JD DURKIN: Good morning, subscribers. I'm The Street's JD Durkin here with Chris Versace to answer some of your latest questions. Each and every Thursday, Chris and I will be sitting down to address everything that is top of mind for you. So, please, continue to reach out to us at email@example.com with all of your questions.
Let's get going with a question on the general market to kick things off on this Thursday. We have a member wondering, Chris, if it's better to stay out of the market and come back in a little bit later given all of the increase in negative sentiment. What do you think?
CHRIS VERSACE: Yeah. I mean, look, we've been very cautious in terms of deploying the big cash position that we have in the portfolio because we were very nervous about the start of 2023. And it seems that, once again, the market is kind of catching up for thinking, especially yesterday, where Fed officials were making the rounds, sharing that, yes, the Fed funds rate is likely to go above 5%. That's catching a lot in the market off guard for some reason. Not really sure why.
And I say that because the Fed communicated that rather clearly in December with their economic projections. But we've also got some other factors here that we've been concerned about, including the reopening of China. And now we have President Xi warning about a potential COVID spike. We also have the US debt ceiling. So to put it all together as we really March. Into earnings season, I think it does make sense to be a little more cautious here in the near term.
JD DURKIN: Chris, if the dollar has, in fact, peaked, would AAP consider looking at international ETFs or emerging market ETFs?
CHRIS VERSACE: So that's a great question because, really, last year, we introduced the notion of using ETFs for some select exposure. So I don't want to say that anything is off the table. Of course, we want to look for the best opportunities for members. So we'd have to find the right strategy inside an ETF that benefits from the dollar. Whether that's domestic or international, we'd consider it.
JD DURKIN: All right, let's move on to a name that many members have been asking about. In a alert yesterday, you said that you'll be looking for buying opportunities as yesterday's plunge in AMN Healthcare seemed to be missing a cause. Can you expand a little bit more, talk to me about what you think is actually going on here?
CHRIS VERSACE: Sure. So there was some-- one data point that emerged yesterday from a private health care company that competes with AMN. And they said they saw some weakness in their travel nursing. And I have to be very, very specific here. This is but one data point.
And I think what we're seeing is a market overreaction. And what makes me say that is a few things. One-- all the data that we get on the jobs market, it continues to be tight. Even today's weekly jobless claims fell month over month. We saw the December employment rate move lower month over month.
But at the same time, almost every headline that we see when it comes to nursing continues to talk about the nursing shortage. And so I think from time to time in a nervous market, like we just talked about, one data point can kind of set off a quick knee-jerk reaction in the stock price. And I think what we need to do at times like that is step back, look at the other data that's out there, and make a smart, rational decision. And that's exactly what we're going to do with the shares of AMN.
And I think that that's something that we're going to look to do in the coming days. We want to let all this bad news kind of settle out. That includes this market reaction so we can get the best price for the portfolio and for members.
JD DURKIN: Smart, rational decision making. That is what it's all about. I do appreciate that note of caution, especially for people that see the dizzying array of headlines right now. Maybe they need to be reminded to take a deep breadth and take a step back. I appreciate that.
Let's talk Clear Secure, another name that had a rough Wednesday, to say the least, closing down here over 9% in the session. What happened there?
CHRIS VERSACE: Yeah. Again, it's another one that it seems to be an overreaction. And I say that because when we look at its two key partners-- Delta Airlines, United Airlines-- not only do they put up really good numbers, verifying the TSA data that we monitor 100% of the time, their outlook for 2023 was also positive. And then we take another look. The IEA's oil forecast-- one of the big drivers is jet fuel.
So it tells us that we're going to have more people on more planes flying around the world in 2023, especially as business travel opens and we get that eventual reopening in China. So a lot of reasons to be positive on Clear Secure. We've kind of talked about where we would buy it-- between that $26, $27 level. And again, if it comes into that range, that's something that we'll be doing.
JD DURKIN: Yeah, that's a great point there, especially as we've heard from the major airlines about what the year looking ahead could actually hold. You recently did some trimming on ChargePoint. Now, from an educational perspective, Chris, do you have any [INAUDIBLE] advice for members who may have smaller positions in ChargePoint or any stock in the portfolio?
CHRIS VERSACE: Yeah, so this is an interesting one, right? Because we kind of waded into this last slug, if you will, this last piece of ChargePoint late in 2022, around 8 and 1/4 or something like that. And the shares have catapulted significantly higher, some 45%, I think, when we made that trim.
