Trust the process, not the pitch

Foreign. Welcome to Trader Talk, where we dish out the latest Wall street buzz to keep your portfolio sizzling. I'm Kenny Polkari coming to you live from the iconic New York Stock Exchange, a place that'd been my home for decades and still fuels the pulse of capitalism, entrepreneurship, and freedom. Now let's jump into my big take for the week. Turn on the TV, open the YouTube, scroll your feedback. And there are all the financial gurus shouting predictions with godlike confidence. Stocks to buy now. Crash warnings, Millionaire blueprints. They look slick, they talk fast, they package themselves as shortcut to riches. But here's the truth. No one likes to say it out loud. Most of these gurus aren't in the markets. They're in marketing. The more certain someone sounds about the future of the market, the less you should trust them. Because real investors don't. Those who've spent decades in the trenches don't speak in absolutes. They speak of probabilities. They know no one can predict the market consistently. And they certainly don't promise you guaranteed returns in exchange for a subscription fee. Why does this work? Because uncertainty is uncomfortable. So when someone steps up and says, I've cracked the code, people listen. Even when it's snake oil wrapped in financial jargon. Even when they're selling fear or worse, hope. But real investing is messy. It's slow, it's full of risk and mistakes and adjustments. There's no cheating code, just hard earned discipline. Bottom line, if someone's selling you an illusion of certainty, they're not a guru, they're a salesperson. You don't need louder voices. You need clearer thinking. Trust the process, not the pitch, okay? Joining us today is my friend Chris Versace, Chief investment officer at thematica Research, where he leads the development of thematic investing that align portfolios with powerful long term trends like digital transformation, aging demographics, and the rise of the connected consumer. Chris is also the co author of Cocktail Investing and a veteran equity analyst with a deep background in technology, consumer and industrial sectors. He spent years helping investors understand how big picture shifts translate into actionable stock ideas. Please join me in welcoming Chris Versace. Chris, it is a pleasure to have you here at the New York Stock Exchange. A place for me that feels like home.

I'm so happy to be here. Kenny, you all right? We have known each other for some time.

We have.

I just hope that I live up to that very nice introduction.

Absolutely. Live up. But let's start by talking about thematic investing. What thematic research is so. So educate the crowd just a little bit about about what it is.

So I got started a long time ago. I mean, I almost hate to say how long ago at this point, just as a regular sell side equity analyst. And you know, I wound up covering a certain sector, right, where you're responsible for understanding the puts, the takes, the industry, everything about that sector, that sector, only that sector. And at times you're in favor, you're out of favor. But as I was doing this, I kind of sat back and said, you know, there are things happening here that if I don't have a vertical approach, if I took a horizontal approach, boy, can I connect the dots and get something pretty interesting. So this started to give rise to this thematic framework where we look for the shifting landscapes of economics, demographics, psychographics, technology, regulatory mandates, when they happen and what we're trying to identify, structural change and the companies that are poised to benefit from them. Not all companies are. Some companies will they get left behind? You bet they will. But that's really, to us, what thematic investing is about. It's about identifying structural change.

Okay, but so does it really work in today's environment, today's technology environment? Like, give me an example. Talk to me about how you would maybe create a thematic portfolio.

Well, let's see. We haven't created one in a little bit of time, but we actually have about two dozen thematic models that we have everything from aging of population, AI digital infrastructure.

Are they ETFs or are they just models?

These are just models, individual names with a basket of six to eight names. But we also have taken some of these strategies into Europe where we've got some ETFs as well. One is cybersecurity, the other sustainable future of food. We had a few others at one point in time, but those are the two that we have now with our partners over there.

Right. So are you, is, is, is Tomatica a consumer? Like, like is the retail investor going to go to you or is it an institutional.

So I would say that today, yeah, it's primarily institutional clients and RIAs. But I don't want to get too far ahead of myself when we talk, Kenny, let's say second half of the year, fourth quarter, we might have something to share.

That's interesting. I look forward to that because now, you know, I left my years here at the New York Stock Exchange, of which I will say it was four decades.

Right.

That sounds better than 40 years.

It does.

