KATHERINE ROSS: Welcome to the January Action Alerts Plus members call. I'm Katherine Ross, and I'm, of course, joined by the one and only's Bob Lang and Chris Versace. OK, so it obviously looks a little different this time around. And we, unfortunately-- we're not able to be in person together. But I've scoured the forum. We've pored over the emails and put together a very comprehensive kickstarter for the new year.
Now, it is a new year, but not a new you. I've asked you guys-- Bob and Chris-- for your self assessments during the last month's call. Chris, you gave yourself a B-minus, and I'm wondering if you stand by that assessment now, and how can you improve now that we're in 2022?
CHRIS VERSACE: Well, Katherine, I'm never going to improve myself from a B-minus because there's always more work to be done, always more companies to look out, more data to parse, and we can always be more effective communicators with our thoughts in terms of subscribers. We can always do much more. And I'm hoping that we're going to start doing much, much more for subscribers as we move through January, and even more so throughout the balance of the week. So sorry, Katherine. Still a B-minus.
KATHERINE ROSS: All right. Bob, you gave yourself a B-plus, just slightly better than Chris. Do you change that grade, and what will you change in 2022?
BOB LANG: No, I wouldn't change that grade very much. I'd keep it at a B-plus. I think we performed admirably in the fourth quarter when we took over in October 1, and performance of the portfolio is very strong versus the S&P 500 and versus other bogeys that we were challenged to work against.
I think bringing out the communication was a key thing for us in the fourth quarter and being true to our nature of bringing new names into the portfolio and cutting ones that weren't working. And we'll continue to improve on that. That's why I wouldn't rate us an A just yet, but B-plus as good.
So what we would improve upon? It would be increase that communication, the learning, the education, bringing out some webinars. I certainly don't want to let the cat out of the bag here. But I think we had planned to do some more educating for our subscribers, and just to give them a lot more than other services are able to provide. So it's not just about the performance and about the stock picks. It's about the teaching and the learning as well.
KATHERINE ROSS: So Chris I do have more bullpen-centric member questions for you at the end. But because Bob brought it up, I actually want to get started on some of the changes that you guys have made.
Now, obviously, aside from management, you also shook up the bullpen at the end of last year. So I'm wondering what led to that.
CHRIS VERSACE: Well, I think, Katherine, when we looked at the bullpen, there were a lot of names that had either already run earlier in the year and it was time to get rid of them, or they were names where the thesis just simply wasn't poised to play out. And I think what we wanted to do was make some room at the same time.
There were some names that we've been gently talking about with members, that we've been eyeing over companies-- like a ChargePoint, for example, so we could start to lay the groundwork as we move deeper into 2022 and start to, perhaps, shed some names in the existing portfolio and bring in some new blood with even greater earnings prospects, greater upside potential, because at the end of the day, that's what we want to do. We want to continue to reinvigorate the portfolio and prudently trim, as they say, certain branches that might have bloomed and now they're starting to wither.
KATHERINE ROSS: Well, speaking of reinvigorating the portfolio, Bob, now that we've got your technical perspective on board, what kind of changes can we see this year? What kind of themes are you guys looking at? I know, overall, you've really homed in on investing themes.
BOB LANG: Yeah, so one of the things that we're going to be focused in on here is where the Fed is and Fed policy as it turns and shifts to become a little bit more hawkish. We all know that. But we don't know what the extent of interest rate hikes are going to be. Could it be 3? Could it be 4? Could it be extended into 2023? And this as much of a liquidity driven market as we've ever seen.
So when the Fed starts sapping some of that liquidity out of the markets, it's going to have a negative effect, eventually, on stocks. We're not talking about tomorrow or next week or next month, but over time, that is going to have a negative effect. Interest rates-- when they rise-- it is basically countering-- trying to counter inflation.
And for the past 43 years, the Fed has been incredible inflation fighting committee, using the tools such as interest rate hikes to snuff out some inflation, and they're seeing some of it. Every member of the Fed sees the inflation that's been coming in. One of the criticisms that we've had with them is that they've been somewhat tone deaf as to what's happening in the real economy versus what they see in their bubble. But I think that, by and large, they see the inflation coming in, and that is something that is going to be a high priority.
So going forward, I think we have to acknowledge that the Fed policy-- they're making a change here it's a much more hawkish policy. And there are certain names and stocks that we have to pay attention to, either to cut or to add into in our portfolio. So that's pretty much, I think, where our focus is going to be in 2022.
KATHERINE ROSS: So before we get into the meat of our meeting today, I do have two member questions that I want to open you guys up with. Chris, Sandra B. is going to be our first member up today. She's asking, if no real dollars are in play when you recommend a trade or sell, how do you pick the price of the buy or sell that's listed in the portfolio chart of current and past actions?
CHRIS VERSACE: I just want to make sure I understand this because there's a couple of things here. So how does the portfolio determine the buy or sell price listed if no real dollars are at play? That's an interesting question because we certainly run the portfolio as if there is real money at play because we know subscribers are putting money to work. So it's not something that we take lightly or gingerly. We do our best to ferret out price points where we want to maximize the exposure to a particular name, where we want to dip our toes in, perhaps in improving our cost basis, and ultimately prudently reap the rewards of the efforts that we have had.
So Katherine, I think the answer, in short, is whether it's monopoly money, whether it's real money-- to us, it's exactly the same because it's real money to subscribers.
KATHERINE ROSS: OK, and Bobby H, Bob, noted that Morgan Stanley just issued a 2022 outlook, and that they're calling for a decline. So what do you think about 2022 forecast? And what should AAP members do? I mean is it time to book profits, raise cash, or look at dividend stocks?
BOB LANG: So I think these forecasts-- we have to keep them at arm's length and really just pay attention to what's happening in the markets at the time. They could have a forecast for 2022 of-- let's say they were looking for maybe a 10% decline. We could have a 10% rise first before we get a 20% decline later. And that would make Morgan Stanley look right.
