Analysis: AMD CBOE CHPT CMG COST DE GLD GOOGL MSFT NVDA URI VZ AMZN AMN AWK AAPL AMAT CIBR F MA MKC MS PEP UPS XLE PSQ SH NUE

Stocks closed out July on a strong note, putting in the first positive month since March. The sobering view is that despite the July increase of more than 7.5% for the S&P 500, that market barometer and the AAP benchmark are still down more than 13% year-to-date. Similarly, even though the Nasdaq had an even stronger start to the current quarter, it finished the month down 21%.

The logical question is what drove the rebound in the market, given that recession concerns are mounting, companies are slowing hiring, inflationary pressures remain sapping consumer purchasing power, the Fed has boosted interest rates, adding to borrowing costs, dollar headwinds are still blowing, the Russia-Ukraine war continues to be a thorn in the side of the global economy, and companies are warning of inventory de-stocking and consumers starting to cut back?

The short answer is several things, including, more than 40 days of falling gas prices; the June-quarter earnings season, for the most part not being as bad as feared; China moving past its second-quarter 2022 lockdowns; and the market view the Fed could dial back its pace of interest rate hikes in the coming months, so as not to sink the economy. Plus, stocks were battered hard during the June quarter with the S&P 500 and Nasdaq falling more than 16% and 22%, respectively, during those three months. And as we've seen in some cases, near misses in June quarter results did little damage to stock prices, even though larger misses and guidance cuts, like that from Intel and Roku still did some damage.

With the initial 2Q 2022 GDP print coming in at -0.9%, slightly better than the -1.2% forecast put forth by the Atlanta Fed's GDPNow model, it's rather clear that despite what the White House and Treasury Secretary Janet Yellen are saying about the economy, it has slowed considerably. Companies are trimming capital spending and hiring, which will contribute to that slowness, and consumers according to Procter & Gamble, Best Buy and Samsung, among others are slowing their spending amid mounting inflation. With several companies announcing plans for further price action to combat the inflation pressures they are facing, odds are the non-gas inflation pressures being faced by consumers won't vanish overnight.

While the better than feared rationale helps explain the market pendulum moving back as well as the fall in the Volatility Index and the CNN Business Fear & Greed Index rebounding to 41 level as we close out July from the 25 reading this time last month, several of the uncertainties that plagued 2Q 2022 remain in place at least for now. The month of August is a notoriously slow time of the year as folks squeeze in the last bit of summer vacation, which tends to make trading volumes seasonally thinner than usual.

We still have quarterly results from the other half of the S&P 500, including retailer and retail companies. Following Walmart's negative pre-announcement that confirmed our decision to exit the shares in early June and comments above and elsewhere about consumers cutting back, odds are we will see more expectation resetting to be had as those companies report in the coming weeks. Given the importance of consumer spending on the overall economy, we will be watching retail sales, personal income & spending and consumer credit metrics as well as other consumer spending data rather closely.

With equities increasingly overbought and still in a bear market as we prepare to enter August, we will continue to move cautiously with the portfolio, recognizing that while the picture has improved, there will likely be a few landmines and potholes to contend with. We wouldn't be surprised if the weeks leading up to the Fed's September meeting have the stock market trade more or less sideways, but as we and the Fed know that will depend on the data we get. As members know, investing isn't like crockpot cooking, in that you "fix it and forget it." Rather, the narrative evolves as new data comes in, and as that happens in the coming weeks, we'll continue to update our expectations and manage the portfolio accordingly.

The AAP Portfolio

Amid a barrage of corporate earnings reports this week, the outcome of the Fed's July monetary policy meeting and a handful of key economic data, we took modest action with the portfolio. The lone move we made was to begin a new position in the SPDR Gold Shares ETF with a $200 price target. We made a few price target adjustments as well, boosting our Apple target to $175 and lowering the ones for Alphabet, Microsoft and Chipotle Mexican Grill to $155, $310, and $1,850, respectively.

Strong performers for the week included the double-digit moves in United Rentals, Chipotle, Nucor, Amazon and ChargePoint, as well as a number of mid- to high-single-digit movers including the Energy Select Sector SPDR Fund, Deere & Co, Microsoft, Alphabet, AMD, and American Water Works. Given the market's performance this week, our inverse ETF positions were the larger drags on the portfolio this week.

Sizing up the first month of the current quarter, almost 60% of the portfolio moved significantly higher compared to its benchmark, the S&P 500. Similar to our comments about this past week, the larger drags on the portfolio in July were our inverse ETF shares and the portfolio's modest position in Verizon shares. With less than a 2% position size in VZ shares, we have ample room to add to our holdings at prices that will not only improve our cost basis but also add to the portfolio's stream of dividend income.

