Analysis: CAT NVDA AMZN MTH TSLA GOOGL AAPL VIAB CBS DIS MSFT FB

Markets are moving lower today on a disappointing release from Caterpillar (CAT) , an industry bellwether that can provide significant insight into the ongoing trade dispute, a negative pre-announcement from Nvidia (NVDA) and uncertainty regarding the potential for another government shutdown in coming weeks as Republicans and Democrats continue to fight over funding for a border wall. Additionally, adding to the risk-off tone, we remind members that this is the busiest week of earnings season, and on Wednesday we will hear from Fed Chair Jerome Powell following this month's FOMC meeting as all meeting this year will be followed with a live discussion.

Given that we have some time today before our portfolio companies begin reporting tomorrow (recall, we have a total of 10 companies releasing results this week), we want to discuss a few updates regarding our tech and media holdings.

These days, it's no secret that tech companies increasingly want to push deeper into consumer homes. It's no longer enough to be the manufacturer of your smartphone, the gatekeeper of arguably the most valuable piece of real estate in the world, your phone screen. Companies around the world are doing all they can to be more ingrained in our daily lives, be it via more apps, hardware offerings, voice assistants or cloud storage. However, it is now becoming increasingly more apparent that getting a device into consumers' home is no longer enough, now the goal is to become part of the fabric that is a user's home. Today, a smart home is simply a home with smart devices in it, however, now tech companies not only want to be added to the home after its built, they want to be a part of the development process, with their tech woven into the fabric of the home.

Take Amazon (AMZN) , the company that is the undisputed leader in at home smart assistants thanks to its first to market Alexa voice assistant. While Amazon already has a dominant position in the smart home market, with device installs growing on a daily basis and compatible 'internet of things' appliances hitting the shelves regularly, it is becoming increasingly more apparent that the company wants to know even more about its consumers at home habits and for the overall Amazon ecosystem to be a key consideration when home builders begin development, not simply an afterthought considered by the home buyer.

This morning analysts at Morgan Stanley, calling out reports indicating that Amazon "is expanding its initiatives around home/apartment design and construction" via a partnership with Meritage  (MTH) , a home builder focused on connected, energy-efficient homes. We believe this makes perfect sense as companies look to digitize everything from your watch, lights, doorbell, car, home appliances and more. In the note, the analysts call out three potential ramifications longer-term including a more sticky ecosystem, something we have always called out as it relates to all successful tech ecosystems - the higher the switching costs, the more reliable the recurring revenue streams; new category penetration, recall we have noted in our investment thesis that "the embedded call option is that management is always looking to enter a new space and generate new revenue streams"; and a reduction in last-mile shipping costs allowing for more profitable deliveries and grocery deliveries.

To achieve these positive potential outcomes, the analysts called out that by working with home builders in the development phase, Amazon can push for on-premises delivery lockers (perhaps even refrigerated ones to help with the grocery delivery initiative - something that could also play to PillPack as some medications require refrigeration, creating an obstacle to home delivery) or smart garages that would make in-home delivery more secure. Providing trial Prime memberships with purchase would provide another path for the company to pull in new customers and indeed, the analysts note that in addition to the Meritage deal, Amazon partnered with apartment complexes in Texas and Oregon to offer an "Easier with Amazon" services that "gives tenants a free year of Amazon Prime, a free Amazon Echo with installation and Amazon lockers for deliveries."

Further backing this view that companies are seeking to become even more ingrained in our everyday lives and push deeper into our homes, the Wall Street Journal published a report this morning, here, entitled "Google, Amazon Seek Foothold in Electricity as Home Automation Grows" that describes a future in which tech companies not only have greater control automating our homes, but one which they also work to address energy consumption habits and look for ways to increase efficiencies and ultimately, reduce costs to consumers. The goal, however, is not to sell megawatts but rather collect information from smart devices such as thermostats, aggregate the data and use it to manage demand and influence energy consumption habits. Per the article, "some executives anticipate a future where solar panels, battery storage and even electric vehicles all become part of a smart-home ecosystem."

Interestingly, while there is no name of electric vehicle maker Tesla  (TSLA) , the ecosystem described appears identical to the company's home energy initiative, here, which seeks to provide at home renewable and storable energy via solar panels and a large capacity battery pack (Powerwall), which can be used in combination to recharge the electric vehicle.

Adding all of this together, and applying the knowledge to our portfolio positions, we remain bullish on the longer-term opportunities in the tech space and continue to believe that names such as Amazon, Alphabet (GOOGL) and Apple (AAPL) , which was not discussed in detail above but continues to be a key player in the smart home market, all have further upside in coming years as they work to further automate our lives and use data gleaned from their presence in our homes, pockets and cars to address our wants and needs and in the process, increase their own efficiencies, leading to increased sales and profitability.

Looking to the media space, we remind members that last week, portfolio holding Viacom (VIAB) announced that it would be acquiring free streaming television service Pluto TV, here. In line with our view, analysts at Morgan Stanley came out positive on the acquisition noting that while not a game changer, the move can benefit Viacom as it provides a faster path to deliver on its OTT strategy with an added outlet for its branded channels and plays to Viacom's scale in advertising, with the analyst stating, "we see an opportunity for Viacom to leverage existing ad sales to accelerate Pluto's growth and monetize its "TV-like" digital OTT inventory." That said, the analysts did note that acquisition success will depend on management's ability to realize synergies and their ability to continue growing the Pluto TV viewer base in the face of increased competition. Bottom line, while the deal is likely immaterial in the near-term it better positions Viacom to compete longer-term as OTT continues to replace the traditional TV model. That said, we reiterate Jim's commentary from last week's Daily Rundown (here) that the elephant in the room, and the factor most likely to see shares shoot to the upside, is whether the company will seek to merge with CBS (CBS) . As Jim called out on Friday's Mad Money, "I'm betting that Viacom and CBS re-merge, which would be huge for both companies. That's a major reason why we own Viacom for my charitable trust"

Also on the media front, CNET reported this morning (here) that Disney (DIS) has greenlit a second virtual reality product, following the release of Cycles (which members can read more about here) which marked the company's first foray into the new medium. While we don't believe this to be a reason to buy or sell shares of DIS at the moment, we believe it to further demonstrate Disney's ability to innovate and from a higher level, provides insights into companies are looking to take advantage of virtual reality, not only for gaming, but for entertainment and as a story telling medium in general. On that note, we remind members that several of our holdings, including Microsoft (MSFT) , Facebook (FB) and Alphabet are deep at work on VR headsets while Amazon is looking to attack the space via its game development platform Lumberyard via Amazon Sumerian (here) and Apple is rumored to be working on a headset and has already made augmented reality (a combination of virtual reality and the real world) a key feature of its iOS operating system and developer kits.

All in, we believe it is important to keep longer-term themes such as these in mind on a down day like this, in the heart of earnings season, as too often we can allow short-term sentiment to scare us out of longer-term winners. Focusing on these small updates, while perhaps not helpful to share prices in the near-term, are one way to help keep emotions in check and focus on how to achieve longer-term investment goals.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long AMZN, GOOGL, AAPL, VIAB, DIS, MSFT, FB.