KATHERINE ROSS: Welcome to our Action Alerts Plus monthly call for April. I'm Katherine Ross, And I'm joined by Bob Lang and Chris Versace. Before we review every holding within the portfolio, let's get a read on how Bob and Chris are currently approaching the market. Chris, I want to start with you here. On a day where the market is currently taking a beating, what's one catalyst that is driving your approach to the portfolio?
CHRIS VERSACE: Well, Katherine, we've been really concerned about the expectations for earnings. Obviously, they haven't moved at all in the first half of the year despite everything that we've seen. So as we've been sharing with members in our notes and in the Daily Rundown, we're trying to take a much more cautious approach to the market here, being more individual stock pickers, using opportunities where and when we can rather than being folks who are simply buying the market. So more prudent behavior ahead, Katherine.
KATHERINE ROSS: Bob, you tweeted yesterday the 4,600 on the S&P was confirmed as a top. So what do members need to do based off of that?
BOB LANG: Yeah, so the 4,600 level, we were having trouble getting through that late last week in the early this week on Monday. And we came down pretty hard yesterday and are confirming that move down today. If we end up back into a trading range, which was pretty much where we were at for a good part of 2021, between 4,200 on the S&P 500 and 4,600, there's some room further south from where we're at right now-- I mean, perhaps a 50% retracement and take you down to about 4,400 on the S&P 500.
We're sitting at about 4,470 or 4,475 right now. So that would be another 1.5% to 2%, Katherine, on the downside. But again, this trading range is right back into play. It was looking like we were going to have a little bit of a breakout last week with the move above 4,600-- not to be right now. So we'll wait and see what happens. But I certainly think that a little bit more downside is in store for us.
KATHERINE ROSS: So what do members need to do, then, based off of that?
BOB LANG: So being about 1.5% to 1.75% lower is where I see the market support at about 4,400, possibly even a little bit lower than that 4,390 or 4,385. I think members need to just step back a little bit, take it easy, don't panic right now. Certainly, you don't want to be selling into a market like this.
And actually, looking at some opportunities on some stocks that have come down into a buy zone-- we've had a couple of additions the last couple of weeks. And I would say use these dips as opportunities to jump in there and add more exposure there. Because when the markets start lighting up again, like they did about 3, 3 and 1/2 weeks ago, you want to be there. You want to be adding these names when when the pressure is on and the selling is at its highest point.
KATHERINE ROSS: And now, it's time to go stock by stock starting with one of our newest positions and, unfortunately, one position that is really taking a beating today to reuse that word. Chris, that would be ChargePoint. Based off of that, Bob C is wondering, what kind of moat ChargePoint currently has around its business.
CHRIS VERSACE: The pressure on ChargePoint today is apparently the Senator from West Virginia was talking about how he can't simply get behind EV rollout. Remember, too, that West Virginia's a big coal state-- I think he's playing more politics than anything else, Katherine. We take a look at the continued adoption of EVs-- there's going to be a pain point at some point, because these things have to be charged, plain and simple.
So we do like the story long term on ChargePoint. In terms of a competitive moat, there's only three or four real players out there. ChargePoint is arguably the largest and increasingly the best backed. And it's coming out with a number of strategic partnerships, including the latest one with Toyota, but others as well.
We just think that they're extremely well positioned, best price, best scale opportunity. That's why we added them to the portfolio when we did.
KATHERINE ROSS: And, Bob, Ryan G. was asking why you didn't enter ChargePoint around the $11.70 support level. And what led to entering a building on the position around $17?
BOB LANG: Yeah, so we're not picking bottoms or tops here. And certainly, we couldn't tell at the time when the stock went to $11.70 at the end of February that was going to be the bottom. But we certainly could have waited for a little bit of confirmation, which is what I like to do as a technician.
I like to identify patterns and wait for that confirmation to hit before we start stepping into the name. So I wanted to wait and see if there was a higher high and higher low on the chart. We got that. We entered it a little bit early at $17-- it did come down a couple of days later about $14, and nailed that 50-day moving average to a T.
Now, more recently, the stock on Monday and Tuesday hit a ceiling at the 200-day moving average. And we talked about that, Katherine, about how this was probably going to be some stiff resistance. And sure enough, it fell off yesterday and it's coming down a little bit today. So going forward, I think still with a pattern of higher lows in place and higher highs, this is a stock that if you want to start adding it, buying on the dips is a great spot to get into ChargePoint.
KATHERINE ROSS: So buying today would be what you recommend, correct?
BOB LANG: Absolutely. I say even today at $17 and change-- it's only a little bit higher than where we were. Again, remember, this is a stock that's going to be pretty volatile, right? The chart shows a lot of volatility.
So you're going to have to stomach some of these moves like today we're having a down 10% move. We've had big up-moves off of this too. In fact, Katherine, the stock moved down 10% two days after we got into it last time around. Then it ran up 13% the following day. So you have to be able to stomach these big, volatile moves.
KATHERINE ROSS: Let's go to United Rentals. Chris, you noted that you'll be turning to earnings reports from various construction companies to understand the scope of URI's business. What do you want to hear from these companies and how could that impact you URI's stock?
CHRIS VERSACE: The reason we added URI is it's simply the largest equipment rental company period, poised to benefit from not only the seasonal uptick in construction, but also the eventual acceleration tied to the infrastructure spending bill. So when we listen to what Caterpillar and others have to say when they report their earnings, what is their outlook not just for the second quarter, but when do they really see the infrastructure bill starting to really, really kick in?
So we're just looking for confirmation points on United Rentals. And, candidly, Katherine, with the shares pulling back here, it is one that we are eyeing scaling into.
KATHERINE ROSS: And since URI has lost some of its momentum, Bob, should members look at this as a buying opportunity?
BOB LANG: Yeah, this recent pullback the last seven days has really given us a great opportunity to add some more shares here. And what you like to see is when a stock is rising, as it was at the beginning part of March to the middle, is you want to see increasing volume, as you see big institutions starting to pile into the name.