During July, we added to the portfolio's position in Verizon and United Rentals as well as First Trust Nasdaq Cybersecurity ETF shares. We also took profits on the portfolio's positions in Costco Wholesale, AMN Healthcare, and Cboe Global Markets. With the Bullpen, we added several new companies, including Kimberly Clark and Wendy's, joining other additions in June. We will continue to look for new candidates in the coming weeks, and as the market finds its footing, we'll look to bring some new blood into the portfolio.

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)

Chart of the Week: Taking Stock of the VIX

This weekly chart of the CBOE market volatility index (VIX) shows a steady downtrend from a peak in early May and in late June. It seems the trend of lower highs, lower lows in this chart indicate more of a "risk on" preference to market players.

That's fine, we can embrace that situation for now, but we should also be mindful the VIX weekly chart is right near some major support. It is on this McGinley Dynamic (arrow) that the VIX has rallied sharply from on several occasions. We can see that from 2021, where a steady stream of touches during the entire year pushed eventually led to a rally in volatility in 2022. The VIX could continue to decline, and the market rally along with it, however, we believe the odds favor the fear index moving higher and back towards the 30 level on this next move higher. That would be bearish for markets.

The Coming Week

As we enter August, we start the month off with the twin engines of the usual start of the month economic data and another leg in the June-quarter earnings season. Following the Fed's three-quarter percentage point rate hike and its comments that the size of expected future rate hikes will be a function of the data to be had in the coming months, next week brings data on how the global economy fared in July. The ISM data for the month as well as the final data for S&P Global on the domestic economy will point to speed of the manufacturing and services economy and give an updated view on inflation pressures companies faced.

On the jobs front, next week not only has the July employment report but also the July Challenger Job Cuts Report. Given Fed Chair Powell's comments about the employment rate and pace of job creation thus far in 2022, we'll be looking to see whether any meaningful changes emerge in the July data. And it goes without saying that July's average hourly earnings data will be closely examined to gauge that aspect of inflation, but also with an eye toward consumer spending. Given the number of higher profile companies announcing hiring slowdowns and reductions we expect to see a sequential move higher in the Challenger Job Cuts report for July. The key will be in contrasting the job creation data with the job cuts data to determine if the employment market remains in an overheated state.

Next week also brings the next iteration of the monthly JOLTs, which arrives a few days before AMN Healthcare (AMN) reports its quarterly results. With the June data in hand, we'll have all the data for job openings and job hires for the health care sector. Comparing that with comments made by hospital company earnings reported thus far will paint a healthy picture for AMN's June quarter results.

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

U.S.

Monday, August 1

  • Construction Spending - June (10:00 AM ET)
  • S&P Global Manufacturing PMI - July (9:45 AM ET)
  • ISM Manufacturing Index- July (10:00 AM ET)

Tuesday, August 2

  • JOLTS Job Openings Report - June (10:00 AM ET)

Wednesday, August 3

  • Weekly MBA Mortgage Applications (7:00 AM ET)
  • Factory Orders - June (10:00 AM ET)
  • ISM Non-Manufacturing Index - July (10:00 AM ET)
  • Weekly EIA Crude Oil Inventories (10:30 AM ET)

Thursday, August 4

  • Challenger Job Cuts Report (7:30 AM ET)
  • Weekly Initial & Continuing Jobless Claims (8:30 AM ET)
  • Weekly EIA Natural Gas Inventories (10:30 AM ET)

Friday, August 5

  • Employment Report - July (8:30 AM ET)
  • Consumer Credit - June (3 PM ET)

International

Monday, August 1

  • Germany: Retail Sales - June
  • Eurozone: Manufacturing PMI Index - July
  • UK: Manufacturing PMI Index - July

Wednesday, August 3

  • Germany: Import/Exports - June
  • Eurozone: S&P Global Service PMI - July
  • UK: Services PMI - July
  • Eurozone: Producer Price Index, Retail Sales - June

Thursday, August 4

  • Germany: Factory Orders - June
  • UK: Bank of England monetary policy meeting and interest rate decision

Friday, August 5

  • Japan: Household Spending, Coincident Indicator, Leading Index - June
  • Germany: Industrial Production - June

The June quarter earnings season continues next week with another 163 S&P 500 constituents reporting as well as a few AAP Portfolio companies, including AMD (AMD) and AMN Healthcare (AMN). From a "connecting the dots" perspective, we will also have quarterly results from several cybersecurity companies, the aggregate results of which should confirm our thesis on the First Trust Nasdaq Cybersecurity ETF (CYBR) shares. With regard to the uptick in infrastructure spending, we'll look to Caterpillar's (CAT) guidance for its domestic business in the coming quarters. Comments from Cars.com (CARS) as well as Carvana (CVNA) will give further insight into consumer auto demand, and we'll match up their guidance vs. that for Ford Motor (F), General Motors (GM), and others. We also have several restaurant companies, including Restaurant Brands (QSR) and Shake Shack (SHAK), and their comments on input costs as well as pricing plans will be something we pay close attention to. And with regard to smartphones as well as the expanding notion of connected devices, we'll be digging into quarterly results and guidance from Skyworks (SWKS), Qorvo (QRVO) and InterDigital (IDCC).