So I think they're going to be sending these messages out to their clients, to their investment clients, large and small. And it's just a cautious note, I think, from what we just talked about with where the Fed is right now. And I think a lot of these investment banks are aware and understand the importance of liquidity in this market. And if the liquidity is drained, it's going to have a negative effect on the markets, as we just said.
So as far as Morgan Stanley or some of these other investment banks, since they're seeing it down here, again, just keep it at arm's length. There's lots of game left to be played in 2022. We just got started here. We're in only the third trading day of the year. Lots of things can happen between now and then.
But for the most part, just keeping an eye on what's happening in the economy and the growth. Chris does an excellent job at analyzing the economic data as it gets passed out every single day, every single week. And this is this thing that we have to be paying more attention to.
KATHERINE ROSS: And as you noted just yesterday, Bob, we just exited a very exuberant Santa rally, so it's really time to see how the markets shape up. OK, so I do want to start running through every name. But members, if you have specific questions on AMAT, Marvell, Nvidia, and Deere, you know how to reach me. Those are some names that I surprisingly didn't get some member questions on this year.
So let's start it off with the apple of our eye, Apple. It has been a winner over the past year. Thank you for laughing at that. I really tried.
It's been a winner over the last year, rising over 37%. It's also the first company to hit a $3 trillion market cap, although I do want to note that, as of the time of this taping, guys, it is slightly below that. Chris, from a fundamental perspective, can Apple keep leading the tech pack here?
CHRIS VERSACE: Oh, I think absolutely it can, Katherine. The big driver for the company is the iPhone and the iPhone upgrade. And we are still, despite 2021, in the relatively early innings of the 5G upgrade cycle.
One of the things that I think a lot of people are excited to see is the lower tier iPhone SE get the 5G upgrade, hopefully in the first half of this year. That, in turn, is going to help spur additional volumes for 5G iPhones.
But there's also the services business. And even though there's been a lot of chatter, Katherine, there is some expectation at some point this year we could see a new product from Apple. Perhaps it's the AR, VR goggles or something else. But we'll address that in terms of our earnings expectations and price target as we have more concrete information on that. We're not going to be subject to rumors. But having said that, 5G upgrade cycle-- very much intact. We will be sticking with Apple all the way through.
KATHERINE ROSS: And Bob just yesterday said that you look to nibble at this name in the future. So what do you need to see from the technical perspective to warrant taking a bite out of Apple?
BOB LANG: Well, Katherine, more recently the stock has come in and tested the 20-day moving average on a number of occasions. It's really close to it right now. The 20-day moving average is coming in at around $177. So it's a little bit below where we're at right now, which is ticking about just under $179.
It's come in a little bit. It had a hit a new all-time high yesterday at about $183 and change in a lot of the talk about-- Monday and Tuesday. Oh, it's a $3 trillion company. And we talked about this the other day, that it really makes no difference whether it's $2 trillion, $3 trillion, $4 trillion. For me, it's paying attention to the charts and the technicals.
The stock has really performed well when it comes down and test that 20 day moving average. And again, it's almost there right now. So that would be a good spot to enter the name on a pullback here.
More recently, in October, it tested a 100-day moving average. And the buyers said, that's enough. We're coming in. And they came in really hot and heavy and took the stock up really strong in November, even during days when the markets were getting slammed. So that had really good relative strength.
So we liked Apple. And we did take some off the table just because it got a little oversized. But it's going to be one of the better names that I think-- it's going to perform in 2022 for us.
KATHERINE ROSS: And then we got at the AbbVie. AbbVie's a little bit of a tick upwards today after it got an FDA breakthrough tag for its lung cancer treatment. This name is great from a dividend perspective, but overall, if we're being honest, it's not really a name that garners a lot of attention. So when looking at this name from a technical perspective, Bob, what makes you want to keep it in the portfolio?
BOB LANG: Oh, boy. This stock is just a dynamo. I'll tell you. This thing really takes off after it broke out in early part of December. And it is only had two down days, I think, or three down days perhaps in the past 30. That's amazing. That's what we call a strongly efficient stock, a stock which continues to go up day after day after day and it doesn't pull back and give you an entry point.
One thing that I learned two years ago is that the best trending stocks barely give you a chance to get in. So this is a name that-- obviously, it's due for a correction. But you know what? You're better than me if you're going to tell me when that's going to happen. More power to you.
But I think that this stock has certainly got some more room to run. I think we have some potential of $150, $160 on this name. This was a spinoff from Abbott a few years back. AbbVie-- from a technical perspective, nothing wrong with this stock.
KATHERINE ROSS: OK, so moving into Airbnb-- this is a name that we've talked about quite a bit over the past couple of weeks. And actually, Darrell B. Noticed that there isn't P/E listed for Airbnb, as well as a couple of other stocks within the portfolio. So we wanted to know why, Chris.
CHRIS VERSACE: Well, I think we'd have to take a look at the exact companies. It's probably, if I had to guess, Blackberry. And if we look at both of those, are they generating positive EPS? In some cases, it might be very de minimis, or the answer is simply, no. If we were to put a P/E in, it would be erroneous and/or misleading. You can't really have a P/E that's 500 or 400 or some nonsense like that.
So the smart thing would be simply to have NM, or not meaningful, just to avoid confusion. But at some point, we do think Airbnb, since it's already cash flow positive, will be generating EPS. We think the same thing with Blackberry, as it continues to benefit not only from cybersecurity spend, but as the connected car becomes an increasing reality.
So stay tuned. We'll continue to update those as the prospects get even better.
KATHERINE ROSS: And Bob, from your particular perspective, buy, sell, hold this name here?
BOB LANG: I'm a big buyer in Airbnb. I think this stock is going to be one of our better performance in 2022, so I'm a buyer on this one.
KATHERINE ROSS: We're looking at Abbott next. Abbott, obviously, is really big in the news right now because there's such a huge need for all of us to get COVID-19 testing done, especially with Omicron. So with rapid testing rising and, Chris, with places like Walmart and Kroger hiking the prices of at home tests, does that feed into your bullish thesis on this name?