Four decades sounds better. But I left after being an institutional broker servicing the institutional community. And now I sit on the other side, right so I'm the chief market strategist at Slate's Own wealth, which is an independent raa. So I'd be very interested to hear what you have to say come towards the end of the year. So let's just make sure we mark our calendars.

Already done.

All right, so let's talk about. Let's talk about the market.

Sure.

So let's talk about this recent recovery. We had to sell off in April after Liberation Day, and many of us got liberated from our money, I like to say. Right. But some of it's come back. In fact, you see some of those names that got absolutely crushed are actually higher today than they were on April 2nd.

True.

And so the market has rebound a little bit. Tell me, first of all, before we get into the Moody's downgrade and to China's now kind of maybe pull back on this whole 90 day thing that they announced this morning. But talk to me about where you think the market is today.

Yeah, just as we're sitting. So, you know, coming out of last week, you know, we look at the relative strength index levels S and P 500 flirting with overbought NASDAQ back in overboard territory. Not surprising, right?

No, not at all.

We've had huge runs in both of those market indices.

Right.

But we don't by the market.

Right.

We pay attention. We're mindful of the market and where it is. But, you know, we're continuing to look for names that are well positioned based on some of our themes and others that we can be opportunistic in.

Right. So what I always love is when someone asks me, is it too late? Is it too late for me to get in the market? Is it too late? I go, it's never too late to get into the market. A, because there's always opportunity. But B, tell me where you are in your life cycle. Are you talking about getting in the market for a month or five years?

Right.

Because then there's always opportunity in the market.

Yeah, I think that's right. I think you got to be mindful, though, of not. There's not always as much opportunity at any particular time. And I think after the rise that we've seen.

Right.

If you were able to put, you know, money to work, like I co. Manage or manage, I should say the Street's pro Portfolio. Basketball.

The Street.com's pro portfolio.

Correct. Right. Thank you. And it's a, it's a real portfolio, 25 stocks.

Yeah.

Today, sometimes more, sometimes less.

Is it a range of sectors?

It leverages some of the thematics that we have at Tomatico and some other areas that we want purposeful exposure. That's what I will say. We're not as broad based as the S&P 500. We don't have to have exposure in every sector. Right. We want companies that are poised to outperform the market. Right.

In whatever sectors you're in that portfolio of the 11 Major s and P sectors, what are you representing?

Oh, good God. You know, I don't think of it that way. I hate to shatter that thought. And the reason I say that is if you get back to thematics.

Right, right.

You know, think of a company like Amazon.

Right.

What's the, what's the sector? What's the right sector?

Yeah, right. You're right. Could fall in a bunch of different sectors. Right, right.

Or, or Apple these days, or even Disney, you could argue. Right. So I, I try not to get caught up in that.

So what's the biggest, in your mind currently? What's kind of the biggest theme out there that, that investors and, and, and, and traders should know about?

We're not going to break any new ground with this.

Right.

With this revelation.

Right.

But I would say that today, where we stand, especially coming out of where we were, you know, six, eight weeks ago, and the potential going forward, it's going to be AI. And I say that largely because, yes, we know about Nvidia and Marvell and all these other companies, but I also think about connecting the dots and the ripple effects. Right, right. So if we think about the demand for data center, the construction of data.

Center, we think about people, you know, sometimes people aren't thinking like that.

No, no, I know, I know. And it's, I like one of my favorite things to do not, not, not to get sidetracked is when you go through earnings season and you read all the transcripts and you pick up all these data points and you literally connect the dots. Right, right. So it's, you know, there's the stock that you want, there's the, you know, math major. First, first. First derivative, second derivative. And sometimes you can use those data points up and down.

Right, right.

So it's, I just love doing that and I find it very helpful. So I try to do that when we invest in the portfolio, but also tie it back to our themes as well. So, for example, if we're going to build all these data centers. Right. You need equipment to build them.

Right.

You need electricity to power them.

Exactly.

So, you know, if you were to say, well, Chris, it sounds like you might be Long United Rentals or Vulcan Materials or Eaton and Waste Management has to haul all this crap away. Yes, yes, yes, yes.

Right. Well, what about names like Dominion and CEG that are getting into the nuclear space? Right. Because utilities.

Now, nuclear is interesting.