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

Monday, August 1

  • Open: Check Point Software (CHKP), Global Payments (GPN).
  • Close: Activision Blizzard (ATVI), Avis Budget (CAR), CF Industries (CF), Kennametal (KMT), Mosaic (MOS), Omega Health (OHI), Simon Properties (SPG).

Tuesday, August 2

  • Open: Caterpillar (CAT). Cummins (CMI), DuPont (DD), Eaton (ETN), Ferrari (RACE), JetBlue Airways (JBLU), Marriott (MAR), Uber (UBER).
  • Close: AMD (AMD), Airbnb (ABNB), Caesars Entertainment (CZR), PayPal (PYPL), Service Corp. (SCI), Starbucks (SBUX).

Wednesday, August 3

  • Open: Cars.com (CARS), CVS Health (CVS), TradeWeb Markets (TW), Tupperware (TUP), Under Armour (UA), Yum! Brands (YUM).
  • Close: Clorox (CLX), eBay (EBAY), Ethan Allen (ETD), Fortinet (FTNT), Ingersoll-Rand (IR), MGM Resorts (MGM), Ping Identity (PING), Qorvo (QRVO), Realty Income (O).

Thursday, August 4

  • Open: ADT (ADT), Air Products (APD), Alibaba (BABA), Dentsply Sirona (XRAY), Hanesbrands (HBI), InterDigital (IDCC), Kellogg (K), Papa John's (PZZA), Parker-Hannifin (PH), Restaurant Brands (QSR), Shake Shack (SHAK), Vulcan Materials (VMC).
  • Close: Allscripts Healthcare (MDRX), AMC Entertainment (AMC), AMN Healthcare (AMN), Axon (AXON), Block (SQ), Carvana (CVNA), Insulet (PODD), Live Nation (LYV), Lyft (LYFT), Post (POST), Skyworks (SWKS), Warner Bros. Discovery (WBD).

Friday, August 5

  • Open: American Axle (AXL), Cinemark (CNK), Wabtec (WAB), Western Digital (WDC).

ONEs

Advanced Micro Devices (AMD) ; $94.47; 1,160 shares; 3.1%; Sector: Info. Tech.

WEEKLY UPDATE: AMD shares ended the week modestly higher following a number of quarterly earnings report this week that confirmed consumer PC weakness, but also reaffirmed continued strength in the enterprise and high-end PC market remains. Data center continues to be a robust area following comments from Microsoft, Alphabet, and Intel, even though Intel admitted it will continue to lose market share. We see that confirming ongoing share gains from AMD, which bodes well for a better than feared quarterly earnings report from AMD early next week. Price increases across Wall Street have come down in recent weeks, and candidly we are somewhat overdue - we'll look to address this following the company's June quarter results rather than flip flop our price target like others may have to do.

1-Wk. Price Change: 7.23% 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) ; $123.39; 820 shares; 2.86%; Sector: Financials

WEEKLY UPDATE: Late in the week, CBOE delivered solid second-quarter results with robust revenue growth, up 23% year-over-year to $424 million. EPS for the quarter modestly missed expectations coming in at $1.67 per share vs. Wall Street's estimate of $1.69, but were still substantially ahead of year-earlier EPS of $1.38. CBOE raised revenue guidance for the rest of 2022 even as it bumped up operating expense guidance by more than 8%. That may hit the bottom line some, but the company remains confident it will meet or exceed guidance. Trading volumes for options and volatility products remain robust. With just under 15% upside to our $140 target, we will revisit the current One rating as CBOE shares gain additional ground. We still like the company and would suggest buying this stock at current levels or on pullbacks.

1-Wk. Price Change: -2.7% 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) ; $15.11; 10,000 shares; 4.27%; Sector: Electrical Components & Equipment

1-Wk. Price Change: 9.1% Yield: 0.00%

WEEKLY UPDATE: ChargePoint announced it entered into partnership with Charge Across Town and California state to install EV chargers at multifamily properties across the state. Late in the week, CHPT shares were boosted after Senator Joe Manchin and Majority Leader Chuck Schumer announced a surprise deal that includes $369 billion for "energy and climate change." If passed, the package would also include a new $4,000 tax credit for used electric vehicles and other new tax credits and grants for automakers to retool factories to build greener cars and expand the existing $7,500 EV tax credit as well as a new $10 billion investment tax credit to build clean-technology manufacturing facilities. The Senate is expected to vote on the proposed legislation next week after which it would next go to the House of Representatives.

