Despite the strong finish to the week, all four major market indexes closed the week in the red. Sure, the indexes are up quarter-to-date -- but still down double-digits year-to-date.

The market continues to vacillate between the dueling narratives of inflation and the speed of Fed rate hikes vs. a recession and its impact on demand. This week the larger focus was on the June inflation data and retail sales reports, which combined with other data during the week kept the Atlanta Fed's GDPNow forecast for the June quarter in negative territory. Some believe we may already be in a recession with a Fed that may overshoot and jeopardize a soft landing.

Next week will be all quarterly earnings -- and the Flash July PMI data that lands later in the week. The developments had during the June quarter and prospects for continued inflationary pressures, dollar headwinds, and higher interest rates compared to the first half of 2022 and the back half of 2021, in our view, run the risk of companies resetting the expectations bar lower. As companies report weaker-than-expected quarterly results or offer guidance that falls short of consensus expectations, we'll be looking to see the impact on share prices as we continue to evaluate how much of the "bad news" is already priced into stocks.

We'll continue to be opportunistic with the portfolio, looking to take advantage of near-term disruptions while focusing on the longer-term picture. That said, our practice is not to buy stocks just to generate action and our preference is to not fall for any market head-fakes. More than likely that means we will remain cautious at least until after the bulk of the S&P 500 has reported June-quarter results and we have a better understanding of what the Fed is likely to do in the coming months.

The AAP Portfolio

While all the major market indexes moved lower week over week, erasing some of last week's gains, the portfolio had a number of positions move higher week-over-week. Leading the charge were the shares of AMN Healthcare and Costco Wholesale, with a number of others moving nicely higher. Mitigating that progress, the portfolio took some blows this week in the form of the latest move lower with ChargePoint shares as well as a modest tumble in Alphabet and Microsoft shares.

During the week we took advantage of the robust gains over the last few weeks in the shares of Costco Wholesale, AMN Healthcare, and Cboe Global Markets, all of which were up double-digits vs. declines in the S&P 500. So, we made some sales. We also used some of those proceeds to add to the portfolio's positions in Verizon Communications, United Rentals, and shares of the First Trust Nasdaq Cybersecurity ETF. Those moves were in keeping with our stated strategy to opportunistically wade deeper into those positions given the prospects for cybersecurity spending, the positive impact of the Biden Infrastructure Law in the coming quarters, and the inelastic business model of mobile and data services.

We also used the week to freshen up the Bullpen, swapping shares of Kimberly Clark (KMB)  for Marvell Technology, the SPDR Gold Trust (GLD)  for American Barrick, and Wendy's (WEN)  for DoorDash. To be clear with club members, we are keeping watch on these new additions for when the fundamentals and technical "go" signs overlap. For now, they are on the radar screen.

Given the economic data to be had next week, the sharp increase in the number of companies reporting over the next two weeks, and the upcoming Fed meeting on July 27, there are a few uncertainties that we and the market will have to contend with. Our plan will echo our actions this week - prudent oversight of the portfolio, chipping away at existing positions that have favorable risk-to-reward tradeoffs and known catalysts ahead on the one hand, and inelastic business models and dividend payers on the other. As the number of price target cuts and downward earnings revisions slow as we move past the peak of June quarter earnings season, should the market find its footing we'll be ready to go bargain shopping.

Key Global Economic Readings

(Note: T is the most recent period, T-1 is the prior period's reading and T-2 is two periods back, the intent being to illustrate any trends)


As we mentioned above one of the key focuses of the week was the macro-economic data that included the June consumer price index, producer price index, retail sales and industrial production reports. June retail sales came in better-than-expected with year-over-year retail sales climbing 8.4% year-over-year but stripping out gas station retail sales, which rose 49.1% year over year, total retail and food services sales rose 5.1% year-over-year.

Viewed against the June consumer price index that came in hotter-than-expected at 9.1% year-over-year - the fastest increase since late 1981. Turning to the core CPI, which excludes food and energy, it also came in hotter than expected at 5.9% in June vs. the 5.7% estimate and May's 6.0% reading. Digging into the innards of the June report, we see a mixed picture of sequential inflationary pressures, but also indications that some are easing. As most if not all of us can attest, energy costs were a major thorn in the side of the June report with the overall Energy component soaring 41.6% year over year and 7.5% vs. May. Those same energy costs were a likely factor in the Transportation Services sub-index rising both month over month and over year.

We know several commodity prices have trended lower in recent weeks, including those for oil and gas, but even a number of those commodities are still up on a year-over-year basis. This more than likely means we aren't likely to see a quick retreat in inflationary pressures in the near-term. We also know that companies are planning to instill further price increases to consumers in the coming weeks and months, another reason to think the downward path in inflation won't be a quick one.

The headline figure for the June producer price index also came in much hotter than expected at 11.3% year-over-year vs. the upwardly revised May figure of 10.9% and the 10.7% consensus forecast for the month. Some may find some comfort in the core PPI reading ticking lower to 8.2%, but not only did that match the consensus forecast, it compares to the upward revision in for May to 8.5% from 8.3%. The bottom line with this report is inflation pressures remain at elevated levels and combined with yesterday's CPI data, it is going to spur the Fed into bigger action.

Exiting the week, we received the latest update for the Atlanta Fed's GDPNow Model, which clocked in at -1.5% vs. its July 8 update of -1.2%. So far, the Fed is hanging it hat on the continued strength in the jobs market as an indication the economy remains vibrant enough to handle its inflation fighting tactics.

In response to the week's inflation data, speaking at a European Economics & Financial Center event in London, St. Louis Fed President James Bullard said the Fed should target a policy range of 3.75%-4% by the end of 2022, up from his prior call for 3.5%. Adding to that, Federal Reserve Gov. Christopher Waller said he's willing to consider what would be the most aggressive interest rate hike in decades at the central bank's meeting later this month. Waller went on to say that "If I see the incoming data the next two weeks coming in and showing me that demand is still really strong and robust, then I'm going to lean into a higher rate hike."

The latest Fed Beige Book, an anecdotal summary of economic activity across various Fed regional banks, found economic activity expanded at a modest pace but "several Districts reported growing signs of a slowdown in demand, and contacts in five Districts noted concerns over an increased risk of a recession." Per the report, the labor market remains tight and substantial prices increases were reported across all Districts with pricing power remaining steady despite concerns about cooling future demand.

This tells us the Fed is more likely to go big at its July meeting as it looks to not only get ahead of the inflation fight but also restore some of its credibility in the process. In our view, a larger July move can offer the Fed greater flexibility at its remaining monetary policy meetings as more data is had. Ahead of the Fed's July 26-27 meeting, we have a several pieces of housing data to be had, the Flash June PMI reports, and the July Consumer Confidence reports. As we get that data, we'll revisit our expectations for what the Fed's likely to do later this month.

Chart of the Week: Retailers ETF Rises

Retail names are starting to improve, and if the VanEck Retail exchange-traded fund ( RTH) is providing any clues, it could be a nice run higher. Some resistance is above around the $175 level, but first up there is some noisy selling around $163 or so.
The indicators are pretty bearish, though, with money flow and the relative strength index both making lower highs. But we could see a few more up weeks from here shift that momentum to the bullish side. The oscillator at the bottom is signal some modest weakness, volume trends are light and not really giving us much of a signal yet. The support line here is important (blue).

The Coming Week

Following the plethora of economic data we had this week, which again led the Atlanta Fed's GDPNow model to -1.5% GDP for the June quarter, down from its prior reading of -1.2%, we have a quieter economic calendar next week. As such we expect the focus to be on corporate earnings as the number of companies reporting picks up considerably compared to this week.

In terms of the economic data next week, its mostly housing related and while we will factor what it says into our thinking, the data we will be most focused on will be the Flash July PMI reports from S&P Global. As club members have come to recognize, we utilize these reports that give us the first hard look at the month to gauge how the manufacturing and services economy fared. Given the recession vs. inflation narrative, these July figures should inform us as to not only the speed of those two key sectors, but also whether their input price inflation has eased and if further price increases for their outputs were had. Based on what we learn, we'll have a better idea if inflation has indeed peaked or if it remains persistently high. The outcome of those reports has a high probability of shaping interest rate hike expectations ahead of the Fed's next monetary policy meeting that concludes on July 27. Members can expect us to continually revisit both the Atlanta Fed's GDPNow model and the CME FedWatch Tool for updates as we get closer to the Fed's monetary policy announcement and press release after that meeting on July 27.