CHRIS VERSACE: Yes and yes. And I believe, when we looked at the name over the last week or so, we hadn't really seen a lot of upward EPS expectations for either the December quarter or the now current March one. That leads me to believe that there could be some upside to be had when Abbott reports its quarterly results in the coming weeks and guides, either for the current quarter or for the full year 2022.
KATHERINE ROSS: And then, Bob, back in November, I was just looking at my notes-- you said that you were concerned about the technicals on Abbott. Are you still concerned or is maybe not now the time to pull the trigger on this name?
BOB LANG: Well, the stock had an incredible run in December and has pulled back the last couple of days. I was looking for a little bit of a pullback for an entry point. So pulling back down to around the 20-day moving average, which is where it's at right now, probably a good spot to pull the trigger on buying some more shares.
KATHERINE ROSS: Sticking with you as we move into Applied Materials. When looking at the technicals here, what stands out to you, Bob?
BOB LANG: The fact that it ran hard in November. It ran up really strong on really good volume. It pulled back a little bit. It's made some higher highs, higher lows so that the bullish trend is still intact. It's pulled back here the last four or five days, again, right near that 20-day moving average. Actually tested it yesterday. That's been a good launch point for the stock to move higher. So I think all signals-- all systems go on Applied Materials. I like this name. It's been very strong.
KATHERINE ROSS: Advanced Micro Devices is our next stock up on the list. Now, this one was down slightly when I checked it earlier this morning. However, it is a member favorite, and we've covered it from a number of angles, including the Xilinx acquisition.
AMD, last week, said that it plans to now close the transaction of Xilinx in the first quarter of 2022. If there are any further delays, are you going to be concerned, Chris?
CHRIS VERSACE: No, I think we're down to brass tacks. This was telegraphed that it was going to be a little later than expected. It was supposed to close at the end of the year. The company signaled it would be a little later than that. And now I think, like I said, we're pretty much down to brass tacks. We're not going to alter anything based on a couple of weeks.
If it does come in a little later than that, I think what we need to focus on here, like any type of M&A acquisition of this size in nature-- what are the benefits to be had? How does it augment the existing product offering? What technologies does it help fill in? And/or does it bring in any other end markets that the company can go after? And I believe that, when we review those questions, they all check positive for AMD. It does mean, however, that when the transaction does close and we understand what some of the cost-related synergies are to be had we'll, be taking a hard look at our current price target.
KATHERINE ROSS: Another fan favorite is Amazon. And Bob, Scott K. likes to make money with Amazon call options. This is right up your alley. When is it a good time to buy a new Amazon call option? Is it now?
BOB LANG: No. [LAUGHS] And the thing is that Amazon has been trending lower, currently right now-- I mean. As a stock buy, we've been in the name for a while. And we still like the name. Fundamentally and even technically, it still hasn't broken any rules here on the weekly or the monthly charts.
But the daily chart looks atrocious on Amazon. And I hate to tell [AUDIO OUT] this truth that. No. Getting long calls, by the way, means that you're bullish on the stock and you think the stock is going to go higher. But if you're buying puts, which is the opposite side, means you're bearish.
So for a call buy, I'd say, no, not right now. Maybe if it gets up above $3,400 to $3,500, maybe. It's a momentum name, and call buying is going to be very expensive for a stock that's $3,000. So I would say, no.
KATHERINE ROSS: A name that you like for the long-term but has been a little bit of a laggard, Chris, is Boeing. Now James T. specifically asks, now that BA has had several other countries approving the Max, including Indonesia and Ethiopia, is China going to be next? And then to also add on to that, what kind of move would that mean for the stock in 2022?
CHRIS VERSACE: Sure, so remember that the company-- the stock really trades on orders. So we have seen a number of different orders, even one out this morning, as well, for about 50 new 737 Max jets. The great thing about it is it goes into backlog, and as backlog levels creep higher, it gives Boeing the room to ratchet up their production levels, which translates into higher earnings.
So I think we're going to start seeing that happen as we move through this current quarter, as they, again, process all of these orders. It does mean we should see some really favorable backlog comparisons, not only for the December quarter but comparing that year over year to the December 2020 quarter, but also sequentially from September. And I think that's going to be the juice that a lot of people are looking for.
In terms of China, look, I wholeheartedly agree we're waiting to see when that happens because the amount of large body aircrafts expected to be ordered by China over the next, not one decade-- next two decades is significant, as air travel really ramps out of there to other parts of the world. So I think let's be a little more patient on that. It is a great long-term driver, but things are already starting to take off for Boeing, Katherine.
BOB LANG: Ouch.
CHRIS VERSACE: [LAUGHS]
BOB LANG: I had to do that. Sorry.
KATHERINE ROSS: I was going to ignore it, but thank you for calling it out, Bob. But after my what three or four Apple puns, I was just going to let that one slide.
Guys, I want to move into Blackberry here, because this was one stock that a slew of members emailed in and even DM'd me on Twitter about it. In fact, Rain Man on Twitter said that their one Christmas wish was for you guys to answer this question. So when BB starts to rip, when is it appropriate to sell calls to maximize the premium, Bob?
BOB LANG: Well, when it starts to rip-- obviously, when volatility starts to rise, the standard deviation is increasing as well, too, and we see premiums starting to rise here. I don't see a lot of volatility right now in Blackberry. So at this point in time, we wouldn't want to do that.
So normally, volatility starts to rise when events happen. And I think Chris has been talking about an event happening at some point in time out in the future. Maybe if and when they do sell their patent portfolio, it's going to be bringing a lot of cash to the company. That's going to cause a lot of volatility to increase in the stock.
So I would wait for that point. If I had some stock in Blackberry right now, I would be selling calls and waiting for that event to happen, not just yet, because you risk missing out on some of that premium increase when that news actually hits, so I would probably wait for that.
KATHERINE ROSS: And Matt W. wants to know, Chris, if you're worried about the recent analyst price targets that are lower than Action Alerts Plus's entry point?
