Cash-Strapped Consumers, Mortgage Rate Lows: The Latest Signals Informing Our Strategy (original) (raw)
Let’s open up our reading notebook and share some of the latest ripped-from-the-headlines signals that we've collected for our investment strategies and TheStreet Pro Portfolio.
Aging Population
Another reminder that that demand from healthcare services is outstripping supply.
“As the Lewiston-Clarkston Valley’s population ages, the strain on medical providers locally will be especially impactful in primary care, said TriState Health CEO Kym Clift… Primary care shortages are being felt across the country in every population, Clift said, but especially in rural areas. The Valley’s high senior population also increases the need for access to specialty care, she said."
Aging of the Population, Cash-Strapped Consumers
This speaks to the looming savings and retirement pain point, one that we help address here at the Portfolio.
“Gen Xers between 45 and 54 years old had a median account balance of roughly $60,000 in defined-contribution retirement plans at Vanguard Group in 2023, according to the firm. For most Americans, that is well below the target some financial experts recommend of having roughly six times one’s salary saved for retirement by age 50.”
Artificial Intelligence
Ahead of quarterly results from Nvidia (NVDA) , Marvell (MRVL) and Salesforce (CRM) , we have multiple signals that speak to growing AI adoption.
“Agents come in many forms, many of which respond to prompts humans issue through text or speech. Yet as organizations figure out how generative AI fits into their plans, IT leaders would do well to pay close attention to one emerging category: multiagent systems. In such systems, multiple agents execute tasks intended to achieve an overarching goal, such as automating payroll, HR processes, and even software development, based on text, images, audio, and video from large language models (LLMs).”
“As businesses have become more complex and computing more ubiquitous, ERP platforms have grown into aggregated tech stacks or suites with vertical extensions that track data from supply chain, logistics, asset management, HR, finance, and virtually every aspect of the business. But adding all those facets—and their attendant data streams—to the picture can clutter the frame, hampering the agility of an ERP platform. Generative AI helps restore clarity."
“General Motors is cutting around 1,000 software workers around the world in a bid to focus on more 'high-priority' initiatives like improving its Super Cruise driver assistance system, the quality of its infotainment platform and exploring the use of AI.”
“Worldwide spending on artificial intelligence (AI), including AI-enabled applications*, infrastructure, and related IT and business services, will more than double by 2028 when it is expected to reach $632 billion, according to a new forecast from the International Data Corporation (IDC)... Software will be the largest category of technology spending, representing more than half the overall AI market for most of the forecast. Two-thirds of all software spending will go to AI-enabled Applications and Artificial Intelligence Platforms while the remainder will go toward AI Application Development & Deployment and AI System Infrastructure Software.”
“Walmart executives appear happy with the results of using generative AI to rewrite product listings, saying it is much faster than human workers on this task. They also plan to roll out a new shopping assistant using the technology. Walmart president and CEO Doug McMillon told investors during its fiscal second-quarter earnings call on Aug. 15 that the company has used multiple large language models to create or improve more than 850 million pieces of data in its product catalog.”
“OpenAI is releasing a new feature that will let corporate customers use their own company data to customize the artificial intelligence startup’s most powerful model, GPT-4o. The move comes as startups face rising competition for their AI products for business, and businesses face growing pressure to demonstrate the gains from investment in AI.”
Cybersecurity
Dare we say, yet another week with reminders of why we continue to own (CIBR) shares in the Portfolio and why all investors should have exposure to cybersecurity in their holdings.
“Death and taxes have long been life’s unavoidable realities. Now, add to that list the rising prevalence of cyberattacks — and the growing imperative for businesses to defend against them, especially in B2B payments… In today’s hyper-connected world, where the lines between digital and physical operations are blurring, safeguarding against cyber threats has become a cornerstone of business strategy. The stakes are higher, especially for organizations dealing with sensitive financial data and payments, where a breach can lead to financial and reputational damage.”
“Microchip Technology said on Tuesday an 'unauthorized party' disrupted the company’s use of certain servers and some business operations, marking the latest security incident at a U.S. chipmaker this year… Chip giant Advanced Micro Devices had also said earlier this year it was investigating claims that its data was stolen in a hack.”
“Earlier this year, hackers stole the data of 2.9 billion people from a broker. Now, that breach threatens to usher in a wave of identity fraud and other crimes, Teresa Murray, consumer watchdog director for the U.S. Public Interest Research Group, said in a recent Los Angeles Times (LAT) interview.”
Digital Infrastructure, Energy Pain Point
Another data point that tells us calling up Eaton Corp. (ETN) to the Portfolio when we did was the right move.
“AWS, Microsoft, and Google are going nuclear to build and operate mega data centers better equipped to meet the increasingly hefty demands of generative AI. Earlier this year, AWS paid $650 million to purchase Talen Energy’s Cumulus Data Assets, a 960-megawatt nuclear-powered data center on-site at Talen’s Susquehanna, Penn., nuclear plant, with additional data centers planned — pending approval by the Nuclear Regulatory Agency. Microsoft, Google, and Nucor, a steel manufacturer, released a request for information (RFI) about clean energy, and Baltimore-based energy company Constellation responded 'to the RFI with our points on advanced nuclear being a fit at existing nuclear sites,' says a spokesperson for Constellation, one of the nation’s largest nuclear power providers.”
Digital Lifestyle
This forecast supports part of our thesis for Qualcomm (QCOM) but we’ll be looking to see what Dell (DELL) , HP (HPQ) and Best Buy (BBY) have to say about AI-capable PC sales for 2H 2024. We’ll be interested in Best Buy’s comments about smartphones and tablets as well.
“Canalys’ latest forecast predicts that an estimated 48 million AI-capable PCs will ship worldwide in 2024, representing 18% of total PC shipments. But this is just the start of a major market transition, with AI-capable PC shipments projected to surpass 100 million in 2025, 40% of all PC shipments. In 2028, Canalys expects vendors to ship 205 million AI-capable PCs, representing a staggering compound annual growth rate of 44% between 2024 and 2028.”
Homebuilding and Materials
Some very positive comments support our longer-term thinking for shares of Builders FirstSource (BLDR) in the portfolio.
“Toll Brothers Inc. raised its expectations for profit margins for its full fiscal year as lower mortgage rates sparked demand for the company’s luxury homes… With mortgage rates at their lowest point in a year and trending lower, favorable demographics, and continued imbalance in the supply and demand of homes for sale, we are optimistic that demand will remain solid through the end of fiscal 2024 and into 2025…”
“Looking beyond 2024, easing inflation and more accommodating mortgage rates should improve affordability slightly. This would help stimulate housing activity, with both new listings and sales rising over the longer term.”
More Pro Portfolio
- Booking a Slice of Big Chip Gains
- Weekly Portfolio Roundup: The Bulls of Summer
- From AI to Aging Americans, We've Got the Scoop
At the time of publication, TheStreet Pro Portfolio was long NVDA, MRVL, CIBR, ETN, QCOM and BLDR.