And of course, we will be reviewing what the potential implications of the transactions-- the transactions, excuse me, is but also the follow out as we think about our position in Dutch Bros. But I will share this, that when we take a look at the announcement of this Keurig Dr. Pepper buying JDE Peet, it is a positive for two other holdings. I'm referring to Morgan Stanley, which is advising Keurig Dr. Pepper, and Bank of America, which is advising JDE Peet in the transaction.

Now, for both of these positions, Morgan Stanley, Bank of America, we said that if we continued to see investment banking activity, as in M&A and IPOs, continue to heat up, we would have to revisit their respective price targets, and that does look like it's going to be the case, especially as the IPO market is looking to heat up once again soon after the Labor Day Holiday weekend.

IPOs that are expected to come to market in the ensuing weeks, Klarna, cybersecurity company, Netskope, figure technologies, and e-commerce firm, Patton group. So as it relates to Morgan Stanley, Bank of America, I would say this, hang tight. We are going to take out our pencils and revisit those targets-- targets, excuse me, obviously, with an upward bias.

In terms of the portfolio or other positions in the portfolio, I would say last week, as you probably noticed, we made several moves. We picked up additional shares of ServiceNow, Soros waste management, Palantir, and Axon. So that was a busy week. We have another busy week, but as we come into this week, we have just over 10% of the portfolio's assets in cash.

Now, you know that we are always looking for opportunities, right? But let's remember that those particular moves we made last week were for very specific reasons. More often than not, we were using pullbacks to improve our cost basis or to strategically pick up more shares, as the case was with Soros or Palantir.

So we have to remember, though, that we are in one of the seasonally weaker times of the year, August, especially, September, and the market, as we look at the CME Fedwatch tool really is expecting the Fed to deliver another rate cut in September, 125 basis point rate cut and still expecting additional rate cuts in the balance of the year.

But when we come back from the Labor Day holiday, we will get a snootful of August data. And that data, which includes the August PMI readings from ISM, multiple looks at the employment market, and of course, the August employment report, all of that data in aggregate is going to tell us if those rate cut expectations are correct or if it's just a bunch of hopium.

So as we think about this, let's remember that September tends to be a little bit of a disappointing month relative to other months in the year for the market. So as we've done of late, and we will continue to pick our spots as we get ready for the seasonally strong time of year in the market, that is October to December.

So just to be clear, what is our plan for this week? We are going to collect and follow company comments from earnings calls and investor conferences. We're going to be mindful of any other Fed head comments we get during the week because we will be getting some.

We're going to dig into quarterly results from NVIDIA, Marvell, and others, and we will look to improve our position over the next few weeks, which means now we collect data points. We get ready to move when the right opportunities present themselves in the coming weeks, as we get ready to position the portfolio for the final quarter of the year.

Now, as we do all of this, the question is, what do you need to do? Well, it's pretty simple. We're going to want you to follow your emails, follow your alerts. We want to make sure you're getting our latest thoughts. And as I like to say, if we make any moves with the portfolio you know that we want you right there with us. Stay tuned. We've got a lot coming. Thanks for watching.