Wall Street Pros Split on Risk: Why They're Still Bullish on $MU & $MRVL

Hey everyone, it is Julie here with TipRanks. First of all, I want to say happy Canada Day to all of my fellow Canadians out there. And this week I am once again joined with Jason Mesnick, the CEO from The Street Pro, where we're going to be diving in to their weekly market sentiment survey, where we're getting insight from the pro contributors on where they're seeing risk, how bullish or bearish they are in the market, and some top stocks that they're keeping an eye on, which this week includes Micron and Marvell. So Jason, thank you so much for joining me today. >> Julie, thank you for having me, and I did not realize that today was Canada Day, so happy Canada Day, and a little known fact about me, my I'm let's see, probably half Canadian. So my dad's my my grandmother was born there, and yeah, so I love Canada, love spending time up there. >> We're in good company today. So we're going to dive right into the market survey. This week, the latest sentiment survey came back essentially split. We had four bulls, three neutrals, and three bears. So what does deadlock on the sentiment survey tell us about where the market actually is right now? >> Yeah, well the interesting thing about our numbers, I think it's the more interesting thing to me is that the team is so split. The reason why our sentiment indicator came out a little bit negative there is because we still have our our big bear, but our big bear turned a little bit less bearish this time. So I think I think that was the big news, is that although as we'll see in in a couple minutes when we talk, he's still pretty bearish, but but for now he's kind of lightening up a little bit, a little bit more of a trader I'd say. So I think I think the big thing is that, you know, we're we're looking at this market that has very narrow leadership, and and the leaders have kind of stalled. >> Now, even though the sentiment is divided on direction there, the one thing that was nearly unanimous is that risk is elevated in the current market. So six out of 10 did say that. So how do you square that with the fact that some of the team is still bullish even with risk being elevated? >> Yeah, so I think the big thing to remember is that markets climb a wall of worry. It's one of my favorite favorite sayings and it's so hard so hard to think about, right? The bearish case always sounds better, but it truth is markets go up in three out of four years. The market's been really strong this year. There's been so much to worry about. Uh but again, you know, when I look at things, we have seven of 10 sectors are up year-to-date, but only really technology and industrials are are the leaders. They're the only two that are actually beating the market uh for the year. Um so, you know, in in technology right now is stalled. So, I think this goes back to the point where this is we're kind of at an inflection point right now and we're looking for some catalyst to drive the market higher and maybe with uh earning season coming up, maybe that'll be it. Um on the other hand, it could be the thing that drives the market lower. We'll we'll see. That's That's where there's so much risk in the market right now. >> Absolutely. And the survey also showed that the team is mostly on the sidelines in term of portfolio activity uh with one notable exception, that your biggest bear there is still shorting. So, what does that positioning signal to you? >> I'm just going to out him. That's the famous Doug Kass that we've talked about so much. Um so, and thing to remember about Doug is he is probably our most at least publicly our most active trader, right? The kind of commentary that he's able to write in the in the part of our site that he manages called Doug's Daily Diary really gives him a lot of latitude to share his short trades in real time. Um so, so we know we know what he's doing and we know that even while he's incredibly bearish and and being that short, sometimes he even goes net long during that. But in general, his overall sentiment is is um is net short. So, um the the big thing though is that our team really sees uh rotation um uh in in the markets. And so even within all this risk and I don't think it's just that they're seeing there's a lot of a lot of position trading, I'd say. They may they may be bullish on a stock, but they might be taking a little bit off the table right now and then adding it back when the stock is maybe short-term oversold. Uh so so that's really what they're doing. They're just they're just taking their positions and and saying, "How can they be most opportunistic right now in in a market like this?" >> And I know we did just touch on risk a bit as well, but one of the questions asked whether risk will rise or fall from here. And once again, the team was pretty split. I believe it was four to four. So, does that level of uncertainty change how they're approaching things in the coming weeks? >> You know, in the last few weeks I've been doing some videos with our team uh kind of a a getting-to-know-you series. And the big thing is that they all pretty much every one of them comes back and they talk about risk management, no matter what my question is. They come back and they and they just talk about how uh risk management is the most important thing that they do. They're all looking, despite, you know, what's happening in the markets these days, um they're all, again, really opportunistic in what they do, but at the same time managing risk. And they they might be doing so through position sizing. Um they might be doing, like we were talking