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) ; $1,564.22; 70 shares; 3.1%; Sector: Restaurants

1-Wk. Price Change: 16.1% Yield: 0.00%

WEEKLY UPDATE: June-quarter results at Chipotle were mixed with its bottom line coming in stronger than expected while revenue for the quarter rose 17.0% year-over-year to $2.21 billion, a tad below the $2.25 billion consensus. Chipotle shared it will be joining the ranks of companies instilling yet another round of price increases in August, a sign that consumer inflation facing pressures aren't likely to fade as quickly as some might be hoping. That said, those same price increases will be powerful margin drives as inflation pressures that span avocado, packaging, dairy, beef and chicken recede. Chipotle repurchased $261 million in stock at an average price of $1,350 during the quarter, and its board authorized an additional $300 million share authorization program leaving it with $320 million in remaining firepower. Even though we trimmed our price target to $1,850 from $2,000, we continue to see Chipotle as a standout company relative to the larger restaurant industry as consumers favor not only its more economical, quick service offerings but both its better for you options as well as limited-time menu items.

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 $1,850; 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) ; $541.30; 265 shares; 4.06%; Sector: Consumer Staples

WEEKLY UPDATE: Costco will report its July revenue and comp sales on Aug. 3.

1-Wk. Price Change: 2.19% 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) ; $343.18; 310 shares; 3.01%; Sector: Farm Machinery & Equipment

WEEKLY UPDATE: Corn, wheat, and soybean prices rebounded this week as hot temperatures continued. Weather maps are still calling for a hot and dry forecast for the first 10 days or so of August, and suggesting some potential risk to crop yields later this year potentially tightening supply-demand dynamics even further. Late in the week, competitor CNH Industrial (CNHI), reported its June quarter results, handily trumping consensus expectations as pricing and product mix offset component shortages and other supply chain issues. Speaking to the strength of its business, CNH shared its order book is more than 3 times the pre-pandemic levels and it is accepting orders only through Q1 2023. Those comments, continued year over year gains in key ag crop prices, and the Russia-Ukraine war hampering ag exports all bodes well for the current ag equipment upgrade cycle that is benefitting Deere's business.

1-Wk. Price Change: 9.9% Yield: 1.25%

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

SPDR Gold Shares ETF (GLD) ; $164.10; 212 shares; .98%; Sector: Commodities

WEEKLY UPDATE: This week we called GLD shares up to the portfolio from the Bullpen and established a price target of $200.

1-Wk. Price Change: .48% Yield: 0%

INVESTMENT THESIS: The GLD ETF is a proxy for gold. This 'trust' buys and sells gold futures each day in an attempt to mimic the daily moves in the underlying asset, in this case gold. We see gold as an ideal hedge against a weaker dollar, strong inflation (which tends to weaken the dollar) alternative and in uncertain times (worry over war and battles). For the past 15 years gold has been a strong asset class held by fund managers, countries and banks. The metal is not correlated with markets and will move based on the demand/supply dynamic in the marketplace. Other precious metals such as silver and platinum are good proxies for the criteria stated earlier, however gold is far more liquid and offers better upside opportunities.

Target Price: Reiterate $200; Rating: One

RISKS: Weak inflation data, interest rate risk, dollar strength relative to other currencies, geographic risk.

Alphabet (GOOGL) ; $116.32; 1,100 shares; 3.62%; Sector: Communication Services

WEEKLY UPDATE: Alphabet modestly missed consensus expectations for the June-quarter with EPS of $1.21 on revenue of $69.69 billion vs. the expected $1.27 and $69.87 billion. Google Advertising revenue increased 11.6% year-over-year to $56.3 billion, YouTube ads increased 4.8% year-over-year to $7.34 billion, and Google cloud revenue climbed 35.6% to $6.3 billion. Alphabet sees currency headwinds becoming a larger issue in the current quarter, one that will also likely see further slowdown in advertising spend. That said, the company's businesses are holding up better than expected across Wall Street, something we chalk up to the search and YouTube businesses having the customer reach advertisers want. We continue to see the company winning ad spend as the economy slows at the expense of legacy media but reduced our price target to $155 from $175.

1-Wk. Price Change: 7.8%; 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.

