Headlines for the Holidays: News That Speaks to the Pro Portfolio
Major themes include AI adoption, thrifty consumers and military spending.
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As many were focused on the holiday-shortened week, we were hunting the headlines for reports that speak to the Pro Portfolio's investing themes. The adoption of artificial intelligence remains a strong story, and so does that of consumers remaining selective in their buys. But another major theme is defense, with more calls for greater military spending. Let's dig in:
Aging of the Population
“America's senior population is growing, putting a strain on services for older U.S. citizens. A Northwest Florida expert says the state has the second largest population of people over 65 behind California. She says this is what has been called the “silver tsunami."… "We'll see in the next few years brings in terms of innovation and things," Dyess says." On one hand, there may be problems. On the other hand, we see innovation and all of the ways we could use technology,” Read more here
Holdings: Labcorp LH
Artificial Intelligence
“Enterprise spending on generative artificial intelligence (AI) increased sixfold in 2024 as businesses began implementing the technology after first experimenting with it… Seventy-two percent of enterprise IT decision-makers from companies with 50 or more employees expect to see broader adoption of generative AI “in the near term” Read more here
“Middle-market companies experiencing strong ROI are increasing their AI budgets by 19%, compared to just 6.2% for those seeing negligible ROI. But even companies reporting limited ROI are determined to press forward with their AI investments, with 78% of CFOs planning to increase their GenAI budgets next year.” Read more here
“KPMG will spend $100 million over the next four years on its enterprise AI services. It’s part of an artificial intelligence (AI) partnership between the professional services giant and Google Cloud, Steve Chase, vice chair of AI and innovation for KPMG… He pointed to a poll of business leaders conducted by KPMG, which showed that 50% of companies planned to spend $100 million on AI projects in the next 12 months, with 20% planning to invest at least $250 million. Chase added that bookings for KPMG’s Google Cloud-related services have increased tenfold over the last two years.” Read more here
Holdings: Elastic ESTC; ServiceNow NOW
Artificial Intelligence, Digital Infrastructure
“Verizon has paired with Ciena to transfer 1.6Tbps of data in its live fiber network. The carrier stated the trial shows how it can ensure its fiber network can support AI and the growing demand for data… Verizon stated that the trial is a key part of its plans to ensure its fiber network can support AI.” Read more here
Holdings: Marvell MRVL
Cash-Strapped Consumer
“Most cardholders say their outstanding credit balance is either holding constant or increasing. Overall, 25% said their outstanding balance increased over the last year, while 55% said it stayed about the same. Just 21% said that it decreased. Financially struggling consumers were the most likely to see their credit card debt grow. Among cardholders living paycheck to paycheck with issues paying bills, 34% said their outstanding balances increased. For those paycheck-to-paycheck cardholders without difficulties paying their bills, 30% said the same.” Read more here
“Consumers will be focused on deals, selective on splurges, and hitting up discount and off-price retailers, following a “trend we have been seeing for almost two years now,” said Mari Shor, a senior research analyst at Columbia Threadneedle Investments, an asset-management group. “I would describe the consumer as ‘stable’ but still choiceful in their spending.” Read more here
Holdings: Amazon AMZN, Costco COST
Cybersecurity
“Russian state hackers APT28 (Fancy Bear/Forest Blizzard/Sofacy) breached a U.S. company through its enterprise WiFi network while being thousands of miles away, by leveraging a novel technique called "nearest neighbor attack." The threat actor pivoted to the target after first compromising an organization in a nearby building within the WiFi range.” Read more here
“Security researchers have uncovered two previously unknown zero-day vulnerabilities that are being actively exploited by RomCom, a Russian-linked hacking group, to target Firefox browser users and Windows device owners across Europe and North America.” Read more here
“Supply chain management firm Blue Yonder is warning that a ransomware attack caused significant disruption to its services, with the outages impacting grocery store chains in the UK… The company offers AI-driver supply chain solutions to retailers, manufacturers, and logistics providers, encompassing demand forecasting, inventory optimization, and transportation management.” Read more here
Holdings: Elastic, First Trust Nasdaq Cybersecurity ETF CIBR, Microsoft MSFT
Data Privacy & Digital Identity
“Stolen or falsified credentials now account for 41% of fraud cases measured — a very high share given the variety of tactics fraudsters use. That’s nearly twice as prevalent as the next most common type, fraudulent transactions, which account for 24%. Additionally, approximately seven in eight FIs report increased credential-based fraud instances. Given this atmosphere, it is likely no coincidence that FIs exhibit urgency to adopt innovative solutions like tap-to-authenticate metal payment cards.” Read more here
Positions: First Trust Nasdaq Cybersecurity ETF CIBR
Safety & Security
“When Republicans take control of the Senate in January, the chairmanship of a panel that overseas military spending will fall to one of the upper chamber’s most prominent defense hawks. Sen. Mitch McConnell of Kentucky, the Senate’s longest-serving leader, will become chairman of the Senate Appropriations Committee’s defense subpanel when he steps down from his leadership post next year. He said he intends to use his new perch to pour resources into the military.” Read more here
“Greece’s PM Kyriakos Mitsotakis called on all European NATO allies on Tuesday to boost their defense spending and create a common anti-missile defense given the developments in Ukraine and the Middle East… The Greek PM said that collective defense requires a strong defense industry and significant investments. He also stressed the need for a common anti-missile defense after Russia’s lunch of the Oreshnik missile, a hypersonic intermediate-range ballistic missile, against Ukraine.” Read more here
Holdings: Lockheed Martin LMT
The Strategies Behind the Thematics Mentioned Above
Aging of the Population - Capturing the demographic wave of the aging population and the changing demands it brings with it.
Artificial Intelligence – Software, chips, and related companies that facilitate the collection and analysis of large data sets and autonomous generation of solutions given non-machine language prompts.
Cash Strapped Consumer - Companies poised to benefit as consumers stretch the disposable spending dollars they do have.
Cybersecurity - Companies that focus on protecting against the penetration of digital networks and the theft, ransom, corruption or destruction of data.
Data Privacy & Digital Identity - Companies providing the tools and services that verify authorized users and safeguard personal data privacy.
Digital Infrastructure & Connectivity -The buildout and upgrading of our Networks, Data Storage Facilities, and Equipment.
Safety & Security – Targeted exposure to companies that provide goods and services primarily to the Defense and security sectors of the economy.
