After you receive this alert, we will make the following trades:
- Sell all 765 shares of Airbnb (ABNB) at or near $99.50. This will close out the portfolio's position in this Three rated stock, one that retuned -44% since being added to the portfolio in November 2021.
- Sell all 900 shares of Disney (DIS) at or near $93.25. This will close out the portfolio's position in DIS shares, one that returned -40% since being added to the portfolio in September 2021.
- Buy 150 shares of American Water Works (AWK) at or near $137. Following the trade, the portfolio will own 600 AWK shares, roughly 2.5% of the portfolio.
- Buy 190 shares of McCormick & Co. (MKC) at or near $83.40. Following the trade, the portfolio will own 1,280 MKC shares, roughly 3.25% of the portfolio.
- Buy 140 shares of PepsiCo (PEP) at or near $162. Following the trade, the portfolio will own 560 PEP shares, roughly 2.75% of the portfolio.
- Buy 970 shares of Verizon Communications (VZ) at or near $50.85. Following the trade, the portfolio will own 970 VZ shares, roughly 1.5% of the portfolio.
We are using this morning's upward move in the stock market to let go of Three rated Airbnb and Disney shares, following additional data that points to meaningful slowdown in travel, particularly tourism. As we shared when we downgraded the shares of both companies, we have yet to see any meaningful downward revision in EPS expectations, and this morning's revelation in the Flash June PMI data for the Eurozone that pointed to a tourism growth stagnating in June means before too long we see those revisions be had.
Earlier this week we shared our thoughts on the upcoming June quarter earnings season and the likelihood for EPS expectations to be dialed back for the second half of 2022, and rather than stick around for that to happen for Airbnb and Disney, we are opting to exit the shares now.
We are funneling the proceeds into a new position in the shares of Verizon Communications with a $60 target. Adding in the current 5.1% dividend yield to be had with the shares, we are starting with a One rating for this defensive business model and dividend paying company.
As we'll explain in a far more detailed overview of the company that will be published for members soon after this trade alert, we see modest downside in the shares from both a fundamental and technical perspective while EPS expectations for the coming quarters have yet to be lifted for previously announced wireless price hikes some of which begin to phase in as soon as today.
As we tend to do, we are beginning with a starter position in VZ shares, and we would look to build out that position size at better prices should they present themselves.
We are also adding to our existing positions in McCormick & Co., PepsiCo, and American Water Works given the growing prospects for a more challenging second half of 2022. Like today's move with the addition of Verizon shares, we see these three buys increasing the portfolio's defensive posture as well as boosting its dividend stream while also modestly increasing the cash level.
Recent comments from Richmond Fed President Tom Barkin and Fed Chair Powell are seeding the market and investors with the growing likelihood of a recession. We would rather not get caught flat footed should the forthcoming data increase that probability.
(Please note that we are looking to execute these trades at or near the share price mentioned above. Once the trade is completed, subscribers can see the trade's executed price here. Be sure to toggle the chart to sort by Purchase Date.)