Very interesting.

Right. So we own the, the Van Eck. I'll botch this name, but it's the Vaneck Uranium and Nuclear etf and we have a nuclear model over at Tomatica right now. You need to be careful with this. Right. Because I want to benefit from companies and the spending they have. So when I think about Dominion Power, Duke Energy, the utilities.

Right.

At least as it relates to building out the electrical grid, they're spenders, so I'm not going to buy them. Right. It's almost like if you want to buy the 5G build out, you're not going to buy AT&T because they need to spend to build the network.

Right.

I want to buy the companies that are benefiting from that spending. That kind of brings us back to Eaton and there are some other names out.

I hadn't thought about it that way. Right.

That's why we're talking.

That's why we're talking. I appreciate that. Wait, so talk to me also about quantum computing. Is that a theme at all that that makes sense or does it? Not yet.

You know, it's. There's a lot of potential themes out there.

Yeah. Right.

And you kind of need to hit a tipping point.

Right.

And there are sometimes there are individual stocks that are going to be disruptive, but there's a. Not, there's not a fully baked comprehensive theme out there.

Right.

So like I'll give you an example. One of the companies that we own in the portfolio is Universal Display. They help manufacture the key chemicals that go into organic light emitting diode displays. And we're seeing widespread adoption.

Wait, what kind of displays?

Organic light emitting diodes. Excuse me, Or OLED displays. Your iPhone has it. You're going to start seeing them in a lot more places.

Oled display called OLED.

OLEDs, yeah. So you can look them in TV, smartphones, tablets and a growing array of automotive interior lighting displays there. And I think even United in their new Polaris cabin is having some nice OLED displays as well.

So hold that thought one minute because we'll be right back after this short break. Sure. All right, so let's go back to talking about the oled because that's fascinating to me. So talk to me about what's different. What, what makes that different than the displays maybe five years ago.

Oh, so you're talking against LCDs or liquid crystal displays.

Right.

Couple different things. One, organic light emitting diodes. They are individual pixels, Right. So you can get deeper blacks, which is great for TVs and all of that.

Good. And black.

You definitely do. Definitely do. You would pop on the OLED display.

Right.

So there's that. Right. But then at the same time, because it's or light emitting diode there, it's actually less power consumption and it allows for thinner displays and as we'll probably see more of foldable displays. So you've looked, you think of Samsung's Galaxy folding their phones, right? That's that Apple is rumored to have one of those in the next few years, foldable tablets. You know, this is kind of where it's going. And Universal is a key company in that it supplies chemicals to all the major display manufacturing companies.

What's it?

Universal Universal display ticker symbol oled.

Oled, yeah. That's interesting. I had not. I hadn't even heard about these displays. I think that's great. I'll have to take a look. Yeah. Wait, let me ask another question. You made another point is that these displays use less energy, less power and.

And they're thinner.

Right.

That's why you like. If you notice how thin smartphones have become, you may not notice exhibits. Get a case on them.

Yeah.

But you pull off the case, you see how thin they are. You see how thin Apple's new iPad Pros are compared to other iPads.

Yeah. The display, my iPad's, I guess, three years old or so.

Time to upgrade, Kenny.

But it's pretty thin. But it is. It's in a case itself.

No, no Apple intelligence in that device.

I know that, but there's Apple Intelligence in my iPhone. All right. Speaking about the intelligence, I have to tell you. Have you used Grok?

You know, I have used a lot of them. Right, but not Grok.

I think Grok, listen, I think they're all good, but Grok, for some reason, better. Feels better to me when I use it. It just feels better. Like the data it produces and the. I don't know where its sources are, but it just feels.

Well, that's the key though, right? I mean, 100%. It's all about the array of data that it can tap. And if you think of all that X or Twitter, whatever you want to call it has, that's a tremendous amount of information to mine from 100%. But I will say this, though, that's Also, why I don't think you can rule Google out when you think of what they have in search. And YouTube.

Yeah, no, I don't know. I agree with you. I think the whole thing is fascinating And I think ChatGPT does a great job. And when it first started, I was using ChatGPT for recipes. No, no, no. When I would ask it a question if I need to clarify something. But you can use it to clarify a recipe.