Here's a closer look at the economic data coming at us next week:


Monday, July 18

  • NAHB Housing Market Index - May (10:00 AM ET)

Tuesday, July 19

  • Housing Starts & Building Permits - June (8:30 AM ET)

Wednesday, July 20

  • Weekly MBA Mortgage Applications (7:00 AM ET)
  • Existing Home Sales - June (10:00 AM ET)
  • Weekly EIA Crude Oil Inventories (10:30 AM ET)

Thursday, July 21

  • Weekly Initial & Continuing Jobless Claims (8:30 AM)
  • Philadelphia Fed Manufacturing Index - July (8:30 AM ET)
  • Leading Indicators Index - June (10:00 AM ET)
  • Weekly EIA Natural Gas Inventories (10:30 AM)

Friday, July 22

  • Flash Manufacturing & Services PMI - July (9:45 AM ET)


Tuesday, July 19

  • UK: Average Earnings Index, Unemployment Rate - May
  • Eurozone: CPI - June

Wednesday, July 20

  • UK: CPI, PPI - June
  • Germany: CPI, PPI - June

Thursday, July 21

  • Japan: Bank of Japan Interest Rate Decision
  • Eurozone: European Central Bank Interest Rate Decision

Friday, July 22

  • Japan: CPI - June.
  • Japan: Flash Manufacturing & Services PMI - July
  • UK: Retail Sales - June
  • Eurozone: Flash Manufacturing & Services PMI - July

The pace of quarterly earnings accelerates next week with more than 250 companies slated to issues their latest results and impart their guidance for what's ahead. Among them will be 72 S&P 500 constituents and their updates paired with the 17 that reported this week will start to reveal to what extend consensus expectations for the second half of 2020 will be revised for S&P 500 earnings. For newer club members, we pay close attention to these revisions given the S&P 500 is not only the benchmark for the portfolio, numerous mutual funds, and other investment products but it's earnings per share growth and P/E are also a barometer for the overall market. Several weeks back we shared concern that despite all that unfolded during the June quarter, second half of 2022 consensus EPS expectations actually ticked higher at the end of June compared to where they were exiting February. In recent days, we've seen the number of downward revisions pick up for individual companies, but the next few weeks are likely to reveal more cuts S&P 500 expectations.

In terms of portfolio companies reporting next week, we have Nucor (NUE) and Verizon (VZ) on deck. We'll also be dialing into earnings conference calls from ASML (ASML), Netflix (NFLX), Steel Dynamics (STLD), American Express (AXP) and others as we look for not only points of confirmation for the portfolio's positions but red flags as well.

Here's a closer look at the earnings reports coming at us next week:

Monday, July 18

  • Open: Bank of America (BAC), Charles Schwab (SCHW), Goldman Sachs (GS), Synchrony Financial (SYF).
  • Close: IBM (IBM)

Tuesday, July 19

  • Open: Halliburton (HAL), Hasbro (HAS), Johnson & Johnson (JNJ), Lockheed Martin (LMT), Manpower (MNA).
  • Close: Cal-Maine Foods (CALM) JB Hunt (JBHT), Netflix (NFLX).

Wednesday, July 20

  • Open: Abbott Labs (ABT), ASML (ASML).
  • Close: Crown Castle (CCI), CSX (CSX), Steel Dynamics (STLD), Tesla (TSLA), United Airlines (UAL), Valmont Industries (VMI).

Thursday, July 21

  • Open: American Airlines (AAL), AT&T (T), AutoNation (AN), Domino's Pizza (DPZ), Dow (DOW), Nokia (NOK), Nucor (NUE), SAP SE (SAP), Twitter (TWTR).
  • Close: Boston Beer (SAM), Intuitive Surgical (ISRG), PPG Industries (PPG), Snap (SNAP).

Friday, July 22

  • Open: American Express (AXP), Roper (ROP), Schlumberger (SLB), Sensient (SXT), Verizon (VZ).



Advanced Micro Devices (AMD) ; $81.11; 1,160 shares; 2.85%; Sector: Info. Tech.

WEEKLY UPDATE: There were several price target cuts this week for AMD, including Cowen & Co reducing its to $120 from $160, Susquehanna dropping its to $120 from $140, and KeyBanc Capital Markets cutting to $130 while citing the risk of a slowdown ahead in the chip industry. Counterbalancing those actions, BMO Capital Markets upgraded the shares to Outperform and raised its price target to $115 from $100 as it, much like we do, sees AMD gaining further share from Intel. Adding a boost to AMD were comments from quarterly results and guidance from Taiwan Semiconductor that not only confirmed the market strength in HPC and Automotive chip demand but pointed to HPC as driving its business higher amid softer consumer facing demand. Given concerns over the PC market (IDC reported PC volumes fell 15% year-over-year in the June quarter), near-term AMD shares will likely be a "show-me" story but we continue to like the longer-term prospects of its end markets, share gain potential and integration synergies tied to Xilinx. AMD will announce it quarterly results on Aug. 2, and we expect to contrast those results closely against those from Intel, which reports on July 28. Next week also brings quarterly results from Microsoft, and its guidance should offer a clear perspective on PC demand for 2H 2022. Based on the data and what it points to for the back half of 2022, we may be inclined to add to the portfolio's position size. When AMD eventually reports its quarterly, we expect an update on its cost synergies associated with its acquisition of Xilinx.

1-Wk. Price Change: 2.2% Yield: 0.00%

INVESTMENT THESIS: AMD is a chip maker that specializes in the development of both CPUs (like Intel) and GPUs (like Nvidia). On the CPU side, the company continues to take share from Intel in the data center thanks to its 2nd generation EPYC processor line, which is seeing increased adoption in the super computing and high-performance computing space (especially following execution missteps from Intel that has resulted in delays for the companies 7nm chips), which you can read more about at the link here. On the GPU side, while Nvidia remains the unquestioned leader in terms of overall performance, AMD is the close on its tail and provides a strong balance between price and performance. AMD is also seeing strong momentum in the mobile space, recently announcing that its Ryzen platform has exceeded its moonshot 25x20 goal set in 2014 that aimed to improve the energy efficiency of its mobile processors 25 times by 2020. Simply put, we think AMD has more room to run as it gains market share, especially when you factor in the current strength of data center and the company's positioning as it relates to the next-gen video game console cycle given that both PlayStation and Xbox use AMD graphics cards.

Target Price: Reiterate $160; Rating: One

ACTIONS, ANALYSIS & MORE: FY2Q21 Earnings Analysis (7/27/21), CEO Interview (7/29/20), Readthroughs Are Still Positive for AMD (7/24/20), Initiation (7/7/20), Investor Relations

Cboe Global Markets Inc. (CBOE) ; $118.98; 820 shares; 2.98%; Sector: Financials

WEEKLY UPDATE: Following the company's favorable June quarter metrics reported last week, Deutsche Bank raised its price target to $136 from $131 while Credit Suisse increased its price target on the shares to $146 from $143. In a note to members Tuesday we showed how CBOE shares were overbought. Pairing that with the strong outperformance in the shares as we move deeper into earnings season, we elected to convert some of the recent gains into actualized ones. Given the likelihood the coming months will remain volatile, leading to robust demand for the use of options by professional and individual investors, we'll continue to maintain a meaningful position in CBOE. Cboe will report its quarterly results on July 29.

1-Wk. Price Change: 0.3% Yield: 1.6%

INVESTMENT THESIS: Cboe's business, which centers on market infrastructure, data solutions, and tradable products for equities, derivatives, and foreign exchange across North America, Asia Pacific, and Europe. Those operations include the largest options exchange and the third largest stock exchange operator in the U.S., one of the largest stock exchanges by value traded in Europe, and EuroCCP, a leading pan-European equities and derivatives clearinghouse among others. The two primary drivers of the company's earnings are its options and North American equities business, which combined drive around 75% of its revenue but more importantly roughly 85% of its operating income. Viewed from a different perspective, 28%-30% of Cboe's revenue stream is from recurring non-transaction revenue that includes proprietary market data as well as access and capacity fees. We like the sticky nature and predictability of that business. The core driver of the company's business hinges on continued growth in options trading volume and the company expanding its recurring non-transaction revenue.