CHRIS VERSACE: No. In a word, no, not at all. Not to be flip. But I think, when we kind of dig down into
what's happening in the business, what the growth areas are, and look at some of the other metrics aside from P/E-- enterprise value to revenue, for example, or enterprise value to EBITDA, we're comfortable with that.
I think the icing on the cake for that price target, though, is something that Bob was just alluding to, which is the eventual sale of the patent portfolio. The company has targeted that they expect to give an update mid-quarter, this current quarter, and I suspect that they're closing in on it.
I'm very excited for that event to happen, not only because what it means for the stock, but it will finally, finally cement the notion that the company is no longer involved in the wireless marketplace. And candidly-- I think I've said this before, but I really hope that they rename the company to really go along with this final part of their transformation.
KATHERINE ROSS: Well, and to keep with that, Chris, I've actually had another question on BlackBerry. And I really like this one from John B, so kudos. John B. wants to know about the management of BB and how they've evolved since, as you noted, now defunct phone days. Is there a visionary within this management firm?
CHRIS VERSACE: John Chen, without a doubt. He is the current chief chip, as we like to say, at Blackberry, and he has architected the entire transformation at the company. I think as long as he is around, I think they're going to continue to execute.
But again, you know like most companies, the bench is-- not only has it been deep it's getting deeper as well, particularly in the two core businesses that they have-- one, cybersecurity but also, two, really in the cockpit-- in the automotive cockpit business. And again, continue to like the company because, at some point, those two will intertwine as we have the true connected car.
I think we talked about this previously, Katherine. Visa's already enabling mobile payments from autos. We are not that far from that becoming a reality. I think that is going to be the genesis for the new-- I don't want to say Blackberry, but the company formerly known as Blackberry.
KATHERINE ROSS: Another name that has been added since you guys took over was Chipotle. Now, it did get mixed reviews, if we're being candid, from members. And lately there's been a little bit of a decline in this name. And Stuart L. is asking what you guys make of this 100-plus decline in Chipotle. And Chris, I want to start with you here.
CHRIS VERSACE: Sure. So I think, if we trace back the decline in Chipotle, it was almost around the time that we had some monster gains in a couple of other names. And it was really around the time that Omicron started to come into the focus, from the end of November and rippled with us through December.
And I think if we start and stop and think about what's happening, most likely people are reacting to the notion that-- look, Omicron cases are going higher. People are going to be testing. People might be out of work. So Chipotle might be one of those companies, given the nature of its business, that is going to have to reduce hours. Maybe January might be a little weaker than expected. I think that's what's going on, Katherine.
But when we step back and we say, the company's continuing to expand its footprint. They continue to reinvigorate the menu. And they're embracing digital and rolling out more Chipotlanes, all of that is extremely positive. So from my perspective, this 100 point move lower from $1,700-- not a huge actual percentage decline. To me, that makes me want to think about backing up the truck so to speak and adding to more Chipotle as the signs of Amazon Omicron to fade.
KATHERINE ROSS: I knew we couldn't get away from the backing up the truck. I knew it.
CHRIS VERSACE: Did I get enough phrases in there for you, Katherine?
KATHERINE ROSS: You were a couple short. So let's try you, Bob. Sean L. wants your expertise on the chart after this decline.
BOB LANG: Well, I'm waiting for Chris to give a try of that plant-based chorizo first.
CHRIS VERSACE: Bob, we've talked about this. I'm right in line after you.
BOB LANG: That's a deal. That's a deal.
So Chipotle chart-- yes, it's declined the last three days. And listen, you know what? As interest rates have risen for the past two or three sessions, a lot of these growth names have been taking it on the chin, and Amazon being one of them. We saw a few other names get hammered last few days.
Chipotle's-- it's not a value name. It's a growth name. And this stock got hit just like it did in November. We haven't broken the November low. So I'm not too concerned here. Volume levels did tick up yesterday and Monday, if you wanted to be concerned about something.
But I'm willing to bet that this is just a little bit of a pullback as we head into earnings on Chipotle, which is going to be on the latter part of January. And I think that relative strength is down here, at a level where the stock has often bottomed up.
Stop selling over here. We're not going to sit there and predict when the selling is going to stop. But at some point in time, it's going to stop, and buyers are going to pick up the pieces here. The dip buyer's going to come in. And we'll see if we can get back up above $1,750 again. So I'm willing to be a little bit more patient with this one.
KATHERINE ROSS: All right, Chris, for your sake, let's back up the truck and talk about a real winner for the portfolio, and that's Costco, one stock that is just such a winner that we talked about it time and time again. It even won over with the supply chain issues. I tried to give you all the hard questions there, Chris, and it just kept going.
So what levels would you hit buy on this stock? Or do you need it to cool off?
CHRIS VERSACE: So I think we would need it to cool off considerably. Portfolio's is 86%, and we're quickly encroaching upon our I believe $575 price target. So we would either need to see upside easily north of $600, more likely north of $625, to really get invested from a fundamental perspective to buy a new position in it.
There might be some areas where Bob thinks that, for those people that are underweight, they can look at the chart and perhaps do some quick nibbling. But for a fundamental position in the portfolio, we're going to have to wait for this to cool off, I'm afraid.
KATHERINE ROSS: Bob, do you think it's time to nibble?
BOB LANG: Not just yet. Although this 20-day moving average here is somewhat intriguing. It hasn't corrected enough for me to want to nibble back on it. Maybe the 50-day moving average comes in at about $533 or $535 would be a good spot to jump in there.
But this stock has just been an enormous successful winner for us, especially since we stepped in here in October, beginning of October. That basically was the bottom of this last cycle here, at about $430. Not often you see a company this size really run 25% in a quarter. But Costco did. It really didn't have very many down days since October. We've been a big fan of this, but I think, like Chris said, a little cooling off, down to about $535, maybe $533 level, would be a good spot for people to pick up the shares.
KATHERINE ROSS: Moving into Cisco, Bob, what level would you recommend buying there?