So for folks that can't necessarily mimic the exact things that we do, we would say, think about on a percentage basis, if we're cutting 10% of position, 5% of position, 15% of a position, we would recommend that you do that, especially in a case like this with ChargePoint because that is such a significant move in a stock price in a relatively short period of time. But I would also say, because I we've got some questions on this, JD, do you continue to like ChargePoint for the long term?
And I would just point out that even after that trim that we did, that modest register ringing, ChargePoint is still the largest position in the AAP portfolio, ahead of PepsiCo, ahead of Costco. So we continue to like the long-term prospects with that business, again, as EV adoption accelerates and as the fund of flows-- sorry, as funds begin to flow from the Biden Infrastructure Law and we see that build out of EV charging stations.
JD DURKIN: All right, let's head on over and focus our attention now to Lockheed Martin. Is the new Congress a good reason to start a position-- of course, keeping in mind there's already been some jockeying back and forth with regards to what the year will hold for defense spending?
CHRIS VERSACE: Yeah. It's, again, another great question. This is a stock that we were-- when we bought it, it really accelerated. One of the reasons that we liked Lockheed Martin was not only the expected increase in defense spending for 2023 but also the notion that in a slower economic environment, perhaps a recession, the fact that it has the best customer in the world, US government, people would kind of lean into that.
But as we've seen in late, the shares have kind of pulled back. And while there's some debate as to what might happen with the defense budget for 2024, our thinking here is this pullback actually gives us the opportunity that we've been waiting for it to get deeper into the position. It's not just the US government. Yes, they are a great customer. But we've seen a number of wins from other customers as well, all that extending the company's backlog out multiple years. So we like that visibility.
JD DURKIN: All right, let's wrap things up here with a quick trip to the bullpen, shall we not? I think that's what they do and they're going to the bullpen, right, in baseball? Why doesn't AAP currently own a biotech or a banking stock?
CHRIS VERSACE: So those are great questions as well. And look we're always looking at opportunities. Biotech-- there's an-- there's usually a joke that people make-- well, investing is not rocket science, right? But biotech is. So we have to be very careful in choosing the right biotech stock.
It is something that we've seen some movement in that area. And we do see it kind of blending in with our aging of the population, investment theme as well. So there are some thoughts that are percolating in the background-- not anything we're ready to share definitively just yet. As far as banks go, look, take a look at what we've seen from the recent round of bank earnings.
And we've been concerned about the negative drag from investment banking. We're also seeing some headcount reductions. I think we want to let those things settle out before we contemplate adding a financial to the portfolio or even the bullpen.
JD DURKIN: Yeah, I think hit this one in an alert just a few days ago. But for members who may have missed it, why was UnitedHealthcare care taken out of the bullpen? UNH-- what's up?
CHRIS VERSACE: Yeah. So the bullpen is kind of a living, breathing holding pen for stocks that we're taking a look at. And candidly, UNH probably should have been removed when we added Elevance Health to the active portfolio. We look at that alongside the shares of AMN, it's giving us great exposure in that part of the market.
And some folks-- we're get some emails, well, why Elevance over UNH? And, yes, the business models are similar. Yes, both have pulled back. But when you look at the valuation relative to the EPS growth, EPS growth between the two is roughly about the same over the coming year, year plus.
But Elevance trades at a nice 25% discount to UnitedHealth. We like that value opportunity we had and, over time, expect those valuations to close somewhat.
JD DURKIN: All right. Finally, let's talk COTY. They trade right here at the floor of the NYSE. Why is that company in the bullpen and not a stock like ELF for example?
CHRIS VERSACE: Oh, that's a great question. So there's a couple of reasons we like the COTY stock. One is the level of brands that they have. Two-- a new management came in roughly two years ago or so. And that transformation is kind of in its back half. So we can reap a lot of the benefits there.
But also the reopening in China-- again, we've kind of sat on the sidelines waiting for this potential end wave to spike during the Lunar New Year. We think that will give us the opportunity as some of the expectations get reset and those stocks that have run on reopening hopes kind of pull back a little bit. But comparing specifically against ELF-- ELF is predominantly a US-based business.
It's international businesses is, I think, something like 10%, 11%. But that's all international, meaning that its exposure today to China is far less than that for COTY. And again, that's something we want to lean into at the right time.
JD DURKIN: All right. Thanks a lot for helping us get smarter together and for all of your answers, Chris. Appreciate it.
CHRIS VERSACE: You got it.
JD DURKIN: All right, folks. That's going to do it for today. Members, I will be back tomorrow with AAP team member Bruce Cammack to dig deeper into the technical landscape and everything that you need to know. Thank you so much for taking the time to join us. And we will see you tomorrow.