Target Price: Reiterate $140; Rating: One.

RISKS: IT spending, competition, supply chain challenges

ACTIONS, ANALYSIS & MORE: Addition to AAP Portfolio; Initial Technical Review, Addition to Bullpen, Investor Overview.

ChargePoint Holdings Inc. (CHPT) ; $11.57; 10,000 shares; 3.51%; Sector: Electrical Components & Equipment

1-Wk. Price Change: -13.5% Yield: 0.00%

WEEKLY UPDATE: According to a study by Consumer Reports, 71% of U.S. respondents expressed interest in buying or leasing an EV. Of that group, 14% said they would "definitely" buy or lease one, 22% would "seriously consider" one, and 35% "might" consider one. This is significantly higher than the 2020 Consumer Reports survey on EV adoption that found just 4% of respondents would "definitely" buy or lease an EV. This reaffirms the shift toward EVs that will necessitate the buildout of EV charging stations, a positive for ChargePoint and our shares. During the week JPMorgan reiterated its Overweight rating on CHPT shares and its $18 price target. The week's pullback in the shares has shrunk its overall position size in the portfolio, giving us a potential opportunity to prudently round out our position size at attractive levels. We see the current share price a great hopping on point for new club members.

INVESTMENT THESIS: ChargePoint Holdings designs, develops and markets networked electric vehicle (EV) charging system infrastructure and cloud-based services which enable consumers the ability to locate, reserve and authenticate Networked Charging Systems, and to transact EV charging sessions on those systems. As part of ChargePoint's Networked Charging Systems, subscriptions, and other offerings, it provides an open platform that integrates with system hardware from ChargePoint and other manufacturers. According to the US Department of Energy, the US reached a milestone this past year with its 100,000th EV charger installed in 2021. Industry analysts at Guidehouse Insights forecast that a total of 120 million chargers will be needed globally by 2030, providing a meaningful opportunity for ChargePoint to expand its charging footprint. To that end, the U.S. Departments of Transportation and Energy announced nearly $5 billion over the next five years that will be made available under the new National Electric Vehicle Infrastructure (NEVI) Formula Program established by President Biden's Bipartisan Infrastructure Law. The aim of NEVI is to build out a national electric vehicle charging network of high voltage chargers along designated Alternative Fuel Corridors, particularly along the Interstate Highway System.

Target Price: Reiterate $22; Rating: One

RISKS: EV adoption of passenger and fleet applications, changing technology, subscription renewals.

ACTIONS, ANALYSIS & MORE: We're Calling Up a Name From the Bullpen, The Needle Could Begin to Move on This Bullpen Name, Investor Relations.

Chipotle Mexican Grill (CMG) ; $1,299.99; 70 shares; 2.76%; Sector: Restaurants

1-Wk. Price Change: -2.9% Yield: 0.00%

WEEKLY UPDATE: Like a number of other companies, Chipotle saw several price target cuts this week including those from Oppenheimer, which reduced its to $1,725 from $1,925, and Baird's trimming to $1,800 from $1,900. With concerns over an slowdown that could sap consumer willingness to eat out, we are seeing same-store-sales expectations move lower in the back half of 2022 vs. the 11% consensus for Chipotle's June quarter. Our view remains Chipotle's limited time menu items and better for you fare will continue to attract consumer while price increases put in place in late 2021 and earlier this year drive favorable SSS comps. When the company reports its June quarter results on July 26, we will be looking to see if yet another price increase is likely in the balance of 2022.

INVESTMENT THESIS: Our investment thesis on CMG shares centers on its offering consumers better-for-you fare while also expanding its geographic density, embracing digital ordering and bringing to market limited-time menu offerings that should spur traffic and boost average revenue per ticket. With upside to our price target shrinking, we are once again reviewing the incremental upside and revisiting protein input costs.

Target Price: Reiterate $2,000; Rating: One

RISKS: Input costs, particularly for the protein complex, labor costs, consumer spending, food safety, industry dynamics and competition.

ACTIONS, ANALYSIS & MORE: Initiating a New Position in Chipotle, We're Adding Chipotle to the (Bullpen) Menu

Costco Wholesale (COST) ; $522.95; 265 shares; 4.2%; Sector: Consumer Staples

WEEKLY UPDATE: COST shares were upgraded to Buy at Deutsche Bank with a fresh $579 price target, which lifted the shares higher. We used that incremental move that added to the recent strength in the shares to prudently convert gains in the portfolio's largest position to actualized ones for members and the portfolio. After the trade, the portfolio's position in COST shares remain its largest one, keeping ample skin in the game as the company continues to win consumer wallet share and expand its geographic presence, spurring its higher-margin membership revenue stream. Our thesis for the company continuing to win consumer wallet share was once again confirmed comparing Costco's June comp sales ex-gas and foreign exchange that rose 13.2% in the U.S. vs. overall June Retail Sales that climbed 7.7%. Costco declared its next $0.90 per share per quarter dividend will be paid on August 12 to shareholders of record on July 29.

1-Wk. Price Change: 4.3% Yield: 0.6%

INVESTMENT THESIS: We like Costco's long-term prospects, driven by a club-based operating model that focuses on volumes, not margins, and therefore offers its customers a value proposition of everyday low prices. The strength of this model has created an incredible loyal customer base with low churn and continued share gains in both brick and mortar and e-commerce. And this is a global concept, evidenced by the strength of sales both in the U.S. and abroad, which includes an emerging China opportunity. We see the company's membership model as a key differentiator vs. other retailers and its plans to open additional warehouse locations in the coming quarters should drive retail volumes and the higher margin membership fee income as well. We also appreciate management's approach to capital returns and their willingness to return cash when it is in excess on the balance sheet. Earlier this year, Costco announced a 13.9% increase for its quarterly dividend to $0.90 per share.

Target Price: Reiterate $620. Rating: One

RISKS: Inability to pass through higher costs, fuel prices, weaker consumer, membership churn.

ACTIONS, ANALYSIS & MORE: FY4Q21 Earnings Analysis (9/23/21), FY2Q21 Earnings Analysis (3/4/21), Upgrading Costco to a One (2/25/21), $10 Per Share Special Dividend (11/16/20), Recent Buy Alert (2/28/20), Initiation (1/27/20), Investor Relations

Deere & Co. (DE) ; $297.70; 310 shares; 2.8%; Sector: Farm Machinery & Equipment

WEEKLY UPDATE: Even though it trimmed its price target to $400 from $450, Jefferies reiterated DE shares as a top pick and its backlog offers solid visibility for the coming quarters. The USDA issued its July crop update, boosting its key crop forecasts, which has added to recent pressure associated with commodities selling off and the stronger U.S. dollar that makes U.S. agriculture commodity exports more expensive. While the USDA lifted its corn production forecast, it cuts its outlook for the soybean harvest, but as we can see in the chart below, drought conditions are weaving their way through the U.S. While summer temperatures and their impact on crop conditions are nothing new, it's one of the reasons why the August crop update from the USDA is far more insightful than the July one. At the same time, the combination of drought conditions and the current heat wave in Europe are raising concerns for harvests in Italy, Portugal, France, and Spain. Like any other commodity, ag commodity pricing is determined by both demand and supply factors, with supply influenced by weather and growing conditions. We'll continue to monitor these developments and forward guidance for machinery companies and ag and construction equipment ones in particular as we move deeper into the June quarter earnings season.

1-Wk. Price Change: -2.3% Yield: 1.4%

INVESTMENT THESIS: The global agriculture equipment market size is expected to reach $166.5 billion in 2027, growing at 6% CAGR over the 2020-2027 period. The favorable outlook for equipment purchases in the coming quarters reflects rising farmer income that historically drives new equipment purchases. At the same time, Deere continues to lean into the sustainability movement with its precision ag offering. That technology is helping farmers drive crop yields higher while also realizing cost savings, which makes the new technology a productivity upgrade compared to older equipment.

