We've Got the Scoop on Our Stocks
Here are the latest bits of info on trends and ideas that speak to our investments.
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Part of the job of the investor is keeping up with news and trends, hunting for nuggets of information in earnings documents, letters to shareholders and reports in trade and other publications. It's a lot of work, but it can really pay off and give you an edge when deciding whether to buy, sell and hold shares.
Here, we've collected information and quotes on stocks we hold that speak to the trends we're following, including artificial intelligence, the consumer's outlook, new technology, cybersecurity and housing.
Artificial Intelligence
This line from Palantir's PLTR earnings note to shareholders supports artificial intelligence and our positions in Alphabet GOOGL, Microsoft MSFT, Nvidia NVDA, Qualcomm QCOM, and Marvell MRVL.
“Our growth across the commercial and government markets has been driven by an unrelenting wave of demand from customers for artificial intelligence systems that go beyond the merely performative and academic. The large language models that have transfixed the world will only be capable of transforming the work of a multinational business or a defense agency’s operations if their power is unleashed within the context of an enterprise software system that has an opinionated view of the world—its idiosyncratic objects, logic, and physics.” Read more here
Artificial Intelligence, Cybersecurity
Our view has been AI would bolster improvements in cybersecurity, but it would also be a boon for cyber attackers. As we move ahead, we expect more holdings in the First Trust Nasdaq Cybersecurity ETF CIBR will discuss how it's incorporating AI into their solutions.
“IBM has added generative artificial intelligence (AI) capabilities to its managed threat detection and response services. Built on the company’s Watsonx data and AI platform, the new IBM Consulting Cybersecurity Assistant is designed to speed and improve the identification, investigation, and response to critical security threats” Read more from Pymnts
Artificial Intelligence, Digital Infrastructure
One of our thoughts on Marvell MRVL has been the follow-through on AI adoption driving demand for digital infrastructure spending. The signal below speaks to just that.
“Lumen Technologies (NYSE: LUMN) today announced it has secured $5 billion in new business driven by major demand for connectivity fueled by AI. Large companies across industry sectors are seeking to secure fiber capacity quickly, as this resource becomes increasingly valuable and potentially limited, due to booming AI needs. In addition, Lumen is in active discussions with customers to secure another $7 billion in sales opportunities to meet the increased customer demand.” Read from Lumen.
Cash-Strapped Consumer
We continue to find signals that point to consumers seeking deals and remaining selective with spending. This suggests the next leg of the current earnings season, one that will skew toward retailers, could be challenging and lead second half earnings expectations for the S&P 500 to be revised lower. As retailers report, we’ll also be watching their inventory levels, a potential signal for incremental margin pain leading into the all-important holiday shopping season later this year.
“While CPG brands maintain that consumers are choosing name brands, shoppers continue to exhibit high levels of deal-seeking behavior when making larger purchases such as home furnishings. Kate Gulliver, chief financial officer and chief administrative officer of home goods eCommerce retailer Wayfair, noted on an earnings call Thursday (Aug.1) that the company has seen shoppers still holding off until sales periods to make purchases.” Read more from Pymnts.
“Although inflation has slowed, nearly one third (30%) of respondents have been cutting back spending due to concerns about the economy and over two in five (42%) of respondents have altered their financial priorities over the past year. Among those whose priorities have shifted, 27% report covering daily living expenses such as groceries and utilities is the priority that has changed the most.” Read more TD Stories.
“US consumers are reining in spending on travel and leisure, hitting businesses including Disney theme parks, Airbnb home rentals and Hilton hotels as questions grow about the health of the economy.” Read more from Financial Times
Digital Infrastructure
While we tend to think primarily of digital infrastructure as mobile and broadband, they are one aspect of it. The below comment speaks to the advantages of banks like Bank of America BAC that have been making technology investments. It also suggests that we could eventually see a wave of M&A as banks look to fill technology gaps.
“The banking industry is experiencing a seismic shift as agile, digital-native FinTechs capture an ever-growing share of the market. Burdened by outdated technology, traditional financial institutions face mounting challenges in delivering modern digital services. The growing dominance of FinTechs — securing nearly half of all new account openings — highlights the urgency for banks to modernize their infrastructure.” Read more from Pymnts
Homebuilding & Materials
Some good news on the housing front that could help break the housing logjam and lead to an upturn in housing construction as the Fed’s rate-cutting cycle gets going. However, the CME FedWatch Tool currently shows the market expects the Fed Funds rate to reach 425-450 basis points by the end of this year (with 3 policy meetings remaining) vs. the current 525-550. This suggests the market could once again be ahead of itself when it comes to the number of rate cuts coming in 2024.
"Mortgage rates fell to the lowest level in more than a year, raising hopes for relief in the battered U.S. housing market. The average rate on the standard 30-year fixed mortgage fell around a quarter percentage point to 6.47%, according to a survey of lenders released Thursday by mortgage-finance giant Freddie Mac, a low not seen since May 2023 and the sharpest weekly decline in around nine months. If sustained, lower mortgage rates could help shepherd some Americans back into a market that they have been priced out of in recent years." Read more from the Wall Street Journal
At the time of publication, the Portfolio was long GOOGL, MSFT, NVDA, QCOMM, MRVL, CIBR and BAC.