And when it retreats, like it has past seven, eight days, you want to see the volume starting to die down a little bit. That's kind of what we're seeing here. Even though the price action has been pretty bold and pretty strong here for the last few days, we did have a good run-up from about, let's call it, $290 up to about close to $370. That's a big run for URI in about less than a month.
So it's pulled back a little bit-- about 60% of that move. If we have the price start settling down here, I think this is a great opportunity to add some more URI.
KATHERINE ROSS: The apple of Action Alerts Plus' eye is, well, Apple. So, Chris, all you hear about this name is, own it, don't trade it. Should I continue to pay attention to the stock if I'm already in it?
CHRIS VERSACE: Yeah, absolutely you should. The company is a dividend payer. Smartphones are continuing to go. We talked about the shift recently from smaller iPhone SEs to the larger iPhone 13 Pro and Pro Max models, which was confirmed earlier today. So yeah, absolutely you want to stay ahead of that.
And remember too, Katherine, that they just announced, I believe it's June 6 is the big WWDC meeting where Apple unveils all the latest software it's bringing into its devices. That usually tips their hand for what's coming not only in the second half of the year, but future products as well. What we'll be listening is going to be where are we on that arguably the worst kept secret out in the Valley, the Apple Car, Project Titan.
But also, what's the real timing on AR VR? And how do they plan to use that to get into the metaverse?
KATHERINE ROSS: Bob, what about the members who might not have built out their positions in this name yet? Does Apple's chart look good enough to nibble on?
BOB LANG: Chart shows Apple's in a bit of a no man's land here. It was really running hard on some big volume from the 14th and 15th of March up until recently, be last Thursday. But it's kind of stalled here.
I was just looking at the chart this morning, Katherine, and it's kind of intriguing here that if we do get a much more substantial pullback in Apple, let's call it down to $157 to $159, and it bounces off of there, which would be a little bit above the 200-day moving average-- obviously, with the stock being $171 right now, that would be about a 10% move down.
If we did get that and we turn right back up again, we have a bullish inverse head and shoulders pattern, which is a pretty reliable pattern that we've seen through the years that is quite bullish. So we'd have a left shoulder about $157, the head down to about $150, and the right shoulder about $157 if we get that far.
That would be another excellent buying opportunity on a dip. So if we do get that opportunity there, Chris and I'll be talking again, possibly even adding some more shares of Apple, which hasn't been done for quite some time. But it would create a nice technical condition and a great opportunity.
KATHERINE ROSS: Let's go to AbbVie. And, Bob, I want to stick with you here. The chart of AbbVie does look impressive over the past year. Is it time for members to take some off the table? Or is this a name to put to the side for right now?
CHRIS VERSACE: Oh, yeah, we love AbbVie. It's a great dividend payer. The chart of AbbVie, there's just nothing wrong with this one. It's got to be one of the top five charts out there in the universe of charts. And it's been overbought for, gosh, a good almost 3 and 1/2 weeks now.
It's been overbought on the RSI. But let's remember something, overbought doesn't mean sell. And overbought doesn't mean you need to be bearish on a particular name. So we've been taking some profits along the way. It's a smaller position now than it has been in the past. I think we took profits on it twice already since we took over in October.
Yeah, I would suggest members start taking profits on AbbVie. You don't really want to get rid of the whole entire position. Keep some on. Again, it's a good dividend payer. But yeah, this is a good spot to take some money off the table.
KATHERINE ROSS: Our next talk is Airbnb. Now, Chris, Airbnb was initiated at $191 back in November. It's now down to $170. Is there anything on the horizon that can give the stock a bit of a boost?
CHRIS VERSACE: Yes. I would say it's going to be earnings from a wide variety of companies during the March quarter earnings season. I was taking a look at what's on deck, and we've got a number of airlines coming in the next two weeks. That'll give us some comfort. Also, too, remember we're going to continue to monitor the TSA data, which continues to be off the chart, and even other indicators like Mastercard's March spending survey came out up big year-over-year-- I think 8.4% if I remember, almost 19% compared to 2019.
And they particularly called out airlines, lodging, and travel, all of which is very, very good for Airbnb shares. So I suspect we'll see more of that follow-through from the airlines and other hospitality, travel-related companies during the March quarter earnings season.
KATHERINE ROSS: As of yesterday, Bob, this stock was above the 200-day moving average but below the 100-day. So what do the technicals say?
BOB LANG: Yeah, so it's bouncing down around the 200-day moving average right now, Katherine. Good call on that. It's kind of a rangebound stock right now. Again, it's kind of in a no man's land here. However, this 200-day moving average should add some good support. And if anybody would like to add some more shares, this would be a great spot to get in there-- anywhere between $150 to $165 is a good range to add Airbnb.
KATHERINE ROSS: Looking at Applied Materials, this is a name that you added to your position yesterday on the pullback that we saw then. There is a little bit more of a pullback here, Bob. You said in your chart analysis that you expect a bullish move. What will that move look like?
BOB LANG: That move will take us through $125, and then up to $130, and then we'll see where it goes from there. Of course, the 200-day moving average comes in a bit higher than that-- about $138, $139, but we're approaching some deep oversold levels here on Applied Materials. So this is a good strong name. It's a good high quality company.
I expect this $118 to $121 level to hold here. We're kind of flirting with that area today-- of course, the market being weak. But I expect that level to hold and possibly get back up to the $130s before too long.
KATHERINE ROSS: Chris, in a portfolio of 29 stocks, there are quite a bit of semis. So is AMAT one of the must-owns?
CHRIS VERSACE: Oh, absolutely it is. We keep hearing about chip shortages over the last couple of quarters. They're looking to persist. We're hearing about onshoring.