Target Price: Reiterate $155; 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) ; $280.74; 500 shares; 3.97%; Sector: Technology

WEEKLY UPDATE: Microsoft's June-quarter results came in below consensus expectations with EPS of $2.23 and revenue of $51.87 billion, up 12.4% year-over-year. Its Azure business soared 40% year-over-year and server products and cloud services revenue climbed 22%, while the personal computing segment saw its revenue rise 2% year-over-year, coming in weaker than expected. The company's Windows OEM revenue fell 2% year-over- year in the June quarter, while Xbox content and service revenue dropped 6% year-over-year. Amassing its segment outlook discussed on its earnings conference call suggests $49.25 billion -$50.25 billion in revenue for the current quarter vs. the $51.4 billion consensus. While some may focus on the shortfall, we can't ignore the implied revenue guidance for the current quarter equates to top line growth of 8%-11% year-over-year. However, Microsoft went one step further than most this earnings season and shared expectations for company double-digit growth in sales and operating income in fiscal 2023, with margins roughly flat. With prospects for PC to remain weak in a slower economy, especially after the pandemic-related surge, it means the intelligent cloud business will be the larger driver of Microsoft's top line and more than likely its operating income as well. This has the potential for investors to view the company in a different light, and one that could lead to a re-think on how its shares are valued. In response we lowered our price target to $310 from $320.

1-Wk. Price Change: 7.93% Yield: .89%

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 $310; 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) ; $181.63; 610 shares; 3.13%; Sector: Info. Tech.

WEEKLY UPDATE: NVDA shares were little changed this week, despite positive comments on both the data center market as well as the enterprise and higher-end PC markets. While the company's auto chip business, results from several auto companies, including our own Ford Motor as well as noted auto chip company NXP Semiconductors point to continued demand. The next signpost to watch for NVDA shares will be the quarterly earnings reports from AMD next week and from Marvell in late August. NVDA will report its own quarterly results on Aug. 24.

1-Wk. Price Change: 4.87% 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) ; $322.67; 380 shares; 3.47%; Sector: Industrials

WEEKLY UPDATE: After handily beating June quarter expectations, United Rentals upped its top line guidance for 2022 $11.4 billion -$11.7 billion, up almost 19% year-over-year at the midpoint. Management went beyond the tight-lipped earnings press release to share its rental revenue from non-residential construction was up 27% year-over-year, and infrastructure was up 15%. More broadly, almost every vertical the company serves showed year-over-year growth in rental revenue. Project types that are fueling the company's rental business are large data centers along with infrastructure projects and distribution centers, and added manufacturing capacity given supply chain concerns that emerged during the pandemic and are continuing. United Rentals shared it is also seeing the power vertical accelerating, and quickly mentioned "there are more tailwinds in the wings," which we take to mean the flow of Biden Infrastructure spending. That flow should continue to fuel demand for the company's rental fleet in the coming quarters and the next few years as infrastructure rebuilding gets picks up steam. Our price target remains $380 and we continue to rate URI shares a One; all things being equal, we would look to revisit that rating as URI shares passed the $330 level.

1-Wk. Price Change: 17.64% 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) ; $46.19; 1,300 shares; 1.7%; Sector: Communication Services

WEEKLY UPDATE: Coming off of Verizon's quarterly earnings report last week, the shares started off with several price target reductions, including Raymond James cutting its to $55 from $64 and Truist Securities lowering its to $58 from $65. In an effort to lure subscribers, this week Verizon announced it will offer six month subscription to Disney+ to customer when they activate or upgrade to prepaid pain unlimited plans. Given recession related concerns that could lead to a challenging mix of new subscribers in the coming months, we are lowering our price target to $55 from $60, which still offers a double-digit total return in the shares.

1-Wk. Price Change: 3.9% Yield: 5.5%

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: Reduce to $55 from $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

TWOs

Amazon (AMZN) ; $134.95; 600 shares; 2.29%; Sector: Consumer Discretionary

WEEKLY UPDATE: The company reported better-than-feared June-quarter report, which in our view fared better than expected, given the timing difference between Prime Day this year vs. last year. The company topped its operating income guidance for quarter with its North America and International Segment revenue rising low-double digits while its Amazon Web Service (AWS) revenue soared 33% year-over-year with several basis points of margin improvement vs. the year ago quarter. The company's Advertising Services segment revenue rose 18% year-over-year to $8.8 billion. For the current quarter, Amazon sees revenue of $125 billion-$130 billion vs. the $126 billion consensus with operating income of $0-$3.5 billion, which is once again below consensus expectations. Arguably supporting that guidance, Amazon shared inflationary pressures including higher fuel, trucking, air and ocean shipping rates, remained at elevated levels during the June quarter, on par with those in the March quarter, and it expects those pressures to remain in the current quarter. In our view, Amazon could be overselling the impact of those inflation pressures given the move lower in gas prices and shipping rates vs. their mid-June levels.