Target Price: Reiterate $450; Rating: One

RISKS: Geopolitical uncertainty, economic conditions, raw material and other input prices, prices for key agricultural commodities.

ACTIONS, ANALYSIS & MORE: Initiation (10/25/21), Investor Relations

Alphabet (GOOGL) ; $2,235.55; 55 shares; 3.73%; Sector: Communication Services

WEEKLY UPDATE: The company shared its YouTubeTV offering surpassed 5 million subscribers and trailers vs. "more than 3 million paid subscribers" in 2020. Findings from Morgan Stanley suggest YouTube's engagement continued to rise during the June quarter vs. declines for Meta Platforms's Facebook and Instagram. We suspect part of what is driving the engagement is YouTube's leaning into short form video with its Shorts offering. Recent data suggest YouTube Shorts is being watched by over 1.5 billion logged in users every month, which should drive favorable revenue comparisons for YouTube. On the regulatory front, reports indicate the Department of Justice is likely to reject Google's offer to split its advertising technology business as a concession and go ahead with an antitrust lawsuit over its influence on the online advertising market. As we close the week, we' remind club members of Alphabet's 20:1 stock split that will occur after Friday's market close and will be reflected in the share price early next week and price targets soon thereafter. Accounting for that split, our $3,500 price target will move to $175 early next week. Alphabet will report its quarterly results on July 26.

1-Wk. Price Change: -6.3%; Yield: 0.00%

INVESTMENT THESIS: We believe that while search and digital ad dominance are what will carry shares in the near- to- midterm, longer-term it is the company's artificial intelligence "moat" that will provide for new avenues of growth. AI is what has made the company's search, video and targeted ad capabilities best-in-class and is the driving force behind the company's success in voice (Google Home) and autonomous driving (Waymo). Furthermore, we believe it is this AI expertise that will also make the company more prevalent in other industries, including healthcare via subsidiary Verily, as AI and machine learning continue to disrupt operations across industries. We believe Alphabet's willingness to invest in new areas, knowing most will fail, is a recipe for long-term success as while most "X Moonshot Factory" projects may fail, every once in a while, you end up with a Waymo, perhaps the division's, most successful graduate to date. Lastly, compounding out positive view of the company's future opportunities, we believe that Alphabet's free cash flow generation and solid balance sheet set it apart and are what will allow the company to continue taking chances on far-out ground-breaking and potentially world changing projects. Following the company's announced 20-for-one stock split, a move that could very well help the shares land in the Dow Jones Industrial Average, we will adjust our new price target on July 1.

Target Price: Reiterate $3,500; Rating: One

RISKS: Regulatory risk (data privacy), competition, macroeconomic slowdown impacting consumers and therefore ad buyer activity

ACTIONS, ANALYSIS & MORE: FY2Q21 Earnings Analysis (7/27/21), Why GOOGL Has Shrugged Off Antitrust Headlines in Early Trading Tuesday (10/20/20), Initiation (11/27/13), Investor Relations

Microsoft Corp (MSFT) ; $256.72; 500 shares; 3.89%; Sector: Technology

WEEKLY UPDATE: We entered the week with reports the company-initiated a round of job cuts, less than 1% of its 181,000 workforce. While this could be a sign of the company getting ready for a slowdown, in the past it's made similar moves as it realigns functions inside the company as it begins its latest fiscal year. Mid-week Morgan Stanley shared our view that Microsoft is poised to fare better than most in an economic slowdown, especially as its cloud business accounts for a far greater portion of the company's revenue mix compared to several years ago. Netflix announced it picked Microsoft to be its global advertising sales and technology partner as the streaming giant gets set to offer an advertising-supported tier. Late in the week, Microsoft reportedly responded to the Federal Trade Commission's second request for information surrounding the pending $69 billion purchase of Activision. We expect to hear more on that and its advertising deal with Netflix when Microsoft reports its quarterly results on July 26 but suspect much of the focus will be on its PC facing business, cloud, and dollar related headwinds. Setting the stage for that PC discussion, IDC 's latest report shows worldwide PC shipment fells 15.3% year over year in the June quarter to 71.3 million units.

1-Wk. Price Change: -4.1% Yield: 1%

INVESTMENT THESIS: We believe the cloud to be a secular growth trend and that upside to shares will result from Microsoft's hybrid cloud leadership as the company grab's market in this expanding industry. While companies may look to build out multi-cloud environments, Microsoft's Azure offering will be a prime choice thanks to the company's decision to provide the same "stack" used in the public cloud, to companies for their on-premise data centers. Additionally, we would note that hybrid environments are currently the preference for most companies because it allows them to maintain critical data in house while taking advantage of the agility and scalability provided by public clouds. Outside of the cloud opportunity, we maintain a positive view on the company's growing gaming business, which we believe is becoming an increasingly prominent factor in the Microsoft growth story as gaming becomes more mainstream, management works to convert its gaming revenue from one-time license purchase to a recurring subscription model and as technologies like augmented/virtual reality evolve. Finally, as it relates to LinkedIn and other subscription-based services such as O365 and various Dynamics products, we continue to value them highly for their recurring revenue streams, which we remind members, provides for greater transparency of future earnings.

Target Price: Reiterate $320; Rating: One.

RISKS: Slowdown in IT spending, competition, cannibalization of on premises business by the cloud

ACTIONS, ANALYSIS & MORE: FY4Q21 Earnings Analysis (7/27/21), Ignite 2021, Microsoft Acquires ZeniMax (9/22/20), CEO Satya Nadella on CNBC (3/25/20), CEO Satya Nadella speaks at the World Economic Forum (1/23/20)

Nvidia (NVDA) ; $157.62; 610 shares; 2.92%; Sector: Info. Tech.

WEEKLY UPDATE: KeyBanc and Citi trimmed their earnings forecasts for Nvidia this week citing potential inventory issues in PCs and slower demand that could impact its gaming business. With data center still constrained by server capacity, the outlook for its data center chips remains strong. Those comments were confirmed by quarterly results and guidance from Taiwan Semiconductor (TSM) that not only confirmed the market strength in HPC and Automotive chip demand, but pointed to HPC as driving its business higher amid softer consumer facing demand. We continue to like Nvidia's position in data center, which is now its largest business but expect similar to AMD, we think it will be a "show-me" story in the near-term given the weakening PC market.

1-Wk. Price Change: -.5% Yield: 0.1%

INVESTMENT THESIS: We believe upside will result from Nvidia's GPU dominance, the moat created by its CUDA, the company's parallel computing platform, and significant growth in all of the company's end markets including, the cloud (think datacenter), gaming, autonomous vehicles and pro visualization. Furthermore, we believe the cloud (i.e. data center) growth will be even more of a factor in upside following the acquisition of Mellanox, which thanks to its low latency "InfiniBand" technology, provides Nvidia the ability be a more integral player in the buildout of data centers by working to both accelerate server subsystems via GPU-acceleration and accelerate the data center overall by "tying together" the multiple subsystems and allowing them to operate as a single cohesive unit.

Target Price: Reiterate $225; Rating: One

RISKS: Slow uptake of raytracing chips which will depend on gaming publishers' implementation of the new technology in software releases, a slowdown in the IT/data center spending, competition, slower than expected inventory channel normalization.

ACTIONS, ANALYSIS & MORE: FY2Q22 Earnings Analysis (8/18/21), Highlights From the Nvidia Investor Day (4/12/21), Jim Discusses Arm Holdings Acquisition on Mad Money (9/24/20), Initiation (3/18/19), Investor Relations

United Rentals (URI) ; $251.84; 380 shares; 2.9%; Sector: Industrials

WEEKLY UPDATE: The company announced it will report its quarterly results on Thursday, July 28. Ahead of that report we'll look for comments to be had during the June quarter earnings season about domestic construction activity as well as the data in the June AIA Architecture Billings Index that will be released on July 20. During the week, Keybanc reiterated its Overweight rating but reduced its price target to $355 from $420

1-Wk. Price Change: 1.2% Yield: 0.0%

INVESTMENT THESIS: United Rentals is the largest equipment rental company in the world, operates throughout the United States and Canada, and has a limited presence in Europe, Australia and New Zealand. It serves the industrial and other non-construction; commercial (or private non-residential) construction; and residential construction. Industrial and other non-construction rentals represented approximately 50% of rental revenue, primarily reflecting rentals to manufacturers, energy companies, chemical companies, paper mills, railroads, shipbuilders, utilities, retailers and infrastructure entities; Commercial construction rentals represented approximately 46% of rental revenue, primarily reflecting rentals related to the construction and remodeling of facilities for office space, lodging, healthcare, entertainment and other commercial purposes; and residential rentals ~4% of revenue. We see the company benefitting on three fronts - the seasonal uptick in construction spending; the release of funds and projects associated with the five-year Biden Infrastructure Bill; and the company's nip and tuck acquisition strategy that should further enhance its geographic footprint. In January, the company announced a fresh $1 billion buyback authorization following the completion of $4 billion in share repurchases over the 2012-2021 period.