And that doesn't even get to the drivers that will continue to require more chips. We've written about them-- whether it's 5G, AR, VR, the connected car, all the way down to the eventual metaverse, and let's not forget continuing growth market in the data center cloud market. So you have to own the company that is going to add additional capacity, no question about it.
Key thing to watch is going to be next week when Taiwan Semiconductor reports. Remember, they're the biggest foundry. They are the one that really shot the cannon, if you will, on rising capital spending for 2022-2023. I expect that they will be confirming that outlook next week-- very positive for Applied.
KATHERINE ROSS: Speaking of semis, our next name is AMD. I want to pair this kind of with the AMAT question I just asked you, Chris. Because Sheldon K. Wants to know if you'd recommend AMD over Nvidia or vice versa.
CHRIS VERSACE: So that's a tricky question, Katherine. Because with the acquisition of Xilinx, they
really don't overlap quite as much as one might think, even though AMD is targeting the data center market. So I'm going to do something like Solem would say and split the baby.
I would say if you're going to allocate 4% to one of those positions, don't do it. Split it in half and own both. You'll be better protected going ahead.
KATHERINE ROSS: Bob, AMD's 52-week high of $164 a share happened back in November. Since then, the stock has struggled. What does your analysis say about where the stock moves next?
BOB LANG: It pretty much has made now a quadruple bottom around the $99 to $100, $101 level. And we're right there again. And I think that this is a really solid level to add some more shares. We jumped in a little bit yesterday and added a little bit earlier.
But I think that this $100 level is real solid. And it's got a series of lower highs than in the chart. We need to get past that. We need to get past $124, $125, which we were just there five, six days ago, to get some momentum going. But certainly, I think this area right here is a great spot to add AMD. I like it.
KATHERINE ROSS: We've got Marvell up next. It's taken a hit in the past five days, down roughly 10%, Chris. What keeps you in the stock?
CHRIS VERSACE: Oh, the continued buildout in data center, without a doubt its close relationship with Meta as it really targets that, but also the other end markets as well. Let's not discount their position in auto and other markets. So again, the more that we continue to see the buildout in data center, the more we want to be owning a bunch of these different names.
Having said that, there is no slowdown in the amount of data that we're consuming, the amount of data that we are creating. That is why we're seeing data construction continue to grow over the next several years. That means they need more racks, and other servers, and equipment. Therefore, more chip demand. It is going to continue.
Remember what Mark Zuckerberg said, although I don't like to quote him-- remember what he said that our data networks are not where they need to be to realize the true power of the metaverse in the coming years. We're going to see a continued upgrade cycle-- very good for data center spend, very good for Marvell.
KATHERINE ROSS: Bob, is there any action that you'd recommend to members based on the chart?
BOB LANG: I would say hold here and look for a spot to add the stock in the low-$60s. We're about $65 now, so maybe a few dollars lower would be a good place to start adding. Had a really tough go of it at the middle part of March, we got above that 100-day moving average, which looked like it was going to get some momentum there and it just stalled. And it's pulled back down about $65.
So $60 to $62 would probably be a good spot to add. As of right now, just hold your shares right here.
KATHERINE ROSS: Another stock that's seeing a bit of a pullback today is Nvidia. So, Bob, how does the chart of Nvidia look? And would you add to the position here?
BOB LANG: Yeah. So, again, this is another one that, much like Marvell, had made a good run above the 100-day moving average, and it pulled down the last few days, Katherine. And now today, it's breaking the 200-day moving average. So again, these volatile days put these stocks' backs against the wall.
But these are widely-held names. And so when you get big selling like we've had here right now, we tend to get big, huge price moves up and down. So I think this area down here around the 200-day moving average is a good spot to add some more shares. The stock is not totally oversold here yet, so it's still sort of in a bit of a no man's land right here.
But if the stock got down to, say, $210, $215, I'd be scooping shares up right there. So we're currently at $244, $245-- again, kind of in a no man's land, a spot that nobody really wants to add, nobody really wants to sell. So we'll see how this resolves and whether it goes up or down.
KATHERINE ROSS: The most asked about AAP position this month was by far Skyworks. Steve C. specifically is wondering why Action Alerts Plus is still in Skyworks, Chris.
CHRIS VERSACE: Because the catalyst and the thesis remain intact despite the pressure on the shares, plain and simple. No slowdown in the rollout of 5G, we're going to continue to see that ramp throughout the year in terms of the number of smartphones, we're going to see larger smartphones as well, we're going to see even more devices getting connected to the 5G networks.
All of that is good for Skyworks. Look, I know it's been a frustrating position. Believe me, I it's been a frustrating position. The fact that the company is extremely quiet doesn't help at all. However, I've covered this space since 2004-- I know how these stocks behave.
I know that as we see more smartphones come into the marketplace in the back half of the year, seasonally stronger, we're going to see strength in the name. Would we sell it here? No, because we would be absolutely cashing out at possibly the worst possible time. Rather, we're just going to lump it, and continue to hold, and let the thesis play out. Again, I know it's frustrating. We have to give it time.
KATHERINE ROSS: And, Chris, it sounds like the fundamental conviction that you had back in January still holds, correct?
CHRIS VERSACE: Absolutely, Katherine.
KATHERINE ROSS: Bob, the technicals, though-- Skyworks is well below its 200-day and it's down over 31% in the past year. Members want to know why AAP still holds on to the same if the technicals aren't looking good.
BOB LANG: Well, yeah, the stock recently hit a brick wall at about $140. And frankly, you're right-- the
members are right, the technicals have been pretty weak over here. But what I noticed recently was that it's kind of constructed a nice little bottom here at about $120, $119, which is quite a bit lower, but a little bit lower than it is right now.
And that should hold pretty firmly. We had some good volume down over there. And I wanted to kind of wait and see if Skyworks could get itself back into a trading range. And even trading range is not all that bad, even if it's a pretty wide trading range-- say, between $120 and $140.