BOB LANG: Well, I mentioned earlier that Airbnb is probably my stock of the year of 2022. My second favorite would be Cisco here. And the stock really had an amazing run in December here. It's pulled back a little bit last couple of days and paid a dividend a couple of days ago. So it took a little bit off of that. $0.37, I think, was the dividend.
But I think this has just pulled back to the 20-day moving average today. It's been a good spot for entries. And I think, even right now-- I think we have it rated as a two, if I'm correct, Chris. So the stock has pulled back from a recent high of 64, which, ironically, is a 21-year high. The stock hasn't been this level since 2020-- oh, I'm sorry-- since 2000, the year 2000. So 21-year high. Not often you see stocks pulling up to a 21-year high. So it's pulled back about 4 and 1/2 percent that recent level, not a bad spot to pick up some shares right here.
KATHERINE ROSS: And real quick, Chris, just to stick on this name for a second. Bill M. actually pointed it out and their experience that they would find ways to get around Cisco when it comes to their workplace, and they even sold Cisco back in November. What do you think about that?
CHRIS VERSACE: Companies trying to get around Cisco? Is that the question?
KATHERINE ROSS: Well, it's more of what your fundamental take is because companies are trying to get around Cisco.
CHRIS VERSACE: So I think, again, from a fundamental perspective, we try to take a longer term view here. And whether it's 5G, gigabit, build-out, data center construction and incremental build-out-- and even go one step further than that and think about what's happening unfolding now and what is poised to happen in the next few years, whether it's AI, AR, VR metaverse, connected car, 5G, IoT-- all of that data has to be pulled through the network, as the network is going to be densified, as we like to say, expanded, and increasingly security is moving into the cloud and into the network.
To me, that all plays right into Cisco's sweet spot. From an investor's perspective, it's simply a matter of finding the right price point at which to buy it.
KATHERINE ROSS: Moving into Deere, Bob, when you look at the technicals is this now a time for members to, perhaps, buy this name?
BOB LANG: I would pause right here if I was thinking about pulling the trigger on buying deer, and I'll tell you why. It's because these last three days have been-- the stock's been on an incredible run. I think Chris talked about it yesterday with an autonomous tractor introduction yesterday. The stock had a monster day yesterday, followed through today, although it did hit around the $385 level. Not an all-time high, interestingly enough. All-time high came in around September, at about $390.
We really like Deere a lot, not only with this news about autonomous tractor, but it's also going to be a big beneficiary of the infrastructure law that came into-- that was signed last year. Over time, over years, this stock is going to be a huge beneficiary of that.
So from a technical basis, it's overbought, extremely overbought-- due for a little bit of a pullback. So I wouldn't yet buy it here. Maybe wait for a pullback to $355, $360 or something like that. It's trading around $380 right now. It hit $386 earlier this morning. It's a little hot right now, and I would wait for a pullback.
KATHERINE ROSS: Bob, when I asked about Walt Disney last month, you said that, and I quote, "technically it hasn't performed very well." We're in a new year. What do you think of Disney here? It's down nearly 11% over the past year.
BOB LANG: Yeah, it's having a nice day today here, with the markets-- most of the markets being down. The Dow industrials are up, strong.
It's bounced off of that low from the beginning of December. I think it was one of the two or three worst performers in the Dow in 2021. It's due for a comeback. I know Chris is a big fan favorite of Disney, fundamentally. They have everything going for them. And if things materialize better off of COVID here, probably going to be firing on all cylinders here.
Technically, the stock is still rather broken here, until it reaches and gets passed the $166 level. It's a number that Chris and I were looking at. I think on a recent Daily Rundown, Chris and I had mentioned that once it gets back to that $166 level, which would be about our break-even on the stock, we'd review it and take a look at it again.
The chart looks good. We'll stay with it. If not, then we'll figure out what to do.
KATHERINE ROSS: So Ford, this morning, saw some weak headlines after its December US sales fell 17% from last year. But we also got positive headlines earlier this week with the increased production of the Lightning F-150 and the Mustang Mach-E. What does this tell you, Chris, about where the stock can go this year?
CHRIS VERSACE: I think the stock is going to continue to go higher, and it's one of the ones that we've actually got to dust off our base assumptions for what's happening with it.
I think there's a couple of things at play. One, if you look at the fourth quarter numbers compared to the third quarter numbers-- talking total vehicle sales-- they were up significantly. If we look at some of the other semiconductor industry numbers on a month over month basis, those overall shipments are improving.
That says to us that perhaps the worst of the supply chain is over, and perhaps we need to revisit overall vehicle sales expectations, not just for Ford but perhaps for the entire automotive industry for 2022. First half might be a little stronger than people were first expecting back in September, October, when we were really in the thick of the latest round, if you will, for the automotive chip shortage.
But the underlying story of Ford is really about its transformation, and we're slowly seeing more pieces of that come together. I think, year over year in December, there was a huge increase on a relatively small basis for their EV vehicles. Clearly, that's moving in the right direction. Orders, as you mentioned, of the Ford f-150 simply off the charts. They're announcing other things, as well, during CES that just talk about the further out roadmap for autonomous driving with Intel's Mobileye unit, for example, as well as making other investments for vehicle charging.
So I think what we're seeing here is the tanker that was the old Ford, as they say-- once they this transformation starts to happen, this large tanker ship picks up momentum and it's starting to whip. That's what we're seeing really start to unfold now. And I think, again, expectations need to be appropriately updated for what we're seeing now.
KATHERINE ROSS: All right, well, Bob, moving into Alphabet. It's been a portfolio winner. It's also been a portfolio winner for Lee. It's been their best investment by far. It's up 300% for them. It's also 11% of their portfolio. So Lee knows your favorite saying. What's the play here, Bob?
BOB LANG: Yeah, it's been a strong mover over the past several years. The stock's having a hard day today, but overall I think it's just basically range bound here. And I like the name of Google here, especially over the longer term.