Target Price: Reiterate $380; Rating: One

RISKS: Industry and economic risk, competition and competitive pressures, acquisition risk.

ACTIONS, ANALYSIS & MORE: Initiating a Position in This Equipment Rental Company, We're Adding This Equipment Rental Company to the Bullpen, Investor Relations.

Verizon Communications (VZ) ; $51.02; 1,300 shares; 2.01%; Sector: Communication Services

WEEKLY UPDATE: We nibbled on VZ shares during the week, modestly adding to the portfolio's exposure. Verizon debuted its "Welcome Unlimited" family plan, the cheapest unlimited offering the carrier now sells, with one line available for $65 per month and four lines going for $120 per month ($30 per line, per month). However, the plan lacks access to Verizon's fastest 5G networks (5G Ultra Wideband or "5G UW"), even if the device supports it. This means Verizon is pursuing a two-tier network strategy to cater to lower cost entrants and those that are willing to pay a premium for the more advanced network. Verizon will report its June quarter results on July 21. The day before competitor AT&T will reports its June quarter, setting the tone for what we could hear from Verizon. We expect recent price at Verizon should buoy margins in the coming quarters, keeping its relatively defensive businesses humming.

1-Wk. Price Change: 1% Yield: 5%

INVESTMENT THESIS: Verizon Communications is one of the largest communication companies in the U.S. Its Consumer business, includes wireless equipment and services as well as residential fixed connectivity solutions, including internet, video, and voice services, is ~75% of Verizon's revenue stream but ~90% of its operating income. Exiting the March 2022 quarter, the company had 115.2 million wireless customers split between 91.4 million pre-paid and 23.8 million postpaid, and 7.1 million broadband consumers, the vast majority of which are Fios Internet customers. From a revenue and operating profit contribution perspective, the Business segment accounts for ~25% and 10%, respectively. Through this segment Verizon offers wireless and wireline communications services and products, including data, video and conferencing services, corporate networking solutions, security and managed network services, local and long-distance voice services, and network access to deliver various Internet of Things (IoT) services and products.

Target Price: Reiterate $60; Rating: One

RISKS: Industry and economic risk, competition and competitive pressures, acquisition risk, labor relations, and the regulatory environment.

ACTIONS, ANALYSIS & MORE: Here's Why We're Attracted to This Telecom, Exiting 2 Positions, Initiating 1, and Adding to 3, Investor Relations


Amazon (AMZN) ; $113.55; 600 shares; 2.07%; Sector: Consumer Discretionary

WEEKLY UPDATE: Amazon announced it will reduce the number of private label brand items it sells from around 243,000 items across 45 different brands by well over half and could exit the private-label business entirely to alleviate regulatory pressure. Alongside this, Amazon also announced it will create more than 4,000 new jobs this year, despite fears that rising inflation will hit consumer demand. In terms of its 2022 Prime Day event that was had this week, the company announced that members purchased more than 300 million items over the two-day event making the event the single biggest Prime Day event in its history. According to data published by Adobe, online spending in the US rose 8.5% to $11.9 billion during Amazon's two-day Prime Day promotion, however that figure includes traffic from other digital shopping sites including and Consensus expectations according to EMarketer were for Amazon to net $7.76 billion in the US and $12.5 billion globally over the two-day event, each up about 17% from a year earlier. We expect some greater insight when Amazon reports its quarterly results on July 28. We'd remind members that our intention is to revisit AMZN shares as that report is had and the difficult year over year comparisons are behind Amazon and the favorable ones given the timing of Prime Day 2022 are ahead of it.

1-Wk. Price Change: -1.7%; Yield: 0.00%

INVESTMENT THESIS: We believe upside will result from Amazon's continued Commerce dominance, AWS' continued leadership in the public cloud space, and ongoing growth of the company's advertising revenue stream, which feeds off Amazon's eCommerce business. Additionally, we believe profitability will continue to improve as AWS and advertising account for a larger portion of total sales as both these segments sport higher margins than the eCommerce operation. And while we believe the increasing share of revenue from these higher margin businesses will be key to driving profitability longer-term, we believe margins on ecommerce stand to improve as the company's infrastructure is further built out and economies of scale further kick in. The embedded call option is that management is always looking to enter a new space and generate new revenue streams. We continue to see the company's Prime, logistics service and learnings from its Chime video conferencing platform as a game changer for the healthcare industry.

Target Price: Reiterate $175; Rating: Two

RISKS: High valuation exposes the stock to volatile swings, eCommerce has exposure to slower consumer spending, competition, management is not afraid to invest heavily, potential headwinds resulting from new eCommerce regulation in India, management is not scared to invest aggressively for growth, which can at times cause volatile reactions as near-term concerns arise relating to the impact on margins.

ACTIONS, ANALYSIS & MORE: FY2Q21 Earnings Analysis (7/29/21), 2020 Letter to Shareholders (4/15/21), Initiation (2/2/18), Investor Relations

AMN Healthcare Services, Inc. (AMN) ; $117.56; 1,170 shares; 3.82%; Sector: Health Care Services

WEEKLY UPDATE: Early this week we rang the register on AMN shares and downgraded them to a Two rating given the pronounced move over the last several weeks. Reports during the week indicated the number of Covid related hospitalizations have doubled since early May even as the new variant BA.5 has caused yet another wave of infection across the U.S. and Europe. Thankfully, deaths remain at a minimum, but data from the Centers for Disease Control and Prevention points to 5,000 people per day on average have been admitted to the hospital with Covid vs. 2,000 daily admissions for the week ending May 1. Even before this latest increase, hospital companies were using contract labor at higher-than-expected levels than previously thought and these developments point to that continuing given the ongoing mismatch between healthcare job openings vs. hires shown in the May JOLTS report. We see that as a positive for AMN's business and our shares.

1-Wk. Price Change: 3.9%; Yield: 0.0

INVESTMENT THESIS: AMN Healthcare's business centers on talent solutions for the health care sector in the U.S. The company's revenue stream is tied to talents solutions, it reports in three business segments: Nurse and Allied Solutions, which generated 61% of revenue for the first nine months of 2021 and ~59% of its operating profit; Physician and Leadership Solutions - 24% and 13%, respectively; and Technology and Workforce Solutions - 15% and 28%, respectively. That business mix positions the company to be capitalize on the rising demand for healthcare professionals, particularly for nurses and doctors, which is expected to grow significantly as more of the U.S. population moves past the age of 65 in the coming years.

Target Price: Reiterate $125; Rating: Two

RISKS: Economic downturns and the pace of economic recovery; the ability to win new contracts; the ability to recruit and retain quality healthcare professionals.

ACTIONS, ANALYSIS & MORE:, Initiation (1/27/22), Our Aging of the Population Investment Theme Explores Medical Staffing Issues, Investor Relations

American Water Works (AWK) ; $148.57; 600 shares; 2.7%; Sector: Utilities

WEEKLY UPDATE: American Water Works scheduled its 2Q 2022 earnings call for July 28.