So we know that there's some support in place, even if there is some resistance up there at $140. We can travel between those areas for a little while. As long as the stock is going down, that would be a huge relief there. But let's see what happens here. I do think that we're going to get a good bounce back in this name.
And it is pretty oversold here right now. But volume wise, it hasn't been really anything to scream about. We haven't seen a lot of big institutions distributing the stock for the past couple of weeks. So I think if the markets turn around again, we'll get a good snap back up on Skyworks.
One of the few names in the portfolio that is really holding onto the green so far today is AMN. Chris, there hasn't really been a whole lot of news though since the CEO announced her retirement. So what's next for the stock?
CHRIS VERSACE: I think more of the same as what's next, Katherine. The fundamental thesis we have is aging the population, no slowdown in that, nursing shortage, as well as overall health care shortage-- no quick fix for that. So it's going to be more of the same, I'm afraid.
We can continue to monitor the JOLTS report. That'll give us a good indication of how many openings there are. And AMN is obviously going to try and fill those. But by and large, this is not a stock that we track a lot of weekly, monthly, quarterly data points. It's really just monitoring the continued health care shortage more so than anything else.
KATHERINE ROSS: Well, Bob, based off of that, John N. is asking if this is an opportunity to open a position in AMN.
BOB LANG: Love the opportunity here in AMN here, actually, John. And I think anywhere between $95 and $100, currently about $101 right now, even right now, I'd still dip a toe in there and start buying some of these shares. I love this stock. I love the chart potential here.
It's not doing much for us right now. It's pretty much been in a trading range for the past two, 2 and 1/2 months-- let's call it $91 up to about $108. It did hit a ceiling a couple of times about $107, $108 and rejected over there. But I do think that over time here, we build a higher low here, which we seem to be doing today, even in a tough market, the stock is up.
We'll get some good upside here. And I think, finally, the next time it gets above the $107, $108 level, John, and everybody, I think this is the stock that's going to move up towards that old high, which is coming in at around $125, $126. Won't happen overnight, but I think it's certainly an area where we could find some room.
KATHERINE ROSS: Our next stock is Amazon. And, Chris, under Project Cooper-- I'm not sure I said that right-- but Amazon is planning to launch over 3,000 satellites into low orbit Earth, which would provide high speed internet to anywhere in the world. There are a lot of details, but Amazon's a large company. Do you think that this is a bullish move?
CHRIS VERSACE: I think there's shoring up some of the offerings that they have kind of under the hood, Katherine. When we step back and compare it against what they are in terms of a retail sales company or even Amazon Web Services, again, it's a small probably what I would call skunk works opportunity here-- wild card, upside, you can call it anything you want like that.
Do I think it drives the needle on Amazon this year, next year? Probably not. So I would tend to focus on the other two core businesses, third if you want to add in the advertising business as well. And right now, they all seem to be going rather well.
KATHERINE ROSS: All right, Bob, I've got a double whammy for you. One, what's a good entry level for Amazon? And should members hold off on adding or entering the stock until after the stock split?
BOB LANG: The stock split isn't going to really make much of a dent here. Remember, it's just cutting a bigger piece of pie into smaller pieces. But I do think right now would be a good entry point. We just took a drop below the 20-day moving average today.
The stock was really super constructive last week, week and a half, made him move up towards $3,400, got rejected up there. But I think this minor pullback yesterday and today is creating a nice little entry point. And as far as, again, as far as split's concern, whether you buy it today or a month after the split, it won't really make much of a difference.
However, I do say that from a psychological standpoint, Katherine, that as we come up to that split moment, which is towards the end of May, you're going to get a lot of people piling into the name. So if you're buying it on the dip here today, you're going to get some demand coming into that stock just because of the stock split. Again, it doesn't create any value, but it does create a mindset that people wanting to get into the stock at a lower price.
KATHERINE ROSS: And another stock in the portfolio that is also performing a stock split is Alphabet. Based off of Bob's response, Chris, I want to get your take now-- should members buy Alphabet's stock before or after the stock split?
CHRIS VERSACE: The reason to buy it before the stock split would only be because it has to stock split, there's the opportunity for Alphabet to be added, perhaps, to the Dow Jones Industrial average, which would map a lot of funds into it. So we could see a pickup in that. But if you've got a full weighted position, I wouldn't chase it, Katherine.
KATHERINE ROSS: Let's go to Boeing now. Dave K. is wanting to know, Bob, why AAP still owns Boeing when the technicals don't look great.
BOB LANG: Yeah, they haven't looked great for quite a while. And we did get rejected at the 200-day moving average back in the middle of February, Katherine. And listen, we're oversold right now. And Dave's right-- the technicals don't look very good right here.
We're waiting for a little bit of a bounce here and make a decision on what we want to do with the name. But there are some catalysts there. We've had some good news-- hit the stock, but then the sellers come in and bring the stock right back down again. It's been a tough name for a while now, especially since the accidents a couple of years ago.
But I think as we wait for an opportunity to make a move up towards the 50-day moving average, the 20-day moving average, we're going to make a decision on Boeing. But no, certainly Dave's right-- the chart doesn't look very, very good right here.
KATHERINE ROSS: All right, Chris, let's go to you on this one. What keeps you guys in Boeing? And what's a good entry point?
CHRIS VERSACE: So with Boeing, you have to remember that we were really concerned about when we
would start to see the rollback of the 737 Max. We're starting to see that. We're starting to see China come back in, or China customers come back in, I should say, and make orders for those as well as other aircraft.
So when we look at it from a fundamental perspective, we do see rising production levels, improving margins, and incrementally better EPS. So from that perspective, we do like it. But again, I have to kind of reiterate what Bob was saying-- that it has been a tough slug.
And I think that when we sit back, we can't think about these positions in a vacuum. We always have to examine what other opportunities are out there. And if Bob and I confer and we agree that, hey, this is an uphill battle, there's a lot better opportunities given the market pullback, then we're going to make a move to do the right thing in terms of Boeing shares for the members. So I would caution, saying, hey, this is a great point to buy when we're kind of revisiting the position ourselves, Katherine.
