After you receive this Alert, we will make the following trades:
-- Sell 100 shares of Alphabet (GOOGL) at or near $105.50. Following the trade, GOOGL will represent roughly 3.0% of the portfolio.
-- Sell 80 shares of Microsoft (MSFT) at or near $255. Following the trade, MSFT will account for about 3.0% of the portfolio.
-- Buy 230 shares of the Energy Select Sector SPDR Fund (XLE) at or near $80.50. Following the trade, XLE will make up roughly 1.65% of the portfolio.
-- Buy 335 shares of Verizon (VZ) at or near $42.25. Following the trade, VZ will represent around 2.8% of the portfolio.
While the shares of Alphabet and Microsoft are down today along with the overall market following the post August CPI re-think on the direction of interest rates, we are opting to trim back the portfolio's position in them given the growing risk of downside guidance in the face of currency headwinds.
Members will recall that shortly after Salesforce (CRM) cut its 2023 revenue outlook in late May given dollar headwinds, shortly thereafter Microsoft did the same for its soon-to-be-reported June-quarter results. Not only did Salesforce do that again several weeks ago, but Dell Technologies (DELL) , Oracle (ORCL) and other companies have also cited the dollar as a headwind when cutting expectations for the balance of this year.
In its June 2022 quarter, non-U.S. revenue accounted for essentially half of Microsoft's total revenue while for Google it was more like 53%. In our view, this alongside slowing enterprise spending could lead to weaker-than-expected results for the current quarter, forward guidance or both. That is prompting us to not only trim back both of these holdings, locking in pre-existing gains, but we will also downgrade GOOGL shares to a Two rating as well. From a technical perspective, the next levels of support for MSFT and GOOGL share are $240 and $95, respectively.
Meanwhile, the use of the U.S. Strategic Petroleum Reserve will soon end, adding further pressure to oil supplies while natural gas price remain elevated. As such, we will take these booked gains and use the proceeds to add to the portfolio's position in XLE shares. We will also take a slice of the MSFT-GOOGL gains to scale further into Verizon shares and its 6.1% dividend yield. As a reminder, Verizon recently announced it latest dividend hike, confirming the strength of its business and its far better balance sheet than competitor AT&T T.
(Please note that we are looking to execute these trades at or near the share price mentioned above. Once the trade is completed, subscribers can see the trade's executed price here. Be sure to toggle the chart to sort by Purchase Date.)