Video: Let's Discuss Monday's Trades and What We're Watching After Today's Close

In today’s Daily Rundown video, Chris Versace recaps Monday's portfolio trades and discusses how the Justice Department's ruling against Alphabet GOOGL brings a similar opportunity for newer members. 

He also discusses the earnings reports we’ll be watching after today’s market close, including from Axon AXON, and reminds members that we have Office Hours after today’s market close in the portfolio Forum. 

Transcript

CHRIS VERSACE: Hey, folks, Chris Versace here, Tuesday, August 6. And as we shared in our opening comments with you this morning, yes, stocks are clawing back some of their recent losses due in part to the growing thought that the worst of the yen carry trade is indeed behind us.

However, the June quarter earnings season continues. And what we can say is that thumbing through some of the results from companies like Palantir, questions about the AI uptake that have plagued some of the big tech stocks, well, those results from Palantir and others are pushing back, saying that, yes, we are seeing AI adoption. We can add those results from Palantir to what we heard from ServiceNow. Even Microsoft's comments during its earnings conference call about the uptake of Copilot and others.

And I suspect we're going to see even more companies in the coming weeks and months talk about the benefits of AI and productivity on their businesses. This to me reaffirms the move that we made yesterday when we used the oversold conditions in Microsoft and Amazon to pick up those shares. We also added to the position in Marvell. And as you saw, we called up the shares of Meta platforms from the bullpen into the portfolio, establishing a $5.75 price target.

With Marvell, in particular, there was some results out last night from Lumen Technologies, which is an infrastructure company, and it said that it booked $5 billion in new business because of the demands stemming from AI. Lumen also said that it's looking to book up to another potential $7 billion in incremental sales from other customers for the very same reason.

And so what all of this tells us is that we are starting to see the AI thesis kind of come back into vogue. I do think that there was an overreaction over the last several weeks, and understandably so that people were concerned about the increasing spending levels that we were hearing about from Microsoft, Amazon, and others regarding AI.

And when we see spending escalate up, even though, candidly, it wasn't all that much from prior forecasts, the questions about, when are we going to start to see the benefits? When are we going to start to see the adoption unfold. And as I just shared with you, we are seeing that. And we just need to continue to look for incremental data points that say, yes, not only is the adoption happening, but it's starting to accelerate.

So we will continue to keep our ears to the ground for those types of data points. And yes, we will be sharing them with you. But the key takeaway here is that the demand profile picture for our positions in Nvidia, in Marvell, and Qualcomm continue to look very bright. That's why we added to the Marvell shares yesterday. And, as I mentioned, we are continuing to look at some other names on our shopping list, including the shares of Qualcomm.

Now, that was yesterday, but let's talk about this morning. We did have some thoughts, initial thoughts out on the quarterly results from Builders FirstSource and Vulcan Materials. And we'll have even more comments once we've put their respective earnings conference calls through their paces.

In our alert to you, kind of giving our initial reactions, we shared what we were looking to uncover in those earnings calls. But quickly with Builders FirstSource, our thought on builders is that while we continue to look forward to the rate cutting cycle in the near term, we want to confirm that home builders are continuing to lean into, as we like to say, the value added product offering that Builders has.

We like that for a couple of reasons. One, higher margin, but also two, the extent that home builders embrace that business, it binds them even more so to Builders FirstSource. And again, we're just looking for confirmation because all signs from home builders that have already reported their quarterly results or that they are indeed looking for ways to streamline their businesses, in other words, drive incremental cost out of their business, and, of course, the adoption of the value added business with Builders FirstSource is a nice way to do that.

With Vulcan Materials, we did talk about the impact of weather. We talked about some other companies that are seeing very robust backlog tied to infrastructure spending. So we'll look for confirmation on the earnings call for that. But for us, it's really thing that Vulcan might start to say about 2025, either because of the expected turn in the housing market or the benefit of the CHIPS Act.

Of course, if Vulcan's comments about the 2025 housing market are favorable, that would support our medium to longer-term view on Builders FirstSource. So we'll be wrapping all of those comments together later today.