KATHERINE ROSS: OK, let's go to Chipotle Mexican Grill. Now, this is a name where it's below its initiation price for you guys. What kind of catalyst, Chris, are you eyeing to push the stock higher?
CHRIS VERSACE: We continue to get really good data, Katherine. Like I said earlier about the Mastercard SpendingPulse-- data for March, retail sales for restaurants have been off the charts. I think what we're seeing is a little bit of a headwind. There's a lot of folks that are nervous about inflationary pressures, but Chipotle has been able to pass through price increases. They continue to flex the limited time menu offering at premium prices.
And by all accounts, it continues to work. So I think the catalyst here is going to be the company reporting earnings that are a little better than feared, better than expected. Stock will trade up on that, and then the company continuing to talk about its footprint expansion. That'll all be when they report their March quarter earnings.
KATHERINE ROSS: And, Bob, how do the technicals look? Is there an opportunity to add to the position on weakness?
BOB LANG: Yeah. Actually, I think so. And the stock had a nice little run off this low in March. It pulled off from about $1,250 to $1,270, recently up to about $1,600, and ran a little bit of trouble up there, and then today, of course, gapped down right at 100-day moving average and it is flirting with that 20-day moving average.
Of course, the market's weak again. But Chipotle, like many of these other names, should not be spared from the selling. But I do think that this pullback is a good opportunity for our subscribers to get in here and take advantage of this dip. It's about $1,535 right now. I would say, Katherine, anywhere from here down to $1,505 would be a good spot to add Chipotle.
KATHERINE ROSS: Our next name is Costco. Bob, I want to start with you on this one. Is it time to take some Costco or Walmart off the table if members have filled their positions in either or both?
BOB LANG: Yes. Costco, we've recently taken some money off the table and trimmed it a little bit. But what a horse-- this stock has just been amazing. It ran from the end of February, let's call it around $465 or $464 all the way up to about $580 where it is right now-- so just enormous run, monster run.
Relative strength is fantastic. It's overbought right now. Volume levels have been real good. They've been very bullish. Money flow is good. Nothing wrong with this chart at all.
But you know what? When you reach a new all-time high, like we did just a few days ago, you got to be prudent and take some money off the table. So yes, I would suggest take some money off the table here. Wait for it to pull in a little bit, maybe comes back to the 20-day moving average, which comes in at about $557, $558, and then we add a little bit more.
KATHERINE ROSS: Chris, is Costco a good hedge against the inflationary pressures that consumers might be facing?
CHRIS VERSACE: 100%, Katherine. Costco is one of the places that people go to to, as I like to say, stretch the disposable spending dollars that they do have. And I agree 100% with what Bob said-- we trimmed back recently, we boosted our price target. Others have come around and boosted their price targets after us, some a little higher than the 600 we have. But it is one of the two or three companies, Walmart, Amazon being the other two, that is poised to really, really benefit for shoppers that are concerned about inflationary pressures.
KATHERINE ROSS: Speaking of Walmart, let's dive into that one. Based off of the question I just asked you for Costco, I'm wondering if Walmart has a similar story, which it sounds like it does. And if I forced you to only keep one of these names in the portfolio, which one would you pick, Chris?
CHRIS VERSACE: At the current price level, I would probably say Walmart.
KATHERINE ROSS: All right, let's go to Cisco. Cisco, it's hard to kind of find an angle with this one. I'm wondering, Chris, can you just tell me what keeps you in the stock?
CHRIS VERSACE: Continued build-out of networks, like we talked about earlier, plus the continued pain point that is cybersecurity. Remember, even as these networks continue to grow, as we have more connected devices, it means more vulnerable attack points for bad actors. That's going to continue to drive cybersecurity spending, continue to be beneficial for Cisco, particularly as security moves more into the network.
KATHERINE ROSS: Bob, is Cisco rangebound? And if so, how should members be approaching this name?
BOB LANG: You nailed it, Katherine. Rangebound stock between $53 and $56. And we're kind of the lower end of the range right now. So if you're a subscriber and you're a little bit light on Cisco or you want to add some more stock, this would probably be a good spot to get in a low risk entry point at the lower end of the range.
KATHERINE ROSS: Let's go to Deere. Members have noted that Deere is the primary ag play for AAP. How will that impact portfolio if we continue to see shortages across commodities, Chris?
CHRIS VERSACE: If we continue to see shortage of commodities, that means the prices will continue to move higher. Farmer income will be higher. We'll continue to see that replacement cycle that we talk about, particularly with these rising fertilizer costs. That's going to spur demand for precision ag, which is relatively a premium product across the industry, but also right in the wheelhouse for Deere.
KATHERINE ROSS: Our next stock is Disney. Plain and simple, Chris, is Disney buy?
CHRIS VERSACE: Yes. Plain and simple, yes, Katherine.
KATHERINE ROSS: OK, Bob, Disney's chart is looking a little less than magical. So how are you approaching the House of Mouse?
BOB LANG: Yeah, again, it's at the lower end of a range here. And we think that this stock is pretty much stuck between a range of about $127, let's call it, on the low side to the high side about $141, $142. So we're at the low end of that range right now.
And like I said, Chris likes this name a lot. I agree with him wholeheartedly about the prospects for Disney going forward. The technicals in the chart are not pretty right now. But I think, again, at the lower end of the range, it's a low risk entry point, much like Cisco was, and I'd be adding some Disney right here.
KATHERINE ROSS: Another name that you like, Chris, is Ford, which is our next stock. Their first quarter sales did fall and there have been a slew of production challenges. So members like Aaron are wondering how they should be approaching the stock.
