VIDEO: Palantir’s Comments Bring Support for These Holdings

In today’s Daily Rundown video, Chris Versace shares how the Portfolio is planning for the U.S. presidential election outcome and discusses how quarterly results from Palantir PLTR, NXP Semiconductor NXPI, and GlobalFoundries GFS are positive for multiple Portfolio positions. 

"They simply added another layer of strong support for AI adoption," he says of Palantir's latest comments. "Another positive data point that explains why some of our names ... continue to increase capital spending to drive additional capacity not only for data centers, but AI." 

And with Builders FirstSource BLDR delivering September quarter results as suspected, Chris also outlines what’s next and why we intend to be long-term owners of BLDR shares.

Transcript

CHRIS VERSACE: Hey, folks. Chris Versace here, Tuesday, November 5, better known as Election Day. Now, you know we here at the Portfolio try to be as agnostic as we can when it comes to politics. We tend to be more policy watchers. But we would still encourage everyone to get out and vote today, keeping in mind that the outcome for policy will be determined not just by who's named the next president-elect, but by the ensuing congressional landscape as well.

And based on those cards, the ones that we get dealt, we'll continue to manage the Portfolio accordingly. But while we wait for the results for the 2024 election, which may not come right away-- it could be late tonight, it could be tomorrow, it could be potentially a little bit longer-- we will continue to focus on the evolving landscape of the market around us. And with that, let's dig into some things that we learned last night and early this morning.

Stepping back, we know we've gotten quite a bit about AI and just robust demand as adoption continues, not to just move along, but really accelerate. We heard that from Microsoft last week, that said that its capacity constrained. Last night, however, Palantir-- a name we don't own in the portfolio but one that we have to pay attention to when it comes to AI adoption-- well, they simply added another layer of strong support for overall AI adoption.

They cited robust demand not only on the commercial side, but also on the US government. Just another positive data point that explains why some of our names-- whether it's Microsoft, Alphabet, Amazon, Meta-- why they continue to increase capital spending to drive additional capacity not only for data center, but AI. And of course, the pull through on this is very supportive for our positions in NVIDIA and Marvell. But we also had October revenue from Apple's manufacturing partner Foxconn.

And there, their October revenue rose about 9.8%, almost 10% compared to September. And it was up over 8.5% year over year, hitting a record October level. Why? Strength in AI servers, computing products, and smart consumer electronic products. So yet another confirming data point. But when we pull back a little bit and we listen to NXP Semiconductor, which issued its earnings press release last night-- they'll have their earnings call today-- communications infrastructure, that segment at NXP was extremely constructive for our digital infrastructure plays, i.e. Marvell in particular.

Mobile was also up double digits, as well, over at NXP. Also, this morning, GlobalFoundries, their smart mobile devices business was up double digits year over year and quarter over quarter. One thing I will point out as it relates to NXP and GlobalFoundries, both of them are being weighed down in part by declines at auto chip businesses that they have, respectively. Now, we don't really have a lot of exposure to that.

There's a little bit with Marvell. There's a little bit with Qualcomm. But by and large, the driving businesses and comments that we've heard as it relates to data center, communications infrastructure, mobile all bode very well for Marvell and Qualcomm, really offsetting, I would argue to a large degree, any weakness in their respective automotive businesses. Now, we are going to have a bunch of earnings calls this morning, NXP as well as GlobalFoundries.

So we'll listen to those, which means we're going to have more comments and perspective, context, if you will, to share with you later today. But as we string across the comments that we've already gotten-- extremely supportive, again, for NVIDIA, Marvell, and Qualcomm in the portfolio. What's the next data point that we'll be paying attention to? Well, I shared this yesterday. In addition to those earnings calls, it's going to be the eventual October revenue report from Taiwan Semiconductor.

That's going to tell us a lot, not only about AI and data center, but also smartphone. We also have something after the close today among the companies that are reporting. We will be listening a little bit to Lumentum and what they have to say about AI and data center as well. Outside of tech, you know, this morning, we were waiting for quarterly results from Builders FirstSource-- BLDR. And they came in with arguably good September quarter results and EPS beat.

Revenue was just a little bit softer. But as we had thought might be the case, the company's outlook is just a little weaker, softer, if you will, than the consensus forecasts. We also heard from LGI Homes today, which also took down its delivery forecast for 2024. They now see about 6,100 to 6,400 homes. That's down from about 6,400 to 6,700 that they guided to previously.

Now, as it relates to these two companies, they both have earnings calls this morning. We'll be able to parse their guidance a little bit more. We'll be doing the same with a Builders FirstSource competitor called TopBuild, which also dialed back its expectation for the balance of the year. Now, remember what we had been saying about Builders FirstSource. We were a little concerned about the backup in mortgage rates and the impact in the back half of the year that that might have for the housing market.

We started to see, in the last week or so, some softer delivery guidance from some of the homebuilders. We saw this again from LGI Homes this morning. So it kind of makes sense. But remember, why did we first start the position in Builders FirstSource? It was because of the longer-term benefits on housing activity as the Fed dials back restrictive monetary policy and gets it to more neutral footing.

That hasn't changed. Mortgage rates have backed up in the short term. That was why we said, let's stay to the sidelines. Let's wait to get through Builders' September quarter results and, potentially, depending on where the shares settle out, pick up more shares after that. Because we know that the Fed is still going to move monetary policy back to more favorable stance and that, over time, mortgage rates would come down and that would help stimulate the housing market.

So we continue to see Builders FirstSource as a longer-term play for the portfolio. As we like to do, we will pick our spots and add more shares when the time is right. Let's get through the company's earnings call. Could that time be later this week? It's possible. But we won't know that until we digest not only Builders' earnings call, but also, let's get through what TopBuild has to say and other key data points.

And remember, we do have the Fed delivering their latest monetary policy results Thursday. Odds are we know that they're going to deliver a 25-basis-point rate cut. But we want to be careful with what the comments are from Fed Chair Powell. As I talked about in yesterday's meeting, I continue to think the Fed is going to say, meeting by meeting. And we will be-- we will remain data dependent.

With that in mind, we will want to pay close attention to this morning's October ISM Services PMI. Look, we know that the economy has been carried by the services sector. We've talked about this. Last week's October Manufacturing PMI showed that part of the economy was contracting. So we really want to pay very close attention to this, especially new orders that will tell us the tone for November.

But we also want to pay extra special attention this time around not just to inflation, which has been sticky-- and we want to see what the Services PMI data for October has to say-- but also what the report out this morning at 10 o'clock has to say about October employment. I say this because, as you know, the October employment report was a little let's just call it suspect. I personally think that the Fed is going to look at what the ISM PMI data has to say, both for manufacturing and for services, when it comes to employment.

They'll look at ADP's data. And they're likely to look through the October employment report. But to me, it's another reason for them to say that they will remain data dependent. They will get that much more data before their December policy meeting. Remember, at the December policy meeting, that is when they will share a set of updated economic projections. So I think the Fed is going to be a little cautious in their comments, again, sticking to the playbook.

That's our video for today. I would say, please, folks, remember to vote. It is important. And as a result, I know you'll be out there on the lines, but be sure to come back. Check your email. Check your alerts. We've got a lot, as you can see, to chew through with you today. We want to make sure that you are getting our latest thoughts.

And as I like to say, if we make any moves with the Portfolio, which I highly doubt will happen today, we want to make sure that you are right there with us. Thanks for watching.

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