1-Wk. Price Change: -1.5%; Yield: 1.7%

INVESTMENT THESIS: American Water is the largest and most geographically diverse, publicly-traded water and wastewater utility company in the United States, as measured by both operating revenues and population served. The company's primary business involves the ownership of utilities that provide water and wastewater services to residential, commercial, industrial, public authority, fire service and sale for resale customers. The company's utilities operate in approximately 1,700 communities in 14 states in the United States, with 3.4 million active customers in its water and wastewater networks. Services provided by the Company's utilities are subject to regulation by multiple state utility commissions or other entities engaged in utility regulation, collectively referred to as public utility commissions (PUCs). Residential customers make up a substantial portion of the Company's customer base in all of the states in which it operates. The Company also serves (i) commercial customers, such as food and beverage providers, commercial property developers and proprietors, and energy suppliers, (ii) fire service customers, where the Company supplies water through its distribution systems to public fire hydrants for firefighting purposes and to private fire customers for use in fire suppression systems in office buildings and other facilities, (iii) industrial customers, such as large-scale manufacturers, mining and production operations, (iv) public authorities, such as government buildings and other public sector facilities. Because there is usually only one water utility available, the business has a rather wide moat, and the company has used its scale and balance sheet to acquire smaller, regional water utilities thereby further expanding its scale. pending rate increases under pin the company's 7%-9% annual EPS growth targets between now and 2026 as well as its stated objective to increase its annual dividend by 7%-10% over the next several years.

Target Price: Reiterate $165; Rating: Two

RISKS: Regulatory oversight risks, environmental safety laws and regulation, weather related service disruptions.

ACTIONS, ANALYSIS & MORE: We're Initiating 1 Name While Adding to Another Initiating a Position in This Public Water Utility Company, Investor Relations presentation.

Apple (AAPL) ; $150.17; 750 shares; 3.42%; Sector: Technology

WEEKLY UPDATE: The week started with a rash of price targets cuts for AAPL shares with Monness Crespi Hardt lowering its to $174 from $199, Citigroup went to $175 from $200 and Barclays reduced its to $166 from $167. Apple released not only the latest round of public beta software for its devices that was previewed at WWDC 2022, it also began shipping its latest Apple Silicon device, the M2 powered Mac Book Air. So far, reviews on the laptop are very favorable. Reports meanwhile indicate demand in China for Apple's forthcoming iPhone 14 models continue to grow as Apple continues to benefit from Huawei exiting the 5G smartphone market. Apple is expected to debut four new iPhone 14 models, but reports suggest supply chain shortages for the larger displays could hamper availability for the iPhone 14 Max product. Late in the week, Apple shares got a boost from Taiwan Semiconductor's (TSM) guidance for the current quarter that suggests the typical seasonal ramp for smartphones is occurring, but the company warned that pockets of excess industry inventory will need to be worked down in coming quarters. Given Apple's insight into its world class supply chain, we suspect that comment is more toward competitors than directly aimed at Apple. Apple will report its June quarter results on July 28.

1-Wk. Price Change: 2.1% Yield: 0.6%

INVESTMENT THESIS: While we acknowledge that near- to- midterm performance remains heavily influenced by iPhone sales, the dynamic is shifting as investors finally being to place greater emphasis on Services growth. We are bullish on the 5G upgrade cycle and believe longer-term upside will continue to come as Services revenue grows its share of overall sales. Services provide for a recurring revenue stream at higher margins, a factor that serves to reduce earnings volatility while allowing for a higher percentage of sales to fall to the bottom line, as a result, we believe that Services growth and the installed base, are much more important than how many devices the company can sell in a given 90-day period. In addition to improved profitability, we also believe the transparent nature of this revenue stream will demand an expanded price-to-earnings multiple as segment sales grow. Furthermore, we believe that Apple's desire to push deeper into the healthcare arena will help make its devices invaluable as more life-changing features are added and the company works to democratize health records. Lastly, also see upside resulting from increased adoption of wearables (think the Apple Watch) and potential new product announcements such as an AR/VR headset or an update on project Titan, the company's secretive autonomous driving program.

Target Price: Reiterate $160; Rating: Two

RISKS: Slowdown in consumer spending, competition, lack of new product innovation, elongated replacement cycles, failure to execute on Services growth initiative

ACTIONS, ANALYSIS & MORE: FY3Q21 Earnings Analysis (7/27/21), Apple Product Launch Event Takeaways (4/20/21), Takeaways from WWDC (6/22/20), Initiation (1/4/10), Investor Relations

Applied Materials (AMAT) ; $94.47; 1,160 shares; 3.32%; Sector: Industrial Machinery

WEEKLY UPDATE: On its Q2 2022 earnings call this week, Taiwan Semiconductor (TSM) shared it remains capacity constrained and expects it to remain so throughout the balance of 2022. TSM acknowledged its equipment suppliers are facing supply chain issues, something Applied Materials called out when it reported its quarterly results several weeks back, but that situation is improving. This could result in TSM's capital expenditures coming in at the lower end of its $40 billion-$44 billion range, but odds are the company will have another strong year of capital spending in 2023 vs. the $30 billion its spent in 2021. We'll look to match TSM's comments against those from other chip equipment companies, including Lam Research (LRCX) , and chip capital spending like Intel. Odds are the company is utilizing its buyback program to shrink the share count, a positive for EPS comparisons down the road.

1-Wk. Price Change: 3.6% Yield: 1%

INVESTMENT THESIS: SEMI, the semiconductor capital equipment trade association, now sees global sales of semiconductor manufacturing equipment by original equipment manufacturers passing the $100 billion mark in 2022, after jumping 34% to $95.3 billion in 2021 and registering $71.1 billion in 2020. Other forecasts point to continued growth in the semiconductor capital equipment market due to the maturing of the 5G and IoT markets as well as the maturation of the other drivers for chip demand. We also like the company's policy of returning capital to shareholders and would note its growing track record of annual dividend increases. Applied's next $0.26 per share quarterly dividend will be paid on Sept. 15 to shareholders of record on Aug. 25.

Target Price: Reiterate $135; Rating: Two

RISKS: Semiconductor capital equipment spending. Geopolitical tensions and international trade disputes.

ACTIONS, ANALYSIS & MORE: Trimming 2 Names; Initiating a New Position, Investor Relations.

First Trust Nasdaq Cybersecurity ETF (CIBR) ; $40.97; 2,220 shares; 2.76%; Sector: Cybersecurity

WEEKLY UPDATE: In keeping with our stated strategy to opportunistically wade deeper into positions that have pronounced and identifiable catalysts, we added to the portfolio's position in CIBR shares this week. We continue to see both cyberattacks and therefore cybersecurity as growth industries even if the economy tips into a recession. Should that happen, odds are companies will continue to emphasize protecting their crown jewels amid a landscape colored by increasing ransomware attacks.

1-Wk. Price Change: -5% Yield: 0%

INVESTMENT THESIS: The First Trust Nasdaq Cybersecurity ETF is an exchange-traded fund. The Fund seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Nasdaq CTA Cybersecurity Index. The Nasdaq CTA Cybersecurity Index is designed to track the performance of companies engaged in the cybersecurity segment of the technology and industrials sectors. It includes companies primarily involved in the building, implementation, and management of security protocols applied to private and public networks, computers, and mobile devices in order to provide protection of the integrity of data and network operations. To be included in the index, a security must be listed on an index-eligible global stock exchange and classified as a cybersecurity company as determined by the Consumer Technology Association (CTA). Each security must have a worldwide market capitalization of $250 million, have a minimum three-month average daily dollar trading volume of $1 million, and have a minimum free float of 20%.

Target Price: Reiterate $62; Rating: Two

RISKS: Cybersecurity spending, technology and product development, timing of product sales cycle, new products, and services in response to rapid technological changes and market developments as well as evolving security threats.

ACTIONS, ANALYSIS & MORE: We're Swapping One Cybersecurity Stock for Another, ETF Product Summary

Ford Motor (F) ; $11.88; 8,670 shares; 3.13%; Sector: Industrials

WEEKLY UPDATE: Early in the week Wells Fargo and Jefferies cut their respective price targets on F shares to $10 and $13 from $12 and $16. Despite the cut, Wells Fargo sees the industry rebounding in the second half of the year as chip availability improves further. Ford's F-Series has the potential to make it a standout for the June quarter as it leans into optimizing its production mix for revenue and profit. Later in the week, Ford shared it will contribute as much as $6.6 billion to build three new EV battery plants in the U.S. (1 in Tennessee and two in Kentucky) as part of its previously announced joint venture with SK On. Ford will report its June quarter results on July 27.