200-day moving average, a couple of points down below at around $2,632 That would be an area we'd need to have hold obviously, and the 100-day moving average, which is crossed today here on January 5.
I do like Google. I think the prospects are good. I just think the growth names are just getting hit these last couple of days with higher interest rates.
I think, really, the area that we'd literally like to see it hold is about $2,700. If you hold at $2,700, we can give it a little bit more room to come down if it needs to. As long as it holds that $2,700 area, we should be in good shape.
KATHERINE ROSS: Next up is Honeywell. When I last asked about this name, Chris, you said that you would hold it. Does that still-- does that still hold now?
CHRIS VERSACE: [LAUGHS]
KATHERINE ROSS: And what can revitalize this company?
CHRIS VERSACE: Yeah, I think that we're going to continue to hold it. There's a number of factors at play. The industrial economy continues to be healthy, although it continues to contend with-- my two favorite words there, Katherine-- supply chains as well as higher input costs. So I think we're going to stick with that aspect of the business.
But the one area that we could start to see-- and again, I apologize for doing this, Katherine-- some lift is going to be on the aerospace facing side of the business as Boeing's business-- we discussed earlier-- really starts to rebound in its production levels go higher. So I'm inclined to stick it out with Honeywell. I will say that the comments that we are receiving about higher input costs could impact the company when it reports, but that might be an opportunity for us to simply nibble further, given our current price target.
KATHERINE ROSS: Moving into Linde Chris, I'm going to stick with you on this one. So Carole S. is asking how to mirror the portfolio when it comes to selling as a smaller investor. If you were to trim Linde or sell it as a full position, should members sell 25% of what you sell, half, or should they just mirror you all exactly?
CHRIS VERSACE: So that's actually a very interesting question, Katherine. And I say that because, in getting ready for today's call, we were obviously reviewing our notes and some things. And Linde is actually at our-- just about at our price target. And it's one of those things that-- given it's a two-rated stock it could very well be a source of funds in the coming days.
So if we were to do that, do I think that we would clear the entire position out? No, I don't think we would. I think the answer to the question, then, is whatever percentage of the total position that we would sell-- that would be the recommendation. So if we sell 25% of the position, sell 25% of yours. If we sell half, sell half. That's the way that we would play it.
KATHERINE ROSS: OK, so Bob, I got a question from David on Mastercard. Following what Chris just said, they're down about 11.6% on this name. What do you recommend? Is it time to sell it or hold, hoping that it can recover?
BOB LANG: Oh, I think we're up on the stock now. It's made a really nice move. We talked about it on the last month call, and I thought that, even though the stock had come down quite a bit, I was pretty constructive, at least on the chart with the stock bouncing back, and it did. From low levels of about $300, $305, it's up about 20%, 24%, since the last month's call. And it's approaching a new all-time high, which is around $395 to $397.
So after it's had a nice run over here, we're a little bit overbought. So certainly taking a little bit of money off the table would not be a bad idea here, especially after this recent run. The stock's already off to a good start in 2022. Three strong days in a row. The stock's up probably about almost 5 and 1/2 percent just in three days. That's a pretty strong move for a big name like Mastercard.
But we still like the name we're going to stick with it. And again, taking some money off the table from time to time is a good thing.
KATHERINE ROSS: Speaking of strong runs, we've got Marvell up next, Chris. It's a top pick at Needham. It's up nearly 90% in the past year. Buy, sell, hold?
CHRIS VERSACE: Hold.
KATHERINE ROSS: All right.
CHRIS VERSACE: Do you want more than that?
KATHERINE ROSS: No, honestly, we've talked about this name quite a bit. So I do actually want to get
into Morgan Stanley because I have a member question from Debbie T, who wants to know whether or not members should be buying this name, Bob.
BOB LANG: Yeah, I think Morgan Stanley had been in a really choppy zone here for the past two months. We talk about, from about the beginning of November, it came down after earnings came out, and it remained in a zone of about $101 to about $95-- let's call it 95 and 1/2-- for about two months, and it broke out yesterday on some strong volume, and it's falling through today.
So I think that the stock has got some lift here. Interest rates are higher. Banks have been doing extremely well. So far in 2022, it's only been three, two and a half days, of course. But names like JP Morgan, Bank of America, Goldman Sachs, Morgan Stanley have been doing very well. Wells Fargo, Citigroup. So no, I agree with that. I think buying Morgan Stanley right here is a good move.
KATHERINE ROSS: Moving into another tech name, Bob, we've got Microsoft up. Kevin H. is wondering if a double bottom or a triple top is forming in this name.
BOB LANG: Could be. These patterns that he talks about-- double top triple top-- you don't see very many triple tops these days. But these patterns need to have follow-through. And if follow-through to the downside sticks, then you've got something to work with. And a double top, obviously, is a bearish pattern, and we have trouble if that happens.
But I think for right now, for me, I would say Microsoft is more so trading in a box. And on the upside, you've got about $350; to the downside, a little bit lower than where we're at right now-- $315 to $317. So it's a pretty sizable box. It's about 1% up or down.
And I think that Microsoft is a good strong quality name. Again, it's just getting hit because a lot of these growth names right now are having trouble with higher interest rates. And money is moving out of these growth names. And Microsoft's certainly one of the top growth names in the NASDAQ and the S&P 500. So I would be holding Microsoft right here and maybe even looking for a chance to nibble on it if it gets down to that $315 level.
KATHERINE ROSS: OK, let's look at NortonLifeLock here. Alan H, Chris, is wondering if it's bottomed in the near term.
CHRIS VERSACE: So since early December, the stock's actually up about 10%. So I don't think it's-- to say it's bottomed near term-- I don't think so. I think the bigger question for us, given all that's going on in the cybersecurity space as growth stocks have gotten hit, is as we look at NortonLifeLock and we have upside to the current price target the question that I'm increasingly asking is, are there other opportunities out there that we might want to capitalize instead of NortonLifeLock?