On the top line, its $125-$130 billion, which is up ~15% at the midpoint, could also prove to be somewhat conservative given the quarter's inclusion of Prime Day 2022. Being consistent with our other comments this week, the crux for Amazon won't be its AWS business, which we continue to see growing as public and private cloud adoption continues, but rather its digital retail business and to a lesser extent its advertising one. While Amazon is poised to continue to benefit from the resurgence in digital shopping as consumers look to combat inflation and stretch their disposable spending dollars, the concern for overall spending dollars amid a rising interest rate environment, continued inflation pressures and rising consumer debt levels. For now we will keep our Two rating intact as well as our $175 price target. As we move through August and complete the Back-to-School spending season, we'll look to monthly retail sales data with an eye to revisit both.

1-Wk. Price Change: 10.4%; 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) ; $112.44; 1,170 shares; 3.4%; Sector: Health Care Services

WEEKLY UPDATE: While there was no company-specific news out this week, next week brings AMN's June quarter earnings report. Ahead of that, we'll get the June JOLTs report, which should continue to show will show healthcare job openings well ahead of hirings pointing to continued demand for healthcare contract labor.

1-Wk. Price Change: 1.91%; 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) ; $155.44; 600 shares; 2.64%; Sector: Utilities

WEEKLY UPDATE: This water utility reported a quarterly earnings per share of $1.20 vs. the expected EPS of $1.15, which brought its EPS for the first half of 2022 to $2.07 vs. the $1.87 delivered in the first half of 2022. That year- over-year increase showcases the positive impact on American Water's business being from approved rate increases, but also the negative impact of inflation pressures that sapped earnings by $0.06-$0.08 per share in the first half of 2022. To date, the company has been authorized additional annualized revenues of approximately $50 million from general rate cases in 2022. In addition, approximately $53 million of additional annualized revenues from infrastructure surcharges have been authorized and are effective in 2022. Moreover, American Water has additional general rate cases in progress in six jurisdictions and has filed for infrastructure surcharges in three jurisdictions, reflecting a total annualized revenue request of approximately $598 million.

On the back of those increases already won, the company reiterated both its 2022 EPS target of $4.39-$4.49 vs. the $4.45 consensus, and its long-term financial targets. As a reminder those targets include an EPS compound annual growth rate target range of 7%-9%. With less than 10% upside to our $165 price target, we are keeping our "Two" rating in play, but would look to revisit that if the shares retreated below the $145 level. Given the concerns over a possible recession, we see a low probability of the shares hitting that level given the inelastic nature of the company's business.

1-Wk. Price Change: 4.87%; Yield: 1.6%

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. American Water declared its latest quarterly dividend of $0.655 per share will be paid on Sept. 1 to shareholders of record as of Aug. 9.

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) ; $162.51; 750 shares; 3.45%; Sector: Technology

WEEKLY UPDATE: Apple reported better-than-expected June-quarter EPS, while revenue for the quarter came in at $82.96 billion, effectively matching the consensus forecast. iPhone revenue for the quarter was $40.67 billion vs. the $38.3 billion consensus and the $39.6 recorded in the year ago quarter. iPad revenue was $7.2 billion vs. the $6.9 billion but was down compared to $7.4 billion last year. Mac revenue of $7.4 billion missed the consensus forecast of $8.8 billion and was down vs. $8.2 billion in the year-ago quarter. Similarly, the company's wearables revenue was $8.1 billion vs. the expected $9.0 billion and $8.8 billion in the year ago quarter. Services revenue was $19.6 billion in the June quarter vs. $19.9 billion consensus, and up from $17.5 billion in the year-ago quarter. Supply constraints came in slightly below expected $4 billion-8 billion for the quarter. While Apple did not provide specific revenue guidance it shared expectations for its September quarter revenue to accelerate sequentially, supply constraints to improve, and its service revenue growth to slow compared to the June quarter. With 2Q 2022 supply chain issues that limited iPhone, iPad and Mac availability the sequential guidance to us makes sense. What we like even more, however, is that Apple exited the June quarter with 860 million paid subscribers, up 160 million over the last 12 months. That should add to the predictability of Apple's Service revenue, which during the June quarter was just under half that for iPhone helping further ease iPhone concertation concerns. Comments received so far this earning season, including those from Samsung and Qualcomm point to demand for higher-end smartphones holding up far better than that for lower tier ones. That certainly play's to Apple's strengths, but given the rising interest rate environment and slowing economic growth we have some near-term concerns over the upgrade cycle for iPhone. Medium to longer-term, we continue to see consumers upgrading to 5G models as more robust applications requires 5G network speeds and its lower latency, but in the near-term cash-straps consumers may hold out longer than they have in the past. We bumped our price target to $175 from $160 and for now we're keeping our Two rating. Similar to other comments we've made this week, we'll look to revisit that Two rating on signs consumer spending and or Phone 14 model uptake is better than expected.