1-Wk. Price Change: 2.2% Yield: 2.6%

INVESTMENT THESIS: Our bullish thesis on Ford is mainly predicated on the turnaround led by CEO Jim Farley and his new leadership team. Whether it be through restructuring underperforming parts of the business and getting out of low profitable vehicles or addressing a roughly $2 billion headwind related to warranty costs, we believe Farley and his management are executing in building a new Ford that grows profitably and generates sustainable free cash flow. We also think Ford's electric vehicle business is underappreciated. Not only do they have the Mustang Mach-E, but Ford is also developing all-new electric versions of the popular F-150 and the E-Transit cargo van. Plus, Ford has a strategic partnership and minority investment with Rivian who is best known for its customer delivery vehicles for Amazon.

Target Price: Reiterate $15; Rating: Two

RISKS: Turnaround execution, the transition from ICE (internal combustion engines) to EV vehicles, competition, economic cycle,

ACTIONS, ANALYSIS & MORE: FY2Q21 Earnings Analysis (7/28/21), Ford Continues to Shine After Capital Markets Day (5/27/21), Our Take on Ford as It Continues Its Climb Higher (1/21/21), Looking for Opportunities After a Ford Downgrade (11/25/20), Initiation (11/24/2020), Investor Relations

Mastercard (MA) ; $332.57; 275 shares; 2.77%; Sector: Info. Tech

WEEKLY UPDATE: June Retail Sales were stronger than expected, rising 7.7% on a year over year basis, lifting total retail sales for the 2Q 2022 to +6.9% year over year. We see that as a positive for Mastercard's payment processing business as the ongoing shift to debit, credit and mobile payments continues. Favorable comments from Amazon for 2022 Prime Day suggests a pick up in spending in July as well. While Wells Fargo reiterated its Overweight rating on MA shares, it trimmed its price target to $400 from $450 even as Mirae Asset Daewoo initiated coverage of MA shares with a Buy rating and a $425 target, matching our own. Exiting the week, the UK Treasury Committee is requesting justification for Mastercard's late 2021 cross-border interchange fees increase on purchases made by UK consumers to European businesses. Fees increased from 0.2% to 1.15% for debit cards and 0.3% to 1.5% for credit card transactions. That increase bodes well for Mastercard's business in the back half of 2022, but we will look for any follow up on this matter. Mastercard will report its June quarter results on July 28.

1-Wk. Price Change: 2.9% Yield: 0.6%

INVESTMENT THESIS: Mastercard is a card network company that benefits from the secular shift away from cash transactions and towards card based and electronic payments. On Covid-19 dynamics, we view MA as a "reopening" play and an economic recovery play within technology because its cross-border volumes fell sharply during the pandemic but will rebound as mobility increases and travel restrictions ease. Mastercard has more international exposure relative to Visa, making its growth outlook more susceptible to new travel restrictions. However, we view MA as the better long-term play as we are betting on that inevitable recovery. Mastercard's next $0.49 per share quarterly dividend will be paid on Aug. 9 to shareholders of record on July 8.

Target Price: Reiterate $425 Rating: Two

RISKS: The recovery in cross-border transactions, regulation in payments market, competition from other fintechs, pricing pressures.

McCormick & Co. Inc. (MKC) ; $81.74; 1,280 shares; 3.71%; Sector: Food; Consumer Non-Durables


1-Wk. Price Change: -.4% Yield: 1.8%

INVESTMENT THESIS: McCormick is a global leader in flavor that manufacture spices, seasoning mixes, condiments, and other flavorful products to the entire food industry-retailers, food manufacturers and foodservice businesses. Roughly 65% and 75% of the company's sales and operating income are derived from its consumer business with the balance from its "Flavor Solutions" one. With consumers feeling the pinch of higher food prices, they are likely to repeat the historical pattern of shifting toward increasing food consumption at home, a driver of demand for McCormick's products. We are also entering the seasonally strong time of year for this dividend payer, which has increased its dividend each year over the past 37 years.

Target Price: Reiterate $110 Rating: Two

RISKS: Local economic and market conditions, input cost inflation, exchange rate fluctuations, and restrictions on investments, royalties, and dividends.

Morgan Stanley (MS) ; $78.05; 1,385 shares; 3.28%; Sector: Financials

WEEKLY UPDATE: Following the company's June quarter results that, like many other companies felt the weight of the quiet Investment Banking landscape, we downgraded MS shares to a Two given the lack of meaningful catalyst for the shares in the near-term. During the quarter, Morgan Stanley finished its $12 billion buyback plan announced last year, buying $2.7 billion in stock during the June quarter. As expected, the company cited its new $20 billion share repurchase plan and its recent dividend hike to $0.775 per share per quarter. The first new dividend will be paid on August 15 to shareholders as of July 29. As we look ahead over the next few months, the key to MS shares moving higher will be the resumption of asset growth and a turn in the investment banking business. Considering expected near-term prospects, we aren't likely to see both of those tailwinds emerge in the coming months, leaving Morgan Stanley to face tough year-over-year comparisons. Still, we recognize the company's premier franchise, its more than 4% dividend yield and prospects for stock support given the refreshed buyback. We are inclined to be patient with this holding, especially with the dividend stream, but until we see the prospects for the Investment Banking business picking up, we do not see a clear-cut reason to chase the shares.

1-Wk. Price Change: 1.7%; Yield: 3.6%

INVESTMENT THESIS: The company's mission is to create three world-class businesses of scale: Institutional Securities, Wealth Management, and Investment Management. The bank has supercharged Morgan Stanley's push into the latter two businesses was recently enhanced by the acquisitions of E-Trade (for Wealth Management) and Eaton Vance (Investment Management). Both deals have increased the bank's exposure to fee-based and recurring revenue streams, making Morgan Stanley less dependent on volatile business lines and interest rates. Estimates suggest Wealth Management and Investment Management fees as a percentage of Morgan Stanley's overall revenues should increase to around 60% in the fourth quarter of 2022, up from about 46% in the first quarter of 2021. We see this transition as a multiple enhancing event. We also appreciate the bank's ability to return excess capital to shareholders.

Target Price: Reiterate $105; Rating: Two

RISKS: Capital Markets activity, Integration risk on recent acquisitions, increased regulation of banking industry, low interest rates

ACTIONS, ANALYSIS & MORE: 2Q21 Earnings Report (7/15/21), Initiation (7/12/21), Investor Relations

Nucor (NUE) ; $110.32; 325 shares; 1.09%; Sector: Materials

WEEKLY UPDATE: Nucor will announce its quarterly results on Thursday, July 21. Like many other companies that are in their earnings quiet period, there was no company specific news this week even though support seems to be growing for China's potential infrastructure stimulus. As we shared on the July Members-Only Call, Nucor is a quality company but with the June quarter earnings season ahead of us we are not rushing in to build out the position size just yet.

1-Wk. Price Change: 1.2% Yield: 1.7%

INVESTMENT THESIS: Nucor is the largest steel producer in the United States, primarily serving commercial, municipal construction, and industrial markets. The company operates in three major segments: steel mills, steel products, and raw materials. Nucor is also the largest metals recycler in North America. We believe the steel industry is going through a multi-year cycle of higher prices, leading to higher margins and bigger profits for Nucor. The sharp, V-shaped recovery in industry activity has been one driver of profit growth for Nucor, as the surge in demand for steel coming out of the pandemic was met with tight capacity. We also believe Nucor will be a major beneficiary of a comprehensive infrastructure package. Lastly, Nucor has a history of rewarding its shareholders with robust capital returns during its upcycles. The company recently announced a 23% increase in its quarterly dividend to $0.50 per share, up from the prior $0.405, and the approval of a $4 billion share repurchase program, which replaces Nucor's prior $3 billion program under which the company bought back $2.33 billion between May-December of this year.

Target Price: Reiterate $175 Rating: Two

RISKS: Steel prices, decline in industrial activity, no comprehensive infrastructure package.