CHRIS VERSACE: Well, OK, so they continue to suffer from the same thing that is going on in the industry-- the chip shortage, again, another reason why we're bullish on Applied Materials. We have to be, and I know this is, again, getting back to my comment on Skyworks, frustrating. But I know that patience is called for here.
When we step back and look at what Ford is doing outside of actual production, planning to break out the gas vehicles versus the EVs, making investments in battery technology, investing in charging and other things-- they are laying the groundwork for the continued transformation that they talk about. Now, obviously, the Russian Ukraine war, the renewed slowdown in China due to lockdowns-- that's all going to weigh on supply chains. That's all going to slow things down a little bit.
As we get past that, the continued adoption of EVs will probably accelerate-- again, pent-up demand because we know people want cars. I would just, again, be patient here with Ford. And if you haven't had any Ford in your portfolio, if you've been standing on the sidelines, at the $15 level, which we're very close to, it's almost, dare I say it, a no-brainer.
KATHERINE ROSS: Bob, what does the chart tell you about that and where it stands in its transformation?
BOB LANG: Yeah. So we did take some money off the table when it was above $20. And now, this seems like such a long time ago when we did that. But it was just a couple of months ago.
The chart shows that the stock is probably going to get a bottom here around a $15, slightly lower than that, perhaps, if markets remain weak. I can see the stock coming in at around the $1,480, $1,490 level at the lowest point and getting a nice bounce back. But relative strength is poor right now.
We did have some sharper money flow out of the name back in February after the stock reported fourth quarter earnings. They're going to be coming out pretty soon and reporting their earnings later on this month. But I still think Ford is a good, strong name, good high quality name.
And again, just getting beaten up with all the rest of the industrial names right now. And General Motors is another one that's really not getting any more love than Ford is. But I think Ford right here, about $1,490 to $15 would be a good spot to add some more shares.
KATHERINE ROSS: Our next stock is Honeywell. This is a name that we really haven't discussed very much outside of actually last month's call. So, Chris, what's your approach here?
CHRIS VERSACE: So with Honeywell, one of the things that we're concerned about is the inflationary pressures, component shortages. And it's one that, internally, we've been, I would say, not as thrilled to own as maybe other times in the past have been because of that.
We've trimmed the position out a little bit in the past. Probably, this is one of those names that if we do see the duration of the war go on much longer than we expect, if we see lockdowns in China continue to persist, those pressures are going to really accelerate on Honeywell's margins. We would probably look to exit the position before adding to it, just to be very candid with members. That's kind of where we're thinking about it right now.
KATHERINE ROSS: Bob, based off of Chris' answer, can you explain that from the technical standpoint?
BOB LANG: Yeah. So the stock broke down in the beginning of February, and some pretty heavy turnover. And we saw a lot of that volume concentrated between the $190 and $199 level. So $194, $195 is kind of an area where I told Chris that on a technical basis recently, I said, look, the stock is probably going to bounce back to about that area from the low end in late February.
And sure enough, here we are-- $194. So yeah, so I agree with Chris. He nailed it. And he said we're going to be taking a look at this name again and, perhaps, look to trim it down the road if not remove it fully from the portfolio. But yeah, this name has got quite a bit of resistance up ahead here, but we'll be watching it the next couple of weeks.
KATHERINE ROSS: Morgan Stanley is our next stock. It's facing a bit of pressure today. We spoke about it yesterday, specifically about the IPO market. And I'm wondering with headwinds and, perhaps, potential tailwinds too, what could the stock face? Shawn specifically, Chris, wanted to know about rising interest rates.
CHRIS VERSACE: So with Morgan Stanley, the real headwind here has been, as we discussed recently, the souring, if you will, IPO market, M&A market. And it's really fallen significantly year-over-year in the first quarter-- a lot of pressure. Also as we discussed recently, we are seeing a lot of refiling, new filing, and amendment activity on the IPO front.
I do think too that companies are probably seeing the weakness in the share price as a result of the market. And they're probably revisiting M&A. We do tend to see a fair amount of smaller M&A deals being announced day to day. So I do think that that investment banking business at Morgan Stanley is poised to turn higher most likely, if not the second quarter, more likely than not in the second half of the year.
Just going to add to the bullish reason why we like the continued transformation over at the asset management business towards fixed fee. The more we see that, the greater the multipole expansion is likely to be. In terms of interest rates, Katherine, we're going to get probably, what, 250 bips or something like that over the next year or so.
I don't think it's really going to impact Morgan Stanley's business quite as much. Remember, they're not like other banks or they're doing a lot of loan activity or mortgage activity. So I don't think it'll be quite the drag that some people are thinking it perhaps could be.
KATHERINE ROSS: All right, Bob, give me the technical reason why you continue to stay bullish on this name despite the pressure that it's faced.
BOB LANG: Well, a couple of reasons here, Katherine. Bottom of the range right now. We're right at the March lows, and right at the March lows last time around we got pretty oversold on the relative strength. And we had a powerful rally that took the stock from about $81, $82 up to about $95, $96. And we got rejected there.
We didn't quite get back to the 200-day moving average, which is what I was hoping for. But still, that was a good spot to for some people to cut the stock loose a little bit. And more recently with this rise in interest rates, the stock has been weak. And we're right back down to that $82, $83 range. I think it's going to be an excellent spot to add a good, high quality company.
Stock is just about oversold enough to look for a nice sizable bounce in the name. Earnings coming out in a couple of weeks, and we think that bluer skies coming up for Morgan Stanley. Good money flow the last couple of last couple of months even with the price action being poor. So we like Morgan Stanley right here.
KATHERINE ROSS: Microsoft is off by about 4% right now. In the weekly roundup, Chris, you emphasized your belief that cloud is a secular growth trend. I'm wondering if this is a wait and see stock for members as this thesis continues to play out.