about uh just a a second ago, sort of rolling around a position or rotating a position and buying and selling depending on when the stock is a little bit more overbought or oversold. Um but I think I think that's the the the important takeaway is that no matter whether they think risk is going to rise or fall, they're they're sort of looking and saying, in the individual names that they hold, how can they manage risk more effectively? >> And another thing that came up was the downtrend within the Magnificent Seven group. June was obviously a bit of a tough month for them. Uh the team was a bit split down the middle, with five saying that it was a warning sign, the other five saying it was just rotation. What were some of the opinions on that? >> Yeah, so let's start with the warning signs cuz, you know, they always, again, make for the more the more fun case. Um I think in general the concern is around AI. It's It's that theme that we've had all year. They're really worried about you know, AI causing inflation for memory, GPUs, other other equipment that's used in technology and that could impact the hyperscalers as well as you know, impacting the products that you and I buy. So So that's probably the really big one and you know, the other one is you know, Micron being kind of a savior for the sector and and I think people are worried that there's just things are just a little bit too narrow I'd say is what they're thinking about on the warning side. The people who are saying, "Hey, not to worry." Really they're focused on just saying, "This is part of normal rotation." You know, the market hasn't fallen and and what they see is they see are just people moving from things that maybe had gotten ahead of themselves and into things that are not ahead of themselves. As As Aline Mizrahi says, she likes to talk about the Mag 7 or the Mag 10 versus the others. And she says money either flows into the Mag 7 and on the days of the Mag 7 don't go up, well, then the others have a chance to go up. And that's just a pattern that she's noticed a lot. The other thing is that some people are saying, "Yeah, the Mag 7's probably going to stabilize and and then that might be the catalyst that makes the market go higher again." >> And you mentioned Micron, so of course we're going to dive into that. It was a big week for them last week with earnings and they were one of the most mentioned names in the survey there. Two team members called it their most bullish pick. And there's been a lot of chatter about the SK Hynix ADR listing in July creating a catalyst. So what are some of the things driving the conviction behind Micron right now? >> Well, the big one is earnings, right? You know, they they announced great earnings and the stock was up big big on that. And so I think the really big fundamental thing that people were looking at is just saying that right now the chip suppliers have monopoly power. So So they really have control over pricing and with AI being the big story here, as we talked about, you know, AI leading to inflation, well, you know, this is exactly where where we see that. So So I think I think that was the big thing that that people were looking at. >> Pro portfolio did just trim its Micron position a bit as part of the quarterly earnings per share All-Star reconstitution. I believe it locked in gains at about 225%. So when you're sitting on a gain like that, how do you guys decide on taking some chips off the table versus letting it ride? >> Well, in this case, and this is one that I love because it's a little bit different than the kinds of profit taking that we normally talk about. And in the portfolio, oftentimes we talk about profit taking from standpoint of we still like the stock, but you know, fundamentally or technically, maybe it's gotten ahead of itself. In this case, the ownership of Micron in the portfolio was purely model driven. So model driven in the sense that this is one of the holdings of what we call our EPS All-Stars theme. And and Chris Versace has built this theme. These are companies that have double-digit earnings growth and they have high expectations for continued earnings growth by Wall Street. So he scans a thousand stocks and he comes up with the stocks that the model says that these are the strongest performers. This portfolio, this EPS All-Stars, which makes up about 6% of the total Street Pro portfolio, does really well in general. This particular quarter, it was up 67%. Now a lot of that was driven by Micron, but you know, that's that's the goal is that you have one or two or five stocks in a quarter that do really well and that lifts the whole portfolio. So So why do we sell something that's doing so well? Well, first of all, Micron remains in the portfolio, but we sold some shares. We sold percentage of our holdings because it had become too big a portion of the EPS All-Stars holding in the portfolio. So, Chris lightened up that and a few other strong performing constituents of the EPS All Stars, so he could rotate into a few other names. And so, that that's really that's really the reason there. It wasn't wasn't anything opinion-based. It was purely allocation-based. >> Yeah, never bad to lock in some profits, especially when they're that notable. One of the other respondents to mentioning Micron said that they should not need to save the sector. So, what did they mean by that? What concerns do they have? >> Yeah, exactly. So, so one thing to note about Micron is that it had a huge pop. You know, well, it's up so much recently, right? And then it had this huge pop after earnings. And then, where is it now? Well, it's it's back