I also wanted to quickly touch on the latest news about Alphabet. I'm, of course, referring to the loss in the antitrust case brought by the Justice Department. So when we see this, there tends to be a knee jerk reaction. We did see the shares trade off a little bit yesterday on that news. And yeah, there is some incremental uncertainty that we're going to have to consider about Alphabet's business over the long term.

But the reality is that Google is going to appeal, and it's going to take at least several quarters, possibly years for a final outcome to be reached. And until then, the reality is that we don't see any disruption to Google's near-term operations as a result of the ruling. If anything, the reaction to the ruling has placed Google shares into oversold territory.

And while we have a relatively full position in the portfolio, because they're oversold, it does offer a nice pickup point for folks that are underweight the shares, not too different from what we did yesterday with Amazon and Microsoft. And after today's close, we are going to get quarterly results from Axon. I discussed that in yesterday's video.

But if you missed it, solid June quarter earnings and guidance from Motorola Solutions set the table for what should be something very similar from Axon after today's close. And we continue to like the Axon story medium to longer term, hinging on the accelerating mix shift towards the higher margin recurring revenue stream, particularly its cloud business, which should drive EPS growth in the coming quarters.

Also after today's close, there are some other earnings that we will be paying attention to. Inter Parfums with an eye towards Coty. Inter Parfums is a fragrance company, so we'll be looking for not only their quarterly results, but really what they say about the second half of the year. Reason being that is the ramp to the holiday shopping season. And for Coty, that is its seasonally strongest time of the year. So we'll be looking for some nice confirmation out of Interparfums.

We also have earnings from Jack in the Box. Now, we don't have any dogs in the fast food fight, but when it comes to Jack in the Box, remember, we do have the shares of Dutch Bros in the portfolio. And Jack in the Box its geographic footprint is really skewed towards California, so we'll be looking to see what they talk about regarding margin pressure because of the $20 an hour fast food minimum wage that went into effect at the start of the June quarter.

And we'll be triangulating that against other comments from McDonald's, Domino's, and others. But candidly, Jack in the Box has one of the largest footprints in California, so we will be watching that very closely. And again, with an eye towards Dutch Bros who reports later this week.

We'll also be poring over quarterly results from Trex, which is kind of the composite decking company. What are we looking for? Well, it's another indication on consumer spending, no question. If consumers are cutting back on their spending, we'll likely see that reflected in Trex's outlook. But we're also curious to see what Trex has to say about the overall housing market for the second half of the year and potentially into 2025 as well. That'll tie back to our thinking on Builders FirstSource.

And then, finally, sticking with the consumer, we do have quarterly results tonight from VF Corp. And this has been a challenged company. Remember in our notes yesterday we did talk about how the final 25% of the quarterly earnings season skews a little bit towards consumer facing names, retailers in particular. So VF Corp will be one of the first ones that reports.

Remember, our thinking is that as these retail facing companies report over the next couple of weeks, consensus expectations for S&P 500 earnings growth, which is already started to come down, could come down a little bit further. So we'll be kind of testing that thesis and thought process with the start of VF Corp but as we get more retailer earnings in the coming days and weeks.

So with that covered quite a bit, but we do have a lot more coming your way today, including our next iteration of office hours. That will be from 4:00 PM Eastern Standard Time to 5:00 PM. In the forum, please bring your questions, and we will bring our answers, or at least our answers as best we can. Between now and then and even after office hours, because it is going to continue to be a busy week. We've got, like I said, earnings from Axon. We have a number of earnings that we'll be watching. And later this week we will get quarterly results from Trade Desk.

So we want to share our latest thoughts with you. So please be sure to check your emails, check your alerts. And if we make any additional moves with the portfolio this week, we want to make sure that you are right there with us. Thanks for watching today's video. And hey, I'll see you at office hours. Come by. Look forward to it. Thanks for watching.

At the time of publication, TheStreet Pro portfolio was long GOOGL and AXON.