CHRIS VERSACE: Wait and see? No, I don't think so, Katherine. When we think about the disruption in the market that we're seeing, particularly, again, all this talk about inflationary pressures-- what is Microsoft? It's a software company. It, along with, candidly, Google should see very little pressure on that front. If anything, I think the pullback in the stocks could be having people think that there will be some pressure. And I think that they'll be surprised on the upside when those companies report.
KATHERINE ROSS: Bob, the stock before today had quietly been making steps up to be near its 52-week high. What does the chart tell you about investor sentiment in this name?
BOB LANG: Yeah. So the last couple of weeks, we made a run up towards that 100-day moving average, Katherine, and we got rejected there for about three or four days in a row. And now today, we gapped down and have some pretty negative price action here. Volume levels, not so bad today, which is interesting, because you would think that a big cap name like this, people would be exiting in a much bigger way.
But it's not happening today. So I'm curious to see where we finish at the end of the day. But still, seriously, Microsoft is a good, strong, high quality name. The chart is not horrible.
It certainly has had better days, like at the end of November. We do have a double top there in November, December. That's a flash of red flag back then. But now I think we get a move over $315, Katherine, and could easily get there, power through there within a couple of days if the market turns back around to the upside.
We can get some nice movement up here for Microsoft before earnings come out. And who knows, if they come out with a good earnings number, we get a move back to back to $330, $335, no problem.
KATHERINE ROSS: I want to check in on NortonLifeLock here. Last week, Morgan Stanley did downgrade the name. It's faced headwinds with its acquisition of Avast, all of which we've spoken about extensively. But, Chris, how is AAP going to approach this name now?
CHRIS VERSACE: Two-rated stock, dead money, I think, is the way we described it, Katherine. It's a
position that we're looking to work our way out on some strength as the shares kind of digest and move higher on cyberattack news. But ultimately, it's a name that we're going to continue to work our way out of. It's one of those ones that it's on the cusp of being downgraded to a three, a rating that we rarely use. But that's the latest and, I dare say, greatest thinking on NortonLifeLock shares.
KATHERINE ROSS: Bob, can you give us some technical levels which you'd be watching so the members can be prudent about, perhaps, exiting this name as well?
BOB LANG: Yeah, so we're bouncing right off the 100-day moving average right now. And it's been there for the past six or seven times over the past two months. So we should see this stock bounce off of this level. It's trading just under $26.75 right now.
I'd be looking for a move above $28. And that would probably be a good spot to hit the sell button. I've actually put an alert on there on my computer, my trading system-- when we hit that $28 level, I'm going to get a ding, ding, ding to let me know. And we'll probably be hitting the exits at that point.
KATHERINE ROSS: I love the fact that you just said, ding, ding, ding. OK, I want to move into Nucor now. Chris, Nucor bought Elite Storage Solutions for about $75 million-- very small acquisition, but the stock has been on a tear for the last year. How are you approaching it?
CHRIS VERSACE: So we're kind of in the push pull, Katherine. There's a lot of folks who like Nucor because when the infrastructure bill comes around, obviously, its products will be needed. However, as a result of the, again, Russia-Ukraine war, we've seen a lot of commodity prices go through the roof-- steel being among one of them.
So we're carefully balancing the push pull between these two. Obviously, we want to maximize, like any investor would, we want to maximize the returns in the position. So we're trying to figure out what's the duration on the war? How long can steel prices be elevated before, perhaps, they drop? And if they do, what does that mean in terms of timing for the pickup in infrastructure spending?
So we're trying to really nail the timing on this one as best we can. But we have been prudently trimming of the position back over the last, again, several weeks, recognizing that steel prices are more likely to go modestly higher, but ultimately lower in the long-term.
KATHERINE ROSS: Chris, has the price target on this name been adjusted? It's still above $142.
CHRIS VERSACE: No, Katherine. And we communicated that with members that, again, we're trying to assess the duration of the war and the impact. We also want to see what the company has to say. Again, you know, given some pricing measures that they have and are putting in place, that could make the difference between a price target of $142 to maybe $150, but I don't see it going much higher than that.
KATHERINE ROSS: All right, Bob, with that answer, what kind of runway does the stock have?
BOB LANG: Eight different times, the stock has pulled down to the 20-day moving average, and bounced off of it, and gone higher. So I think, listen, 8 and 0-- I'm willing to say the ninth time, it's going to happen once again. So we're just above that 20-day moving average.
Let's call it $144, $143.95-- so we get we're about $3 above there right now. So if we can get a pullback down to that area, $143 or so-- maybe $144-- pull the trigger and buy some of this stock. This is a good, strong, high quality name. The chart is fantastic.
It's not overbought any longer. It was about a couple of weeks ago, but it's pulled off some of that froth. And so we would like the stock a little bit lower than here. But still, it's a good, high quality name our subscribers should be in.
KATHERINE ROSS: Our next name on the docket is Union Pacific. Chris, there's a couple of stories here that I want to parse through. One is UNP is attempting to increase how much low carbon fuel it consumes, but fuel prices are still lingering at highs. So I'm wondering if that creates concern for you, especially as traffic is currently down year-to-date.
CHRIS VERSACE: Yeah, you're absolutely right, Katherine. That's a double whammy, if you will, on the revenue stream. Falling traffic creates some pressure there. They will try to put through fuel surcharges. Whether or not that totally offsets the damage that we're seeing from higher energy costs, I don't think it will.
This is one of those names that we've been talking about lightening up a little bit-- we have in the past. My concern is that, again, a lot of the duration on the cost side is going to be with us far longer than, perhaps, we see some things pick up on the traffic side. But even longer term, Katherine, as we get into June, there's a longshoremen's contract set to expire on the West Coast ports.
That could really tie things up leading to very, very complicated traffic patterns for all the rail companies. So with that ahead of us, I'm increasingly not as bullish on UNP shares, to be candid.
KATHERINE ROSS: OK, Bob, the stock did have a run. It's kind of lost its momentum since hitting the $270s. Based off of Chris' answer, are you losing your bullishness here?