1-Wk. Price Change: 5.46% Yield: 0.5%

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 $175; 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) ; $105.98; 1,160 shares; 3.48%; Sector: Industrial Machinery

WEEKLY UPDATE: Competitor Lam Research posted top and bottom-line beats for its June quarter and offered September quarter guidance modestly above Wall Street expectations. While Lam sees incremental improvement in supply chain conditions in the September quarter, its view is industry-wide output will continue to be constrained through the rest of this year. The company also shared it sees semiconductor demand remaining robust despite some pockets of weakness, particularly in consumer-focused markets. Later in the week, Intel cut its 2022 capital spending plan to $23 billion from $27 billion vs. the $18.7 billion in spent on property, plant, and equipment in 2021. Also late in the week, KLA Corp. posted stronger than expected June quarter results and guided its September quarter revenue above consensus expectations. Similar to Lam's comments, KLA continues to see demand for semiconductor capital equipment outstripping supply, but through the balance of 2022 supply chain challenges remain a gating factor. Aggregating those comments, we see semiconductor capital equipment demand remaining strong and the strong likelihood that expectations cuts in recent months may have been somewhat overdone. In the coming quarters as capacity issues ease, we expect Applied's margins to improve as shipments climb. Longer-term, we continue to see rising demand for chip equipment given rising chip content and newer applications that will require it.

1-Wk. Price Change: 4.24% Yield: 0.9%

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) ; $42.16; 2,220 shares; 2.65%; Sector: Cybersecurity

WEEKLY UPDATE: Recent headlines point to hackers selling account data of 5.4 million Twitter users, targeting industrial systems with malware, and stealing 50,000 credit cards from 200 U.S. restaurants confirm cyberattacks continue. These and other reports suggest companies will need to continue to protect their crown jewels even in a slower economic environment or recession. This sets the stage for favorable earnings from CIBR constituents in the coming weeks, including Fortinet, CrowdStrike, Zscaler, Palo Alto Networks, Cloudflare, and others. With CIBR shares below the portfolio's cost basis and ample room to build out the CIBR position size, we'll look to be opportunistic with this position.

1-Wk. Price Change: -1.7% 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) ; $14.69; 8,670 shares; 3.6%; Sector: Industrials

WEEKLY UPDATE: Ford crushed June-quarter expectations, reaffirmed its 2022 guidance, and boosted its quarterly dividend by 50% to $0.15 per share. The company reported June quarter EPS of $0.68, well ahead of the $0.44 consensus on revenue of $37.9 billion, up 57% and well ahead of the $35.2 billion consensus. Demand for its EVs is expected to remain strong while cost reduction as well as pricing actions taken earlier this year along with a favorable product mix of vehicles and improved pricing should contain currency headwinds, keeping it on track to deliver $11.5 billion-$12.5 billion in adjusted operating income. We'd note the dividend hike puts the forward dividend yield for the shares at around 4.3%. The new dividend will be paid on Sept. 1 to shareholders as of Aug. 11. Despite the above, the second quarter 2022 GDP print released this week could lead to curbed spending by consumers and businesses in the near-term, especially as interest rate hikes lead to higher auto loan rates, which increase the total cost of buying a vehicle. Even though we continue to like the Ford's transformation and the longer-term replacement cycle for autos on the road today, at least for the very short-term we are taking a more cautious stance on F shares.

1-Wk. Price Change: 14.59% Yield: 2.04%

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) ; $353.87; 275 shares; 2.75%; Sector: Info. Tech

WEEKLY UPDATE: The company delivered second-quarter earnings Friday and much like competitor Visa, which we discussed in our Alert here, the company handily beat on the top and bottom lines. Mastercard posted healthy revenue growth of 21% in a very challenging environment. The company said inflationary pressures are increasing but have yet to significantly affect overall consumer spending. The monthly "spending pulse" delivered by Mastercard confirms this notion. Switched transactions, or transaction volume, was up a solid 12% during the quarter. Mastercard makes the bulk of its revenue from fees, therefore a strong correlation to transaction volume and revenue growth. Given the negative 2Q 2022 GDP print that could lead to curbed spending in the near-term, we are taking a more cautious stance on MA shares, even though we continue to like the longer-term prospects of continued chare gains against cash and check payments. As new consumer spending data is had, we will continue to revisit our "Two" rating on the shares.

1-Wk. Price Change: 2.91% Yield: 0.5%

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) ; $87.35; 1,280 shares; 3.16%; Sector: Food; Consumer Non-Durables

WEEKLY UPDATE: While there was no company specific news this week, we'd remind members the company targets its latest price increase to thwart inflationary pressures going into effect in August.