down to where it was before earnings. Where it's been kind of tracing out sort of a if you want to call it a consolidation pattern, you know, it's been going sideways really for the last few weeks. And and so, again, it it was near the bottom of that range, the trading range, before earnings, popped up to the top. Um Now it's back down. So, you know, first of all, that leads to different kinds of risk. You don't want one company saving a sector, because what if that company fails to execute, right? So, on the one hand, one company can rarely save a sector. But then, it comes down to again, is there something bigger here? And and there's that that same worry around, you know, AI spending, the cost versus benefit, right? How much money are we spending on AI versus are we actually seeing the benefit right now? And a lot of people are saying companies are are are not seeing the benefit yet. You know, 10 years, 20 years down the road, sure, it's it's going to be huge. But if their companies aren't seeing it right now, companies have to look quarter to quarter, and if they're just not getting those benefits in the short term, well, they're going to pull back a little bit. And and given that the this sector is so leveraged right now and and we've talked about Doug Cass talks about kind of the circular spending where you've got the semiconductor companies loaning money to the AI companies to buy the chips from the semiconductors. You know, is that a house of cards waiting to fall? But at the same time you're seeing communities Peter Thiel sites community in I believe it was in Utah where people are petitioning their local government to not have a data center being built in their town because you know, what do they get from a data center? Right, you get a lot of building, potentially your energy costs go up and it's not like you get any jobs. You get some maybe some jobs initially when the data centers are being built, but then after that you don't get a lot. Um Then the final thing is will open AI delay its IPO until next year until 2027. So really, you know, you can't rely on such narrow such narrow leadership, right? You you want to see more broad leadership in a sector. I think I think that's the important takeaway from that. >> Absolutely. And now I want to pivot over to Marvell cuz the Street Pro guys just raised the price target on the Marvell stock significantly to 340 up from 240. So what was the deciding factor that finally made it the right time to to make that move? >> Well, I'll say our our subscribers have been pushing Chris for a while to to up that price target because everybody knows that Chris is a is a huge bull in the company. So you know, I'm going to say the big thing was it was price that made him do it, but at the same time he's been lightening up on that stock. So he sold some but is still very very bullish on the company and and what he said as as he made that sale is stock is just a little bit overvalued right now and we're going to look for a better price to get back in. So so that that's really the big thing there. >> And then it was also singled out as a top bullish pick in the Sentiment Survey by several of your contributors there. So, what's the specific thesis there? Is this an AI infrastructure play, custom silicon story, something else? >> Yeah, let's just let's go with the AI infrastructure play. You know, if we look at Chris Versace's digital infrastructure theme, every week he writes a piece on his you know, 20 themes that he feels are driving the market. And and this is one of his key ones. He says it, you know, AI is going to continue driving the demand for digital infrastructure and so you have to be invested in companies like this. So, you know, again, he's going to look for the place to get more long. But, you know, it comes back to what we're talking about before, risk management and and and kind of trading around a position. Chris is not a trader, he's an investor, but you can see here where he's upping and lowering his allocation when it makes the most sense to do so. >> All right. Then to wrap it all up, we mentioned that earnings per share All-Star basket and they are just in the process of reconstituting that with Q3 being here and two new names I believe were just added in this morning. So, can you share with us what those are? >> They were, I'll give you the two names. The first one is called SiTime, SITM I believe is the is the uh ticker symbol. That's a fabulous chip maker that makes microelectromechanical systems. I have to read that used for timing in electronics. Um so, so that's that's the first one and then the second one is a is Seagate Tech, which is a data storage company that is based in my home state of Colorado, just up the road from me. I think maybe I said this already before, but you know, that that part of the Street Pros portfolio, those EPS All-Stars, um gained 67% for the quarter and it's just amazing to see what something that is just purely, you know, quantitative when it's when it's well selected and there's a good theory behind the strategy, how well it can do in in markets like this. >> Yeah, that formula obviously is working. And for our viewers who do want to learn more about that EPS All-Star Basket and some of these other Pro Contributors, head on over to TheStreetPro.com to check out all of their latest articles. And if you enjoyed today's video, make sure you let us know in the comments down below. Jason, thank you so much for hanging out with me today and I'll see you back here in a couple of weeks. >> Thank you, Julie, and I hope you have a great rest of your candidate day. >> Thank you.