BOB LANG: Not yet. We know the stock has been pounded here last four or five days. And, frankly, with some heavy volume, the news has been strong-- they haven't been the only one. Norfolk Southern, Consolidated Rail, CSX, the two Canadian rails, have also been hit pretty hard. So they're not the only ones.
But I do see some support coming in at the 200-day moving average, Katherine-- comes in at about $235-- or $232, $235. We're currently at about $244. So there's a little bit of more room down there. If we got down to that 200-day moving average, Katherine, we'd be pretty oversold. RSI would be about 29 to 30. And that would be a good spot to add some more shares. But I do like UNP here.
KATHERINE ROSS: Let's talk about UPS. Again, it's kind of a fuel story here, Chris. Are you concerned about inflation impacting how much consumers are buying and the fuel prices?
CHRIS VERSACE: So I am concerned about fuel prices. But what's fascinating to me, Katherine, is some of the data that's kind of coming out-- how people are more aggressively pivoting into digital shopping and having people order things because they'd rather have things delivered than have to pay more at the pump. So it's quite confounding.
I think we're going to see revenues actually do better than expected for UPS as a result of that, particularly when they guide for the June quarter. But the issue-- you're right, it's going to be on the margin side. And that is concerning, Katherine. I think that's why we're seeing the shares kind of get beaten up here.
The real question for me, and I hate to toss this to Bob, but, Bob, what's the technical level where we really should be revisiting this name, considering that we've got some big upside to our price target at $255?
BOB LANG: Yeah, I would tell you that right here is an area that I'd like to see the stock hold. $192 to
$194 is an area where we cut support back in December at the beginning part of December and at the end of January. So $193 to $195 right here-- $192 to $195, that $3 range is where we'd like to see it hold.
And we're pretty oversold here right now. So if somebody really liked UPS, big brown, and they wanted to add some shares, this would be a good spot to do it. But as of right now, I think that if you have shares, just hold on to them right here and wait for the stock to lift.
KATHERINE ROSS: All right, Robert M., I didn't even have to ask your question. You got the answer. Our final stock of the day is Mastercard. With concerns around inflationary pressures and Deutsche Bank now forecasting a recession, would you guys consider lightening up on Mastercard, Chris?
CHRIS VERSACE: I got to make a comment on that Deutsche Bank forecast. One, it's several quarters out-- I believe fourth quarter 2023, first quarter 2024. No real sense as to how deep, or shallow, or whatever it might be.
I think that could be a little premature. We will see. In terms of Mastercard, remember what we said, Katherine-- whether it's a mobile payment, a debit payment, a credit payment-- no matter how you want to pay, we're seeing, increasingly, consumers shift toward that modality. And again, it doesn't matter if you want to shop at a Costco, at a Walmart, what have you.
You still have to swipe, tap mobile payments. So again, the fundamental story on Mastercard remains favorable, in our opinion. The bigger question is if we see consumers slow their spending, that might be a little bit of a headwind. But again, the data that we've seen thus far, there has been no slowdown in consumer spending, particularly in the US.
Again, Mastercard's own spending survey up 8% year-over-year in March 2022, up 19% compared to 2019. So I think, perhaps, the calls for consumers clipping their spending might be just a tad premature.
KATHERINE ROSS: Bob, Mastercard is slightly below its 200-day moving average-- buy, sell, hold.
BOB LANG: I'd say it's a buy here. It's kind of midpoint of a wide trading range between $300 and $400. It's right there at $353. So I'd say it's a buy.
KATHERINE ROSS: All right, let's go on to talk about what you guys can expect to see moving forward. Now, Chris, you already talked about the Deutsche Bank note. But even without that note, there's tons of pundits talking about whether or not they see a recession on the horizon.
Obviously, that's adding to members' anxiety. So what would you say about that? How can members tie in what they're hearing on the TV to what you guys are doing when it comes to recession forecasts?
CHRIS VERSACE: Check the data would kind of be the first thing. If we take a look at the PMI data that we've gotten thus far, it's still in expansion territory. Yes, it does talk about renewed supply chain woes. Yes, it does talk about input cost pressures. Yes, it does talk about pricing being passed through-- all those things are happening.
I think the wild card that we don't know-- and, again, this is something we've been talking about quite a bit lately-- is the key word, duration. What will the duration of the Russia-Ukraine war actually be? What will the duration of the sanctions actually be? What will the duration of all these inflationary pressures that we have out there-- because, think about it-- at some point, when it's over, all this Russian oil is going to have to find its way back from circling around in tankers and stuff.
And what will happen at that point, we will probably start to see oil prices retreat significantly, gas prices come down. So duration is the issue. Same thing over in China with the renewed lockdowns-- they are being extended a little bit longer than people had previously thought. What is the ultimate duration going to be? My suspicion, Katherine, and perhaps I'm an outlier on this, is if these two events really fall to the wayside, the talk about recession might be dialed back because we could see economic growth that starts to pick up again.
KATHERINE ROSS: Bob, if I told you you could only care about one catalyst for the next month, what catalyst would that be?
BOB LANG: The Fed. And that's really what matters the most. And we're going to find a little bit more about it today. In about an hour or so, we're going to read the minutes from the last Fed meeting. There is another Fed meeting coming up May 4, which, coincidentally, is our next monthly call.
So that's going to be a catalyst for me to watch what's happening with markets. I think one of the things that most investors and traders have come to rely upon is that the Fed is there to protect them and to defend them. And that really could not be further from the truth now, especially when they're in hawkish mode.
So I'm going to be watching the Fed. There's this direct correlation with the Fed and with increased volatility. The VIX is going to be a strong mover here. But to answer your question, it's the Fed.
KATHERINE ROSS: All right, members, thank you for joining us today. Bob, Chris, thank you for joining us as well. We will see you next time. And if we didn't get to a question that you want answered, please email me at firstname.lastname@example.org and we'll see you in May.