1-Wk. Price Change: 3.85% Yield: 1.7%

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) ; $84.30; 1,385 shares; 3.3%; Sector: Financials

WEEKLY UPDATE: None.

1-Wk. Price Change: 2.27%; Yield: 3.4%

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) ; $135.80; 325 shares; 1.25%; Sector: Materials

WEEKLY UPDATE: While there was no company specific news this week, bullish comments from United Rentals (URI) for infrastructure, data center and other construction project demand bodes wells for continued demand strength at Nucor. We continue to see the company's business benefiting from the ramping spend associated with the Biden Infrastructure Law.

1-Wk. Price Change: 13.3% Yield: 1.6%

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) ; $174.96; 560 shares; 2.77%; Sector: Consumer Defensive

WEEKLY UPDATE: PepsiCo competitor Coca-Cola reported an earnings beat and raised revenue expectations for the full year. The company also said commodity price inflation is now expected to a high-single digit percentage headwind, after previously saying it expected it to be a mid-single digit headwind. On the earnings call, we'll be listening to see what Coke's pricing plans are for the back half of the year and if they include another round of price increases. Such a move that would likely be matched by PepsiCo following its comments about product inelasticity and would give reason for revenue expectations for the coming quarters to be lifted.

1-Wk. Price Change: 3.15%; Yield: 2.5%

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.

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) ; $194.89; 520 shares; 2.87%; Sector: Industrials

WEEKLY UPDATE: June-quarter results at topped consensus expectations as the company delivered on both its top and bottom lines. UPS reaffirmed its revenue guidance for 2022 that calls for $102 billion compared to the $101.96 billion consensus and raised its targeted share repurchase program for 2022 to $3 billion from $2 billion exiting its March quarter. Examining the company's revenue guidance, we see the typical seasonal pattern that skews toward the December quarter and the holiday shopping season. Given our concerns about consumer spending discussed above, we are taking a cautious stance with UPS shares in the near-term. However, if consumer and consumer spending data holds up better than expected, we would look to revisit our stance on the shares.

1-Wk. Price Change: 3.68% Yield: 2.6%

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) ; $78.42; 505 shares; 1.12%; Sector: Energy

WEEKLY UPDATE: Shares of this energy ETF moved nicely higher week over week due to several factors. Oil prices in particular rebounded late in the week ahead of next week's OPEC+ meeting that isn't expected to result in a supply boost. European gas prices moved higher closing in on record highs as Russia made further cuts to gas supplies to Germany and other central European countries. Later in the week, XLE benefitted from stellar quarterly earnings from both Chevron (CVX) and Exxon Mobil (XOM), both of which are sizable positions for the ETF. Near-term, the question of an economic recession will loom over XLE shares, but with more sanctions to come against Russia concerning caps in Europe we could see oil prices move higher before year-end.

1-Wk. Price Change: 10.2; Yield: 3.9%

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) ; $12.73; 2,940 shares; 1.06%

WEEKLY UPDATE: With the Fed on path to tame inflation, a move that will see further interest rate hikes in the coming months, we remain concerned over the potential for the Fed to overreach and scuttle the domestic economy. Inflation data received this week, including that in the 2Q 2022 GDP report and the June PCE Price Index point to the Fed having its work cut out for it. Another reason to think the Fed's fight could take longer than expected, more companies shared they are will announce further pricing action during the quarter, including our own McCormick & Co. and Chipotle Mexican Grill. Dollar headwinds and lingering supply chain issues will remain headwinds, and companies are reporting a inventory destocking and pockets of weak demand. All of this has us keeping our PSQ shares in play at least until we clear the Fed's September monetary policy meeting.

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: -4.57%; 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) ; $15.08; 3,310 shares; 1.41%

WEEKLY UPDATE: With the Fed on path to tame inflation, a move that will see further interest rate hikes in the coming months, we remain concerned over the potential for the Fed to overreach and scuttle the domestic economy. Inflation data received this week, including that in the 2Q 2022 GDP report and the June PCE Price Index point to the Fed having its work cut out for it. Another reason to think the Fed's fight could take longer than expected, more companies shared they are will announce further pricing action during the quarter, including our own McCormick & Co. and Chipotle Mexican Grill. Dollar headwinds and lingering supply chain issues will remain headwinds, and companies are reporting a inventory destocking and pockets of weak demand. In light of this, we're keeping our SH shares in play at least until we clear the Fed's September monetary policy meeting.

1-Wk. Price Change: -4.13%; 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

The AAP is long all stocks in the portfolio including GLD SH PSQ XLE UPS PEP NUE MA F CIBR AWK AMZN VZ URI NVDA MS MSFT MKC GOOGL DE COST CMG CHPT CBOE AMAT AAPL AMN.