One of our favorite numbers when it comes to evaluating stocks either in or for the Action Alerts PLUS portfolio is three. When determining a stock's price target or where it might bottom out, our preference is to do so using three valuation metrics. When we get three pieces of confirming data, especially in short order, it tends to boost our conviction for a portfolio position.
That happened this week in the form of the December Construction Spending Report, the latest rail traffic data, and comments issued by Fed Chair Powell during yesterday's post-monetary policy press conference. The December Construction Spending report showed non-residential construction rose double-digits on a year over year basis, while the January rail traffic data revealed carloads for crushed stone, sand & gravel rose 22.6% year over year.
To those to data points, we can add Powell's comments: "There's a lot of spending coming in the construction pipeline both private and public and so that's going to support economic activity."
We see those comments as rather confirming for the portfolio's position in Vulcan Materials (VMC) as well as United Rentals (URI) , building on what was recently said by not only United Rentals but also Caterpillar (CAT) .
That is leading us to make the following trade after you receive this Alert:
-- Buy 85 shares of Vulcan Materials at or near $186. Following the trade, the portfolio will own 575 VMC shares, roughly 3.0% of the portfolio.
During his press conference, Powell also reminded us that state and local governments are "are really flush these days", which bodes well for spending. One area is likely to be on non-lethal weapons, body cameras and related software, a positive for AAP holding Axon Enterprises (AXON) .
We've seen the shares move higher along with the market but have yet to see any major Axon specific news or related announcements that would point to sufficient upside to revisit our current Three rating on the shares. Of course, we are scouring for that and the next known catalyst to watch will be next week's quarterly results from public safety company Motorola Solutions (MSI) .
The quarter to date surge has also lifted our shares of Clear Secure (YOU) considerably in recent weeks, which has them closing in on our price target. That has us downgrading the shares to a Two rating today from One. Barring any new developments such as the addition of additional airline or airport partners, we would look to build out the portfolio's YOU position closer to $29-$30.
(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.)