Do you know what else you can do with that?

What?

You can make a recipe, get your ingredients, and then you can export it to Instacart.

Okay. You can.

Yes, you can. There's a tool you have to get, but you can do it.

Oh, no way.

Yeah, yeah.

Oh, that's interesting. I never thought about that. Anyway, what I'll tell you is that so then when I, when they put Grack on the Twitter grok on the Twitter platform and you're a premium user, then it, you know, the little buttons right there at the bottom and you, you pop it open. Here's the only thing I'll say is if I ask it one question and I'm still in that same thread, and then I ask it a different question, it'll tie, it'll try to tie the second question to the first question and keep the theme going when it's two separate thoughts. And so I always have to, you know, check out and then check back in and start a new thread so that it doesn't, it doesn't continue to try to create that same.

I think you should tell Elon this.

Yeah, well, okay. Elon, are you listening? All right, so let's talk about is there hype or what's real? And this whole AI thing that he's now done in that Trump did you know, he just came back from the Mid east and had some massive conversations with some of the, some of the, the country, uae, United Arab Emirates, Qatar, Saudi Arabia, that they are, they are all plunging deep into AI, building massive data centers over there in the middle of the desert. Does that concern you?

Concern? I don't think that's the right word. I think that, you know, why would we think that AI and the data center build out is only in the U.S. right? So that's the way I think about it. You know, technology is global. Right.

100%.

We're not the only country with smartphones.

Right, Right.

So I'm not surprised that this is going to happen.

Right.

I think it's got some great implications. You know, again, a lot of the names that we just Talked about some, some of them on the construction side are more US based. But if we think about Nvidia Marvell and the like, this is great.

Yeah, no, I think there'll be huge beneficiaries of what's going on over there. I mean, especially if you hear the, you know, the conversation, the commitments, kind of what they're looking to do and they want to be a player in the space and they should be.

Right. But back it up too though. So, you know, a couple of months ago, I think Nvidia CEO Jensen Huang said, oh, I see $1 trillion build out in data center.

Right.

This is all part of that.

Yeah, 100%.

And I think we'll hear more from other countries, you know, over time and I, and I suspect that as we use AI more, as it gets in the enterprise, more, more devices. Right. What's going to happen? You're going to need more data centers, you're going to need to upgrade the digital infrastructure.

It's more energy demand, right? Oh, what about waning? No, energy is not waning.

No, it's.

I think there's a massive oversupply of energy, which is fine, but I don't think demand is waning at all.

I don't, I mean if we're talking electrical energy, 100, 100%.

Right. Just not happening.

No.

All right, let's talk real quick about kind of. We came through the first quarter. Earnings are growing, I think they're growing. What about 15% year over year? Is that what the number was?

So full year, 2025.

Right.

That's what you're talking about.

Well, what the first quarter.

Oh, the first quarter. Yeah, I think, I think that's somewhere.

Up in the double digit.

Yes. Yeah, I think that's right.

What do you think about the second quarter now?

Well, I'm a little more concerned about the second quarter. Yeah, well, we'll see the full impact of tariffs. Right. We'll see potential price increase.

Retails are going to come out, you know, soon. Yeah, they're going to start to report. So it's going to be interesting. You know, the Walmart CEO made that comment, passing on these price hikes, these tariffs on to consumers and Trump right away, you know, shot back, I saw that. Yeah. Telling them.

Well, there wasn't even that though. You remember a couple of weeks ago where Amazon was going to list.

Yeah, yeah.

The impact of tariffs and the administration got on, got on them and they backpedaled.

Well, you know, the argument was why didn't you do that during the Biden years when inflation running at 9, at 9.4%, why didn't you break it out and show what that impact was?

I think that's a little harder to quantify than, than tariffs.

Well, okay, it might be, except prices were going up every month. Prices were going up.

Not, I'm not tariffs.

They're going to go up once and then adjust.

No one's arguing about what happened during the Biden years. We all know. We all. My wallet was a little lighter.

Right.

So, but, but again, I think companies are responding to this because they, you know, people are concerned.

Right.

And I, and I, and I understand that. But I also think though that if we. The concern I have is this. Okay. When was the last time you went to the grocery store, Kenny, and you got a box of cereal or you got a box or bag of coffee.

