J.D. DURKIN: Good morning, members. Chris and I are back to get ready for the week ahead. And it is a big one to say the least with AAP's monthly live call set to kick off on Wednesday at 12:00 Eastern, where Chris will be joined by The Street's Editor in Chief, Sarah Silverstein, and market technician, Helene Miseler, for a comprehensive review of the overall portfolio.
But before we get to that, I do want to start here today with a look back at last week's biggest moves. Chris, on Friday you picked up some shares of Axon. I know we've had some members wondering a little bit about the timing specifically. What led-- or what about the company there led you to upgrade that rating to raise your price target and do some buying all at the same time? Sounds like a busy few days.
CHRIS VERSACE: Yeah, it was a busy day, in particular for Axon. And members know that we were kind of using our three rating being in a holding pattern, waiting for the next catalyst to emerge for Axon shares. And we have to remember that the shares catapulted significantly higher since we first added them to the portfolio, keeping our position size on the smaller side. What we were looking for confirmation on public safety spending for 2023 and beyond. And we got that Thursday night in spades, with the earnings report from Motorola Solutions.
A lot of people have been concerned about the debt ceiling and what that might do to federal spending. But what Motorola Solutions said was fantastic for Axon. And what I'm referring to is, I believe, 75% or more of their backlog was funded by state and local authorities. Now, that's simply wonderful. Axon's got a strong position there. And that led us to rethink what's going on with those shares.
One of the strategies that we've been leaning into is stimulus spending. It served us very well with United Rentals. And it's going to do wonders for other positions in the portfolio as well. But here Axon is poised to prosper, if you will, from this continued increase of flush state and local authorities, as well as federal spending. So getting that catalyst in hand, we took pencil to paper as it were, revisited our price target.
And that, moving it up as we did, said OK, we have enough upside to warrant getting active with Axon shares, so much so that we even upgraded it to a one rating from three.
J.D. DURKIN: Poised to prosper, 10 points for use of that phrase. Chris, is there anything you wish went a little differently I wonder?
CHRIS VERSACE: So I was looking back on that. And we actually did quite a bit last week. We nibbled, if you will, on AMN Healthcare, American Water Works. We picked up some more shares of Coty. Perhaps the only thing that we didn't do was use the pullback towards the end of the week to add to our Chipotle position. But I think that's something that we'll be able to do in the coming days.
Similar speaking, we had a lot of good cybersecurity data. We did not pull the trigger on additional shares for the cyber ETF. And that's something that we are closely watching in the coming days.
J.D. DURKIN: Looking ahead to this week, AMN has been a big focus due to recent volatility in part. What will you be watching for when that company is set to report on Thursday of this week?
CHRIS VERSACE: Yeah, JD, there's no question that the shares have been volatile. It's been frustrating to us. And I know it's been frustrating to members. Believe me, I see the questions that come in through AAP Club at thestreet.com. But-- and this is the thing-- when we look back on the fundamental data, whether it's the JOLTS report or the litany of comments from other companies in and around the healthcare space, it is very, very clear that the nursing shortage I hate to say it is alive and well. And AMN's business speaks to addressing that pain point.
So when we get the company's results, they should be rather good for the December quarter. And I say that because AMN has a track record of surprising to the upside, particularly with its bottom line results. But the guidance is what we're going to be looking for. And I'm believing it's going to be stronger than feared. And we have seen that be a positive catalyst for stocks so far this earnings season.
So continue to like the shares longer term because it's going to take a while, not a month, not a week, not a quarter, to address the nursing shortage.
J.D. DURKIN: And speaking of Thursday, we'll also hear from Vulcan Materials. On that same morning, you did a bit of buying back at 180. The stock has risen since. What will you be expecting for from that report?
CHRIS VERSACE: Well, when we get back to what I was saying earlier about Axon and benefiting from stimulus spending, clearly the Biden infrastructure law, the CHIPs Act, and the Inflation Reduction Act are all positives infrastructure spending. We heard that from Caterpillar. We heard that recently from Jacobs Engineering. Even the portfolio's own United Rentals spoke to that.
So we look forward to a very upbeat earnings report from Vulcan Materials. We expect the guidance, just like those companies said about North American infrastructure to be very, very positive. And we would say to members, look, if the shares are around 1.85 or weighed lower, it's a great spot to pick them up.
J.D. DURKIN: Bullpen Resident, Applied Materials also set to report. My goodness, what a week. Give us an update on your current feeling towards the chip sector as a whole.
CHRIS VERSACE: So when we think about Applied Materials, it's really semiconductor equipment capacity that we have to watch. And look, over the last few weeks, what have we heard? The PC market continues to be weak. Smartphone market challenging. And that's expected to run through the middle of the year. So we've been staying on the sidelines with Applied Materials. But we know that the CHIPs Act, as I alluded to a few minutes ago, is going to start ramping really in the back half of the year.
So when Applied reports, we're going to want to hear what do they see? What's the timing for that ramp in the CHIPs Act? And again, the big question that we're wrestling with here is, is it going to be big enough to warrant jumping into Applied Materials, even though we know companies like Intel, Taiwan Semiconductor, and others are ramping down their spending at least for the first half of the year? So that guidance to us from Applied is going to be critical.
And we'll be able to counterbalance that with some other companies reporting this week, including GlobalFoundries and what they say about capital spending.
J.D. DURKIN: And then this week will conclude on Friday. We'll get the fourth quarter numbers from Deere. Set to wrap up the week in terms of at least portfolio earnings, Chris, what will you be watching for, especially given those strong results from Agco?
CHRIS VERSACE: Well, Agco, CNH Industrial as well. So the two big things that we want to understand when it comes to Deere is, are they starting to see that pricing leverage become margin leverage? We saw that with Agco, especially in their guidance. We want confirmation of that for Deere. That would be a great positive.
But the other question regarding Deere is, is there any pricing action left in the tank that they can put into the marketplace, which would, of course, push margins even higher? So those are the two things we'll be looking for.
J.D. DURKIN: Any earnings you think you'll be closely following outside of the portfolio?
CHRIS VERSACE: Oh boy, JD, there are over 800 this week. So I hope I get them all. But we're going to have checkpoint report. We'll be watching that for the cyber ETF. We're also going to be having, like I said, GlobalFoundries. We'll be watching that with regards to Applied Materials in the bullpen. We also have Cisco and Digital Realty Trust and what they say about network capacity and data center demand. We're going to reflect on that and what that could mean for the shares of Marvell in the bullpen.
J.D. DURKIN: Yeah, I think it's a good thing I didn't ask you to list all 800 names. Although I'm sure you could. If anyone could, you would be the person for it. Finally outside of earnings, the biggest thing on your radar this week? It's a big data week. I wonder if there's anything you're closely following?
CHRIS VERSACE: Well, it is a big data week. And there are three big reports, the CPI, the PPI, and retail sales. But if I had to pick one, it's going to be the Consumer Price Index report for January. We have to remember last week that Fed Chair Powell said that he and his cohorts are really, really watching what happens with that data set, particularly services x housing. So we want to see if it's making some nice progress. And if not, that could mean expectations for what the Fed has to do could once again be revisited, potentially upsetting the market. So that's the thing to watch.
J.D. DURKIN: Absolutely, core x housing, that's what the man continues to say. We will follow it very closely. Thanks a lot, Chris.
CHRIS VERSACE: Thank you, JD.
J.D. DURKIN: All right, folks, that's going to do it for today. Thanks for joining us, members. We will see you next time.