JD DURKIN: Good morning, and a very happy Monday to all of you members watching at home far and wide. Chris Versace and I are now back here to get ready for another week ahead, and it is going to be a busy one, I promise you that. But as always, let's first begin with a quick rewind of the week that we just left behind. And of course, there's no better place to start than the portfolio's newest position, and it's certainly a topical one. Chris, amid the broader sector weakness last week, why was the timing right to buy Bank of America?

CHRIS VERSACE: Well, we always try to be opportunistic looking to expand the portfolio's exposure in segments that we either don't have any exposure or we're underweight. And look, from time to time, we need to really keep our minds on what's unfolding, but where the risk to reward opportunities lie.

And amid the melee that we've seen, Bank of America has kind of been on our radar screen a little bit since early February. The shares were around 36, 37, falling over the last several trading sessions to that 27 to $28 range. And in our view, when we take a look at what's been unfolding with Silicon Valley Banks, Signature Bank, it really screams for a flight to not only bigger banks, higher quality banks, but banks with far greater risk control. And that was really what prompted us to add Bank of America to the portfolio.

When we think about its mixture of businesses, very well diversified, and again, it has those attributes that we were looking for. More importantly from a valuation perspective, it had fallen-- the shares-- sorry-- had fallen considerably, really lining up well with, again, favorable valuation metrics when we look back over history, whether it's PE, price-to-book, dividend yield, all sorts. So from that vantage point, we wanted to start to wade into those shares. And our plan is going to be to build them out either on further weakness or on signs that some of the catalysts we outlined in our note start to emerge.

JD DURKIN: Over the weekend, UBS bought Credit Suisse, of course, in a $3.2 billion, that's in US dollars, of course, deal, to save the struggling Swiss bank. Chris, how does this all fit into your view of the banking sector currently?

CHRIS VERSACE: Well, again, it's going to be more of that flight to quality banks with bigger balance sheets, more diversified business models. So we see that really underscoring our decision to add Bank of America last week, but we also see what's continuing to unfold with Silicon Valley Bank, Signature Bank, and some of these others.

And again, those other shoes are going to drop, but in the meantime, what are depositors likely to do? They're going to flee those troubled banks to banks with more diversified business models, better balance sheets, like I said. And we're already starting to see that happen.

JD DURKIN: Last week, Chris, you also upgraded KODI up to a one. You said, management's upbeat guidance at the BofA Consumer and Retail Conference as at least one of the reasons. How much are concerns around growing US and Chinese tensions playing currently into your thinking?

CHRIS VERSACE: Oh, that's a great question because the way we see KODI in China, it's clearly an opportunity. Asia-Pacific in total is only about 12% of its business model, yet we know that rising disposable incomes in Asia-Pacific, China in particular, are seeing a really trade up in goods and services there. No major surprise there.

So we like KODI because they're leaning into that. But if we do see some brouhaha, kerfuffle, call it what you will, emerge, they are not oh-so tied to that market, but a couple of other things. Remember that part of the thesis is China reopening.

This means not only is that economy poised to accelerate, which is a good thing, of course, but it also means that people will be traveling into China, but people will also be traveling out of China. And that's where it also gets interesting because KODI gets about 45%, 50% of its revenue from Europe and related areas. That's a great opportunity as those Chinese travelers really, no pun intended, take-off.

But there were two other key pieces to the move in upgrading KODI to a one, or buy-now status. The first was Walmart announcing that they're leaning into clean beauty, that's right in line with not only KODI's strategy for that market, but it also speaks to that other 40% of consumer beauty that they're really expanding, not only clean, but really focused on improving their margins. So that's a nice turbocharge for that business as well. And then, of course, the positive comments the week before from Ulta, which really speaks to the strength in the domestic business for KODI.

JD DURKIN: Chris, not for nothing, I feel like any time say, no pun intended, you're a very punny guy. I feel like there's always like some kind of pun that's intended there. For whatever it's worth because you are very funny and clever.

