Signals From Our Investing Notebook
These findings support our thinking as well as confirm parts of our investment theses.
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* We’re opening our investing notebook to share some of the latest ripped-from-the-headlines signals and confirmation points for our portfolio holdings
Amid a busy week of economic data, earnings, the Fed, and the start of Portfolio Office Hours, we still managed to collect an ample number of confirming articles and other reports, not only for our thematic framework but for holdings inside TheStreet Pro Portfolio. While these findings are not hard data, they support our thinking as well as confirm parts of our investment theses.
Let’s review some of them…
Aging Population/Consumer Inflation Fighters
When we think of the “consumer” most tend to use an aggregate view, but when we look at the impact of inflation on fixed incomes for many seniors, we can understand why they would gravitate toward companies like Amazon AMZN and Costco COST.
“While inflation has afflicted Americans of every age, senior citizens are often in a more difficult predicament because many live off fixed incomes. Many depend heavily on Social Security – some 42% of elderly women and 37% of elderly men rely on the monthly payments for at least half their income, according to the Social Security Administration… Senior citizens typically get an annual cost-of-living adjustment that’s based on inflation. But many of them and their advocates have long complained that the increases don’t keep up with their rising expenses. They aren’t wrong: Inflation has eaten away at 36% of Social Security benefits’ buying power since 2000…” Read more here
Artificial Intelligence/Cloud Computing/Digital Infrastructure
We’ll be quick with these because we’ve already discussed the ramping spending by Meta META, Alphabet (GOOGL), Microsoft MSFT, and Amazon AMZN on AI and data centers.
Below we see some details around what looks to be meaningfully higher spending this year compared to last year. And yes, we continue to see Nvidia NVDA and Marvell MRVL as direct beneficiaries with Applied Materials AMAT and new Bullpen resident Eaton ETN as indirect ones.
“Demand for artificial intelligence bolstered sales growth in Amazon’s cloud computing division at the start of the year, the company said on Tuesday, as executives laid out plans to spend huge sums to support the fast-growing technology… Olsavsky said on Tuesday that Amazon expected its capital expenditures this year to increase “meaningfully” compared with $48.4bn in 2023, primarily to support growth in cloud and AI. Amazon invested $14.9bn in property and equipment during the latest quarter, which would be “the low” for the year, he said.” Read more here
“Microsoft will invest $1.7 billion over the next four years into expanding cloud services and artificial intelligence in Indonesia, including building data centres, visiting chief executive Satya Nadella said on Tuesday.” Read more here
“Amazon Web Services (AWS) announced plans to invest an estimated $11 billion in Indiana, creating at least 1,000 new jobs and marking the largest capital investment in the state’s history. With the support of Governor Eric Holcomb and the Indiana Economic Development Corporation (IEDC), AWS will build new data centers in St. Joseph County.” Read more here
Cybersecurity
As we mentioned in this week’s Roundup, nary a week goes by that we learn of new cybersecurity attacks that reinforce why we own First Trust Nasdaq Cybersecurity ETF CIBR shares in the portfolio.
“The US government is warning that pro-Russian hacktivists are seeking out and hacking into unsecured operational technology (OT) systems used to disrupt critical infrastructure operations.” Read more here
“Panda Restaurant Group, the parent company of Panda Express, Panda Inn, and Hibachi-San, disclosed a data breach after attackers compromised its corporate systems in March and stole the personal information of an undisclosed number of associates… Panda has yet to disclose the total number of individuals whose personal information was accessed or stolen in the incident.” Read more here
“Healthcare organisations across the globe are increasingly at risk from cyberattacks, according to a recent report by data security researcher Rubrik Zero Labs… The report noted that healthcare organisations manage 22% more data than the global average. Their data estates expanded by 27% in the past year, and sensitive records grew by 63%, well above the global average of 13%.” Read more here
Homebuilding & Materials
This signal explains why we aren’t likely to see a vibrant rebound in housing at least until the Fed begins its next rate-cutting cycle. As we heard on Wednesday it’s going to be a while, and could, in our view, slip into 2025.
“With the majority of homeowners in the U.S. now holding a mortgage with a rate less than 6%, there’s little incentive for them to move. In fact, 40% of homeowners don’t believe they could afford to buy their own home if they were to buy it today, compared to when they bought it five to 10 years ago, according to a survey by Redfin." The median-priced $420,000 home at a 7.1% mortgage rate would require a monthly housing payment of $2,864, according to the brokerage, which is a record high.” Read more here
Safety & Security
When it comes to Lockheed Martin LMT, these signals reinforce our thinking that as important as US defense spending is, increased defense spending outside the US is a positive tailwind for the company and our shares.
“Some European NATO member countries are calling for the alliances's defense spending target to be raised to 3 percent of GDP from the current 2 percent, the EU's top defense official said Tuesday… The pressure to boost spending comes as Ukraine's defensive war against Russia drags into its third year.” Read more here
“Japan's defense-related budget for fiscal 2024 has expanded to 1.6% of gross domestic product, steadily approaching the 2% threshold in line with Western economies… Japan previously aimed to spend no more than 1% of its GDP on defense. Germany was once as cautious about stepping up spending but said in February that it would reach the NATO target of 2% -- a first since shortly after the end of the Cold War. The U.K. now aims to spend 2.5% of GDP on defense by 2030.” Read more here
At the time of publication, TheStreet Pro Portfolio was long AMZN, COST, MSFT, NVDA, MRVL, AMAT, CIBR, LMT.