Yeah.

And prices were going up and then those prices you were paying came down as other prices and pressures came down.

I haven't seen it yet.

Doesn't happen.

I haven't seen it yet.

Yeah.

And I go to the, I go to the, I go shopping. Listen, I know little secret. I love to go grocery store. So do I. What it is, it's like a treas. I love to go grocery.

It's a treasure hunt.

Yeah. Yeah. So I haven't seen that yet. Yeah.

You're never going to see.

Right.

Just like a pound of coffee. Just like a pound of coffee comes in a 10 to 12 ounce bag.

Yeah.

And a pound of coffee last time I thought was supposed to be 16 ounces. That's right.

Yeah. Right. They do the same thing with peanut butter that, you know, they put that hole in the bottom of the, of the, of the jar a little bit bigger. It's less peanut butter. So it's the same price. I get it. You know, but I just, I think it's, I think unless there's a full blown recession, then I don't think you're going to see prices come down. They'll stop going up and then once again just kind of get used to it. Right. So just hoping that wages start to increase.

Right. So what I'm wondering just about retailers so near term, I think there's going to be a little bit of pain for them.

Yeah.

Right. I think we're going to have to watch their margins. We're going to have to see are they going to announce further price increases? I think they will.

Right.

What's the impact of what we've seen at the ports and you know, supply shortages in the short Term. But if we do get these trade deals and tariffs are ultimately brought lower, that's.

Then the question becomes, right, does the price go lower?

They don't. And if they don't, what does that mean for their margins? Margins go back up.

Right. But if they don't, if the, if the tariff deals are not necessarily as onerous as they were made out to be, and it doesn't look like, by the way, that it's, that's going to happen, I think they're not going to be as onerous as well.

That's the goal. That's right. The goal is to reset global trade.

That's right. Which I think is okay. Yeah. It's okay to have these conversations and renegotiate trade agreements that are decades old. The world changes. So. So I have no problem with that. But if they're not as onerous, if some of these companies started raising prices and then the tariffs aren't nearly as bad, to your point, are they going to come down? Is Trump going to call people out and say, whoa, whoa, whoa, whoa, whoa.

That's a great question.

Great question.

I don't know. I mean, because, and this is, this is not a popular thought, but ultimately, companies are responsible to their shareholders 100%. Right. So if they've, if they can improve their profits and drive their eps, which.

I think is Exactly. Wal Mart's not responding. Walmart's responding to their shareholders. They're not responding. You know, they're not saying, I'm going to raise prices because they're trying to stick it. They want to maintain their margins for their shareholders.

Correct.

I mean, let's, let's, let's call for what it is. No, no.

100%.

Right. Anyway, listen, it has been a pleasure. I hope we get to do this again. I want you to come back in three, four months. I'm going to revisit this whole conversation.

I look forward to.

We're going to see what they're doing over in the Mideast, what's happened here in the United States, what tariffs have and have not done, and kind of.

Where we stand, and maybe we'll have some thematic stuff to talk about.

I hope so. In the meantime, you know, I end every podcast with a recipe. And so today it's spring now in New York City, it's spring across America. So I want to introduce the spring pasta. Now, this pasta is a vibrant celebration of the season, right? It's featuring an al dente ditalini pasta tossed with tender asparagus, sweet peas and sauteed leeks and shallots. A creamy sauce born from mascarpone cheese, a basil pesto and fresh parmigiana. It coats every single bite. You add a splash of lemon juice to just awaken all the flavors. Pair that with a chilled glass of Pinot Grigio. My favorite is Santa Margherita and it's a fresh, elegant dish that captures the essence of every spring in every mouthful. You can scan the QR code on the screen for the full recipe and you'll thank me later. Now look, that's a wrap for today's Trader Talk, but the conversation keeps going. You can subscribe on Apple Podcasts, Spotify, Amazon Music or wherever you get your podcast. You got questions or topics you want covered? Email us at trader talkahoo inc.com because I'm always listening. Until next time. Stay sharp, stay disciplined and stay in touch. Take good care. Of this content was not intended to be financial advice and should not be used as a substitute for professional financial services.