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Veteran fund manager revises Marvell position after big M&A deal
That's good advice for prizefighters, and it'll work just as well for battered investors who have seen their portfolios smacked from pillar to post after President Donald Trump announced his reciprocal tariffs on friends, foes and penguins.
On April 8 stocks initially climbed but the rally started to fade in early afternoon trading. Chris Versace wasn't taking any chances.
"We are a bit wary," the lead portfolio manager for TheStreet Pro Portfolio said in a recent video. "Yeah, the White House is making noise about 50 to 70 countries looking to make trade deals, but it also looks like those negotiations are going to take time, potentially stretching out as far as deep into June."
As a result, Versace said, the probability that Trump's reciprocal tariffs go into effect on April 9 is high and that investors should brace for a resolute China's next round of retaliatory tariffs, which are slated to kick in the following day.
Marvell Technology recently announced a big divestiture.Shutterstock-Valerya Zankovych
Investment firm put Marvell in penalty box
Trump will reportedly follow through on a threat to add a 50% tariff on Chinese goods, in addition to 34% reciprocal tariffs, raising the overall tariff rate on Chinese goods to 104%.
"We're not out of the woods yet," Versace said. "The market is going to remain on edge, ... more reason to be cautious, more reason to proceed carefully so we don't get head-faked."
However, Versace did make a move with Marvell Technology (MRVL) , picking up 255 shares of the AI chipmaker at or near $53.25 apiece. Following the trade, he said, the portfolio will own 2,460 Marvell shares, roughly 3.2% of its assets.
This may sound odd coming from the guy who just told us to praise the Lord and pass the ammunition.
Marvell shares are down nearly 28% from a year ago and off roughly 53% since January.
The stock took an unholy beating last month, losing nearly 20% of its market value after the Wilmington, Del., company reported a solid but unsurprising set of fourth quarter earnings. The report arrived during a market slump tied to tariff and economic-growth concerns.
Cantor Fitzgerald analyst C.J. Muse said at the time that Marvell’s conservative guidance, pitted against the elevated expectations for the sector's biggest players, likely put Marvell "in the penalty box until we gain further clarity."
Marvell has emerged, along with Broadcom (AVGO) and Advanced Micro Devices (AMD) , as one of the major U.S. chipmaking rivals to Nvidia (NVDA) .
But Versace explained in his TheStreet Pro column that he had a very specific catalyst that moved him to take advantage of what he considered the deeply oversold condition in Marvell shares.
Fund manager sees strong return for shareholders
To wit: Infineon Technologies (IFNNY) , the Munich semiconductor company, agreed to buy Marvell’s automotive ethernet business for $2.5 billion. That business is expected to generate $225 million to $250 million in sales this year.
"We believe this transaction delivers the strongest financial return for Marvell shareholders, given its compelling valuation," Marvell Chairman and Chief Executive Matt Murphy said in a statement.
"With Infineon's optimized platform for automotive applications, we are confident the Automotive Ethernet business is well positioned for continued growth and success," he added.
Versace said that given the $322 million in revenue reported in 2024 from its Automotive/Industrial segment, it’s a pretty safe bet that this is the bulk of Marvell’s automotive business.
"To be blunt, with the combined Automotive/Industrial business driving about 5% of total revenue, the sale makes for a cleaner story for the company," Versace said. "Given the size of the remaining industrial business, we would not be surprised to see Marvell exit that down the road."
He noted that the $2.5 billion in proceeds from the sale build on the $948 million in cash Marvell had on its books as of Feb. 1.
During the same quarter, Marvell’s board authorized an additional $3 billion to its stock repurchase program.
"Looking back over the company’s recent 10-K filing, we see that even when the stock price was significantly higher in December and January, Marvell was buying back stock at an average price near $116.50," Versace said.
"With the stock significantly lower, we would not be surprised to see the company again buying stock and potentially rearming its buyback program with the proceeds from the automotive sale," he added.
Marvell is scheduled to report earnings on May 29, and Versace said he was keeping an eye on catalysts such as quarterly results from Taiwan Semiconductor (TSM) and Foxconn (FXCOF) , as well as comments about AI adoption from software companies like ServiceNow (NOW) as they report their results.
"Remember, we still have the initial days of the March-quarter earnings season ahead, and what they bring is likely to keep the market volatile," he said.