I know that we have the vast acquisition that's supposed to close mid-year, but when you see companies like Fortinet that are hitting $380 and are now down around $309, we have to take stock of these moves and look at the overall holdings of the portfolio. So I suspect that we'll be taking a hard look again at NortonLifeLock. Perhaps we'll be doing something with it. Perhaps not.
KATHERINE ROSS: All right, I like how vague that is.
KATHERINE ROSS: Next up, Bob, we've got Nucor. It was a no-man's land two months ago. How's it looking now?
BOB LANG: It's in bullish land now, and out of no-man's land. So the stock consolidated. Made some lower highs but higher lows over the past five and a half, six weeks and really bolted out today on some strong volume. It had a decent day yesterday but it's really, really cooking today on January 5.
I'd like the stock to go higher here. It's probably the number one steel producer in the United States. And again, if it keeps moving higher here, we're going to be at an all-time high in a very short order here. The all-time high comes in at around $128. Stocks are just about 2 and 1/2, $3 below that level right now.
Again, good volume, strong relative strength. Money flow has been good. And the chart is well above all the moving averages, and it blasted through the upper Bollinger Band today, which is really bullish for a stock the size of Nucor. Again, if it gets some more follow-through tomorrow and the next day the stock's got some more up to go.
KATHERINE ROSS: Our next name is up over 126% in the past year, and that's Nvidia. And I've got a wonderfully simple question for you, Chris. Terry C. wants to know what you think about this name.
CHRIS VERSACE: I like it. There's not much to like, especially given the recent weakness that we've seen given the rotation, if you will, out of growth names into value names that has hit Nvidia pretty hard. I think a lot of people are waiting to see-- does the AMD-- sorry, does the pending transaction happen where it's getting arm holdings? That's another turbocharger for the name.
But as we've said before, Katherine, it doesn't necessarily need that given what's unfolding in the graphics space, in the data center market, and even the small piece that it has in the automotive market. So I think we continue to like Nvidia. I wouldn't be surprised if the recent weakness in the name gets us to rethink our current two rating.
KATHERINE ROSS: And Bob, you did call the stock would go sideways a little bit. So I'm going to keep this question as wonderfully simple as the first. Buy, sell, or hold?
BOB LANG: I'm going to say a hold right here, on Nvidia.
KATHERINE ROSS: All right, so the next question I've got up for you is about Starbucks, Chris. And this one's interesting because Frank felt discouraged back in November to buy a cup of coffee from Starbucks after the prices went up. If prices continue to increase and we start to see more inflationary action, could that impact the company going forward?
CHRIS VERSACE: So it's actually a great question with Starbucks, because you hear that they're raising their prices 5%, 6%, whatever it might be. The reality is it translates into a very small amount for the average cup of coffee. I think a 5% increase on a $2 cup of coffee, $3 a cup of coffee, what have you-- is relatively benign.
Candidly, I think most folks don't even blink when they do it, particularly because more and more folks are paying either with their credit cards or with their Starbucks app, that they tend to reload on a separate event. So I'm not as concerned about that.
But I can tell you, firsthand, that the drive-thru lines in Starbucks are insane, so much so that I actually had to turn away from it and walk into the store. I just think that's a very positive data point for the company. We continue to like it.
KATHERINE ROSS: OK, let's move into ProShare's Short S&P because I've gotten quite a few questions about this one. All right, one question that I want to ask is from Jeff F. And they're asking if you could address the risk of deviation from expected performance over a one to three month period, Bob.
BOB LANG: Frankly, as far as the SH is concerned, it's a good question. One to three months is rather short-term. And when we've used this tool in the past, the short SH, a couple of tools for the Dow industrials and the NASDAQ-- we use these tools that are pretty much to reduce the volatility in the portfolio. And it's been a good blunting tool for increased volatility.
Look, we're seeing a lot of volatility right now in the past few weeks, in fact. Even since Thanksgiving, volatility has started to pick up in the markets. That's not really evident in some of the indicators that I look at. But the market volatility, when it's moving up and down, is evident in your portfolio if you're just strictly long.
So buying this SH has been a good tool to help us blunt some of this volatility. We're not necessarily trying to make a lot of money on the thing, but over one to three period months, it's going to be a good tool to decrease that for that portfolio volatility.
KATHERINE ROSS: And Chris, Robert C. wanted to know if this requires a different approach from a common stock.
CHRIS VERSACE: Not sure about that. It is an inverse product. It's an inverse ETF. But we're buying it hoping that it goes higher in a negative reaction to the marketplace. I'm not really sure about the nature of the question, Katherine. I'm sorry.
KATHERINE ROSS: OK, well, basically, just they just wanted some guidance. Could you just give some general fundamental guidance on how to manage a position in the name?
CHRIS VERSACE: Well remember, that we're doing this more as a tactical position. This is not a long-term position. It's one that we'll probably have for several weeks, call it-- generally speaking, probably somewhere between one and four or five weeks.
So I think that just being prudent on that and being watchful on that particular position-- because, again, it's not something where we're going to have for extended periods of time. They'll want to pay attention to what we're doing and be nimble the way we are.
KATHERINE ROSS: Let's move in to Skyworks. I've gotten a couple of questions about this one. But the one that really stood out to me, Chris, was from Tom H, who's wondering what risks there are of Apple developing their own chips and how that could impact Skyworks.
CHRIS VERSACE: Yeah, so that's a wonderful, wonderful question. I think we addressed this in one of our notes upon the news, Katherine. And what I was trying to communicate-- and hopefully I can do a better job here-- is that, is there some risk with Apple? I think it's rather small, to be honest with you.
One, Apple is not going to simply design out RF chips at the drop of a hat sometime this year. They're going to have to develop their chips, prove them, get them to work with 5G. That all takes time. So this, I think, will really mirror what we've seen with Qualcomm.
And candidly, that is a wonderful, wonderful example, because not only is Qualcomm now focusing increasingly on the non-Apple players-- i.e. the other 85% of the smartphone market. But they've made some investments and some acquisitions into the IoT and the automotive space. That's exactly what Skyworks has done, and I see that really playing out as well.
