VIDEO: Here's Our Game Plan as This Semiconductor Name Reports

In today’s Daily Rundown video, Chris Versace explains why we want to be cautious following the strong stock market gains in November even though December tends to be a seasonally-strong month. 

Chris also recaps the Black Friday shopping data and breaks down Monday's November Manufacturing PMI data from ISM, calling out these two positive findings. We also share the earnings reports we’re focusing on this week, including our game plan for Marvell MRVL shares. 

Transcript

CHRIS VERSACE: Hey, everyone, Chris Versace here, Monday, December 2. We are kicking off the final month of 2024. But because we ended November last week, let's start this week with a little bit of rewind for the stock market and what it did in November.

And as you know, it was certainly a very strong month really following the outcome of the 2024 presidential election. The S&P 500 added 5.7% in November alone. The NASDAQ climbed more than 6%. Fortunately, a number of the positions that we had in the portfolio allowed us to outperform the S&P 500, adding further distance between the portfolio and that market benchmark on a year-to-date basis.

Now, we all know that November tends to be a very strong month, as is December historically, but expectations coming out of November extremely high. When we take a look at the Citibank Panic/Euphoria Index, clearly in euphoria. We look at the Fear and Greed Index, clearly in greed. We take a look at the short-term S&P 500 oscillator. It's a little overbought. And when we take a look at the S&P 500's valuation, near 25 times consensus 2024 earnings and about 22 times consensus 2025 expectations.

Now, all of this says that we want to be prudent investors. Yes, there is a lot of enthusiasm out there for the Trump agenda, whether that might mean tax cuts, the extension of existing tax cuts, a more favorable regulatory framework. But there are some questions about tariffs. We are seeing some saber rattling regarding Canada, Mexico, and now the BRICS. So far, it seems to be bringing them to the table, but we'll have to see what the overall outcome is.

But that's kind of the backdrop. But let's focus now on what's coming at us, because it is a busy week, everything from the finish of the Black Friday, Cyber Monday shopping holiday weekend to a rash of economic data that's going to influence what the Fed is likely to do and say on December 18 when it exits its next policy meeting, as well as shares its updated set of economic projections. So let's get to it, as we say.

All right, first, the tally for Black Friday to Cyber Monday shopping-- so far, results are shaping up as we've expected. We've talked with you about this, that we expected e-commerce to really be the big beneficiary. And indeed we, are seeing that, whether it's metrics from Adobe Analytics, Mastercard, or others out there. We broke some of this down in our opening comments this morning, but it bears repeating that consumers are not only flocking to digital shopping, they are flocking to retailers that are using big, big discounts.

When we take a look at the data by the numbers, as we like to say, Cyber Monday, today is going to continue it. They're expected to have about 13.2 billion in sales today alone. That would make it the biggest digital shopping day so far in 2024. And we know we've had a number of big ones. Thank you to Amazon with its Prime Days earlier this year and the competing efforts.

But when we sit back on Tuesday and we take the tallies from Thanksgiving, Black Friday, Saturday, Sunday, and Cyber Monday, we're going to have a much better sense as to how the overall shopping went relative to expectations, where consumers are shopping, and what they're shopping for. As we think about all of this and we've received thus far, it's very supportive for the positions we have in the portfolio, namely Amazon and Costco. They're benefiting from the shift to digital, helping consumers stretch their disposable dollars, and, to some extent, as you know as I like to say by now, season's eatings. But we'll have to continue to keep tabs on them as more data comes in.

We also have, as I said, several pieces of key economic data coming this week. We already got one. That's the November manufacturing PMI from ISM. And while the headline figure was still contracting, it was a little better than we saw in the last couple months. More importantly, the new order figure crossed the expansion contraction line of 50 for the first time since March. And the prices component, wow, a big drop-- came in at 50.4, far better than the expected reading of 55.2 and the October figure of 54.8.

Now, that's just for the manufacturing side of the economy. The Fed and others, including us, we've been focused on inflation on the services side, but we'll get more of that information later this week with the November services PMI data from ISM.

But one other thing the Fed has been focused in on and we've been focused in on is the health of the jobs market in the manufacturing arena. ISM's November manufacturing PMI showed that it came in with a figure of 48.1. Yes, better than October's 44.4, but still tepid, we would say.

So for us, the manufacturing figures were good. A potential rebound is starting to emerge given the new order data, but we're going to want to pay very close attention to what we see in the November service PMI data for inflation and job creation.

We also have some other job creation data coming later this week. Yes, we'll get ADP's employment change report mid-week. And then on Friday, we get the all-important November employment report. As we collect all of this data, we're going to put it into what we call the Fed blender. And the outcome will allow us to update our market expectations for rate cuts, not just in December but also for 2025, but more importantly, too, how the Fed is likely to update its set of economic projections that it will share with us also on December 18.

And as if all of that isn't enough for you this week alone, we do have more earnings coming. When we take a look at the rash ahead of us, we will get results from Salesforce, and we'll be interested in their comments both on cloud and AI. We'll get quarterly results from Dollar Tree, Five Below, Lululemon, Ulta, and some other retailers. What we'll be looking for is what they have to say not only about the holiday shopping season so far, but what do they say about the use of discounts, promotional activity, and the impact on margins? We'll also be keeping an ear open for what they say about their inventory levels as well.

Now, the big report for us and the portfolio will be from Marvell. They report after Tuesday's market close. The company continues to benefit from AI and data center chip demand, which we know has been strong. We're also starting to see signs that, yes, a rebound in demand for enterprise networking and carrier infrastructure is unfolding. That's been a key part of our thesis for Marvell.

Remember that as AI adoption happens, it's going to drive digital infrastructure capacity-- it's going to drive digital infrastructure capacity to tighten further, fostering some incremental capital spending for enterprise, networking, and carrier infrastructure. That's our medium to longer term play here with Marvell. And we seem to be seeing that starting to play out. So we, of course, like that.

We will plan on revisiting our Marvell price target after the company's report on Tuesday, as I said, after the close. But heading into that report, there is some interesting news coming out of the company. They announced a five-year strategic collaboration with Amazon Web Services, which includes a broad range of data center semiconductor chips from Marvell.

If you remember, one of the key things when it comes to AI chips in Marvell is their proprietary relationships with not only Amazon Web Services, but also Microsoft, Meta, and Alphabet. So we expect to see a good report out of Marvell. And again, we will be updating our price target once we have that report. So be sure to look for that midweek, as well as our comments on the overall Black Friday to Cyber Tuesday shopping event, more economic data.

Pretty much business as usual for us in a busy week. And that means please be sure to check your emails, your alerts. We want to make sure you get all of our thoughts as we share them with you. And if we make any moves with the portfolio, we want to make sure you are right there with us. Thanks for watching.

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