ACTIONS, ANALYSIS & MORE: Nucor Preannounces Stronger-Than-Expected Third-Quarter Earnings (9/16/21), FY2Q21 Earnings Analysis (7/22/21), Initiation (6/7/21), Investor Relations

PepsiCo Inc. (PEP) ; $171.12; 560 shares; 2.91%; Sector: Consumer Defensive

WEEKLY UPDATE: The company reported better than expected June quarter results, upped its organic revenue guidance for 2022, and shared that given inelastic demand for its products another price increase could be had later this year. On the earnings conference call, management reiterated its plan to return PepsiCo Beverages North America to mid-teens margins vs. low double digits posted in the June quarter. As it executes on those plans, the company will continue to expand its line of "Zero Sugar" offerings and move further expand its line up of zero-calorie "mocktails." We see that moving PepsiCo in lock step with the evolving taste and health consumer preferences. Given the EPS beat tied to the June quarter, we bumped our price target to $180 and kept our "Two" rating. Should PepsiCo announce an additional round of pricing action, we'll look to revisit our price target. But, to revisit our "Two" rating, we would need to see upside in the shares to at least $195. In the meantime, we see modest downside in the shares given the likely support to be had from PepsiCo's buyback pledge to repurchase $1.5 billion in stock during 2022. Exiting the June quarter, it has $0.8 billion left to go and a much larger slug of $9.7 billion left under the repurchase authorization that doesn't expire until early 2026. In the near-term, our plan with PEP shares will be to scoop them up on pullbacks.

1-Wk. Price Change: -.4%; Yield: 2.6%

INVESTMENT THESIS: PepsiCo is one of the largest food and beverage companies globally. It makes, markets, and sells a slew of brands across the beverage and snack categories, including Pepsi, Mountain Dew, Gatorade, Doritos, Lays, and Ruffles. The firm uses a largely integrated go-to-market model, though it does leverage third-party bottlers, contract manufacturers, and distributors in certain markets. In addition to company-owned trademarks, Pepsi manufactures and distributes other brands through partnerships and joint ventures with companies such as Starbucks. The combination of the consumable nature of those products along with PepsiCo's ability to realize price increases has led to consistent revenue, EPS and dividend growth during both the Great Recession and the Covid pandemic. This company's most recent dividend increase marks its 50th consecutive one and that 7% bump moves the annualized dividend to $4.60 per share up from the prior $4.30. The new quarterly dividend of $1.15 per share is payable on June 30 to shareholders of record on June 3.

Target Price: Reiterate $180; Rating: Two

RISKS: Economic conditions, supply chain constraints, raw material costs.

ACTIONS, ANALYSIS & MORE: Adding to 2 Positions on Market Weakness, We're Initiating 1 Name While Adding to Another, This Stock Should Have 'Pep,' Even in a Recession, Investor Relations

United Parcel Service (UPS) ; $182.59; 520 shares; 2.88%; Sector: Industrials

WEEKLY UPDATE: Ahead of UPS's earnings report on July 26, this week Evercore ISI rolled out coverage on UPS shares with an Outperform rating and a $227 price target. Given our comments above about Amazon's 2022 Prime Day and its timing vs. last year along with continued share gains from digital shopping overall, it's reason to think UPS could issue favorable guidance for the back half of 2022.

1-Wk. Price Change: -1.5% Yield: 2.8%

INVESTMENT THESIS: We are fans of CEO Carol Tomé. Throughout her time at Home Depot, Tomé built an impressive reputation as a turnaround artist, and we think her fresh perspective and intense focus on efficiencies will create a better UPS. However, near-term global supply chain issues paired with rising transportation costs could be a thorn in the company's side. We appreciate UPS's nearly 50 years of stability and growth in dividends, which management calls the "hallmark" of the company's financial strength. In February 2022, the company announced a 49% hike to its quarterly dividend putting it at $1.52 per share.

Target Price: Reiterate $230; Rating: Two

RISKS: Weakness in the broader economy, rising fuel prices, execution, cost management, pricing power.

ACTIONS, ANALYSIS & MORE: FY2Q21 Earnings Analysis (7/27/21), Investor/Analyst Day Analysis (6/9/21), Initiation Post (9/25/20), Investor Relations

Energy Select Sector SPDR Fund (XLE) ; $68.59; 505 shares; 1.05%; Sector: Energy

WEEKLY UPDATE: Chevron CEO Michael Wirth said the recent price downturn in oil could be fleeting as the oil market remains tight. Wirth went on to say that some of the recent weakness in oil is due to short-term demand destruction from high prices, but he pointed to factors that could lead to a longer-term demand resurgence, including an eventual full reopening in China after the recent spike in COVID cases. Toward the end of the week, Energy Aspects predicted that limited supply and rising demand would push the price of WTI crude at least above $120 a barrel and "potentially close to $130 by year-end." Affirming the view that market will remain tight, President Joe Biden is expected to leave the Middle East this week with no announcements on increasing oil supply before a scheduled meeting of producers next month.

1-Wk. Price Change: -3.3; Yield: 4.1%

INVESTMENT THESIS: Energy Select Sector SPDR Fund is an exchange-traded fund (ETF) that tracks the performance of the Energy Select Sector Index. The ETF holds large-cap U.S. energy stocks. It invests in companies that develop & produce crude oil & natural gas, provide drilling and other energy related services. The holdings are weighted by market capitalization.

Target Price: Reiterate $98; Rating: Two

RISKS: interest rates, weakness in the broad economy, energy prices. seek

ACTIONS, ANALYSIS & MORE: Adding to 2 Positions on Market Weakness, We're Initiating a Position in the Energy Sector, State Street Global Advisors SPDR Fact Sheet for XLE.

Market-Hedging Positions

ProShares Short QQQ ETF (PSQ) ; $13.81; 2,940 shares; 1.23%

WEEKLY UPDATE: With the Fed on path to tame inflation, a move that will see further interest rate hikes in the coming months, we are increasingly concerned about the upcoming June-quarter earnings expectations and a downward reset in expectations for the second half of 2022. Adding to this concern for the upcoming earnings season are the dollar's strengthening vs. other currencies in the June quarter and likelihood recession concerns could weigh on forward guidance. As such we intent to keep the portfolio's position in PSQ shares active as we move into that earnings season. Unlike the ProShares Short S&P 500 ETF, PSQ shares specifically target tech stocks, an area that has been pressured in a rising rate environment. We see this position offering protection in the near-term while we focus on the longer-term opportunities with the portfolio's tech positions.

1-Wk. Price Change: 1.1%; Yield: 0.00%

INVESTMENT THESIS: ProShares Short QQQ seeks daily investment results, before fees and expenses, that correspond to the inverse (-1x) of the daily performance of the Nasdaq-100 Index. The Nasdaq-100 Index includes 100 of the largest domestic and international non-financial companies listed on The Nasdaq Stock Market based on market capitalization.

Target Price: N/A

RISKS: Because QQQ shares track the inverse of the Nasdaq 100 Index, QQQ shares will move lower when the Nasdaq 100 Index moves higher.

ACTIONS, ANALYSIS & MORE: Selling Shares in 1 Position, Closing Another, Adding to 1 and Initiating 1

ProShares Short S&P 500 ETF (SH) ; $16.15; 3,310 shares; 1.62%

WEEKLY UPDATE: With the Fed on path to tame inflation, a move that will see further interest rate hikes in the coming months, we are increasingly concerned about the upcoming June quarter earnings expectations and a downward reset in expectations for the second half of 2022. Adding to this concern for the upcoming earnings season are the dollar's strengthening vs. other currencies in the June quarter and likelihood recession concerns could weigh on forward guidance. As such we are intent to keep the portfolio's position in SH shares active as we move into that earnings season.

1-Wk. Price Change: .9%; Yield: 0.00%

INVESTMENT THESIS: The ProShares Short S&P 500 ETF seeks daily investment results, before fees and expenses, that correspond to the inverse (-1x) of the daily performance of the S&P 500®. We are using SH shares to blunt market volatility and hedge the portfolio's performance against its benchmark, the S&P 500. Given the tactical nature of this position, we do not expect to hold SH shares for the same length of time as we do the portfolio's long positions.

Target Price: NA

RISKS: Because SH shares track the inverse of the S&P 500, SH share will move lower when the S&P 500 moves higher.

ACTIONS, ANALYSIS & MORE: Selling Shares in 1 Position, Closing Another, Adding to 1 and Initiating 1, Trimming 2 Names While Initiating Coverage of a Third