You'll notice, if you trace back Qualcomm's stock price when that news happened. Did it get hit? Sure, it did. However, did they continue to deliver, raise their forecasts for 5G, and make these other tactical moves? They have. And we've seen the stock rebound significantly during the December quarter, and I suspect very much the same will happen with Skyworks.
The one difference between those two companies is Skyworks-- I really do wish that they would communicate more about all the good things that are going on in that business the way Qualcomm does. Hopefully they will. They are presenting later this week at the JPMorgan automotive conference during CES. I expect, finally, some good news.
KATHERINE ROSS: OK, one stock that we spoke about yesterday, Bob, was Union Pacific. So I'm going to keep this tight with you. Buy sell, hold, based on the chart that we reviewed yesterday?
BOB LANG: I'd be a buyer of UNP. I like the stock. I liked the chart. And I'd be a buyer.
KATHERINE ROSS: All right, and United Postal Service-- we did see record holiday sales. We talked about this in last month's call. Chris, let's update members with your latest thoughts on this name.
CHRIS VERSACE: So not only did you see record holiday sales. Did digital sales continue to outpace overall sales? Yes, they did. The company also said that it's seeing record returns as a result of those digital sales. I think it continues to pave the way for a positive December quarter report, and upside for the current quarter for UPS.
So I'm inclined to continue to like the name. And if there's any pronounced weakness or a pullback, we would probably be adding to our position.
KATHERINE ROSS: And our final stock for this month is Walmart. Douglas H. is wondering whether there's anything that may lead us to believe that Walmart might break out on the high side, Bob.
BOB LANG: I agree. Yes, I do think it can. It's having a tremendous start to 2022. It's having a great day today. Now some news today, some positive news about buying 3,000 trucks for their home delivery service-- I guess it's a shot at Amazon and some of these other retailers.
But no, as far as the chart's concerned, if we can get above this recent high of about $147, with suppressing some good volume, the stock isn't overbought right now. And if it gets above the $137 mark, especially before earnings come out in February, I think the stock has got going to make a run up to the old highs. There is a double top up there at around $152 and change. But you know it's only about-- currently about four 4 and 1/2 percent off that level right now. There's a lot of momentum in this name right here, and certainly move up to that $150, $152 level-- not out of the question in the short term.
KATHERINE ROSS: With the current levels of Omicron spreading throughout the US, I would be remiss not to mention the variant in the room Chris, can Omicron impacts the markets from a fundamental level?
CHRIS VERSACE: I think it can impact certain aspects of the market from a fundamental level. If we were to think about rising case counts, people testing positive because of the high positivity rate, and people having to self-isolate, then it does stand to reason that there will be certain areas of the economy that are more vulnerable to having people simply not show up to work, whether it's restaurants, retail, that sort of thing. So I wouldn't be surprised if some of those companies issue some more cautious guidance as they report during the December quarter earnings season.
KATHERINE ROSS: And Bob, you talked to us about the Fed at the beginning of the segment. But I want to ask you now. Is there anything from a technical perspective that you are watching in January?
BOB LANG: From a technical basis, I would certainly expect that maybe in the next couple of months, we see a little bit of a pullback. The stock market has been on a tremendous run for the past 12 months. Up 27% on the S&P 500 over the 12 months-- that more than 2% a month. That's a pace that's very difficult to repeat. We've had three strong years in a row-- '19, '20, and '21.
So this year. a little bit of a pullback here wouldn't be out of the question it wouldn't be surprising. It would probably be painful for a lot of people who just continue to think that the market's going to continue to grow like trees to the sky. It just doesn't happen that way.
But I'd say, technically, right now, we're moderately overbought, and I wouldn't be surprised to see a little bit of a pullback here. I don't want to be really short or light coming into earnings. Earnings season is usually a pretty positive time for the markets. But as we head into the Groundhog Day-- we have a Fed meeting at the end of the month. I would say, please be a little bit more cautious here, and I think a little bit of a pullback would not be a bad thing.
KATHERINE ROSS: And Bob, sticking with you for a second, members always want to hear about the bullpen names. You guys have made some recent changes, as I mentioned in the beginning. So Penny T. Specifically wants to know if the names and the bullpen that have been removed are a sell?
BOB LANG: Well, we weren't recommending buys or sells for these things anyway. They were just watch list names. So if somebody had these names and we're no longer following them, well, I guess we just have to draw the conclusion that they would be a sell.
Again, we weren't holding these names in the portfolio for as long as we've been managing it. So we just made some moves to take some names that were off that were off the grid for now. And certainly, we can come back to them, but we do definitely want to keep that bullpen fresh with new names and cycle them through.
KATHERINE ROSS: And Chris, I want to end with you. So James B. is asking, similarly to Penny, why the bullpen clean-up, and specifically why get rid of McCormick, MCK when it keeps going up, and why add CHPT when it's 61% down off of its 52-week high.
CHRIS VERSACE: Sure, so I don't think McCormick was removed from the bullpen. If anything, I think we put it in there to circle back. That was an active move that we did. I'll have to go back and check the bullpen on that.
As far as adding ChargePoint when it sell, that's one of the things that we want to do. That pullback has us actually interested in the name, not only from a fundamental perspective, but from a more value-esque perspective. Clearly, where it was beforehand-- almost like my comments earlier about Fortinet, which is also in the bullpen. Up at $380 for Fortinet-- we want to keep our eye on it so we're ready to potentially pounce when it pulls back. Same idea with ChargePoint. That's why we added it to the bullpen.
KATHERINE ROSS: All right, and we'll end there. Thank you, members, for joining us to kick off our January monthly call. I've loved being able to join you guys for the new year. And I do love when we can be in person together, so maybe next month.
As always, members please continue to send in your questions to email@example.com. We are so grateful for you guys. And I am so happy to kick off 2022 alongside Bob and Chris and you, members. So thank you for joining, and we thank you from the entire team-- from production to us here-- for joining us today. We'll see you next month.