CHRIS VERSACE: People do say I try to be funny. I've never been called punny, though.

JD DURKIN: OK, there you go. First for everything on a Monday. Instead of our typical hindsight 20/20 check-in, which we do do on Mondays like this, I instead want to zoom in on a note that I caught in last week's roundup.

Chris, you wrote the portfolio now has 30 positions and some tough choices could be ahead to make room for new holdings. Can you go a little bit deeper into that line of thinking? What did you mean by that?

CHRIS VERSACE: Yeah, happy to. So over the last couple of months, we've added a bunch of different names to the portfolio. We were just talking about Bank of America. But of course, there was Marvell and a few others.

And what has to happen, we can't continue to add, add, add because it becomes unwieldy, not only just for us, but more importantly for members as well. So we really try to have a rather tight list of names, companies, stocks in the portfolio, and this means that as we continue to look for great opportunities ahead, we might have to make some tough choices with what's in the portfolio.

If we see, for example, a contender that offers us 20% to 25% upside, we might have to sit back and say, there's a number of names in here in the portfolio that might offer less than that, perhaps we need to start winding down some of those positions in order to make room for some of these other positions that could probably do a lot more for the portfolio in the coming 12, 18, 24 months.

And this is an iterative process. We do this all the time. However, it's been a little bit since we've had 30 names in the portfolio. And I wanted to share that thought with members so they don't get kind of caught off guard with what we may be doing in the weeks ahead.

Not saying it's going to happen today. In fact, I know it's not going to happen today. It might happen later this week, next week, something like that. But again, we always like to share our thoughts with members, keeping them in the know with us and prepared as best we can.

JD DURKIN: Absolutely. Well, Happy Fed Week one and all. We celebrate that type of thing here. Of course, all eyes on the FOMC rates decision. We get that Wednesday afternoon. Give us an update of your expectations for the Central Bank here, Chris.

CHRIS VERSACE: Well, let's talk about what the market expects first. If we look at the CME FedWatch Tool, something we look at it seems like every day now, the consensus is that, yes, the Fed is going to increase the Fed funds rate by 25 basis points on Wednesday. Then it has a pause at the main meeting, and then two rate cuts back-to-back in June and July. And I'm a little concerned about this.

Typically, the market gets a little excited about the Fed cutting. It's, of course, a positive for the markets if it does happen. But when we look back at last week's CPI inflation data, particularly the sequential pickup in the core CPI, the Fed is not going to ignore that. At the same time, when we dug into the February PPI report, the services categories were also not showing tremendous progress on inflation.

And again, the Fed is not going to miss that. The issue here is how does the Fed balance all of that with its mission to tame inflation with what we've seen happen in the banking sector over the last couple of days. And I think we always say that the market's going to lean really closely into what Powell has to say during the press conference, and I think that's going to be extremely so this time around.

My concern, however, is that the Fed says, you know what, we have more work to do. We're going to be data dependent, and that is going to not match what the market sees via the CME FedWatch Tool. Again, rate cuts June and July. And I call this out because in the past when we've seen the market have to readjust its expectations for this, it hasn't been pleasant. And for that reason, we're going to tread carefully the next couple of days. We're also going to keep our inverse ETFs in play as well.

JD DURKIN: Real quick on this before I move on to the next question. Do you have a sense as to why markets are maybe still not quite believing Fed officials? I mean, what is your sense as to why we do see cuts being worked in for future meetings?

CHRIS VERSACE: So I think some of it stems from what they've already done, some of the more recent economic data, like the retail sales report last week that was weaker than expected, but also too spinning out of this banking situation, there's little question that banks are going to have to tighten risk controls, tighten lending standards. I think there's a concern that could tip us into a recession.

But remember what the Fed has said previously. There will be some pain to tame inflation. So unless we see a sharp move lower in the economy, crashing, which so far, the data hasn't pointed out, I think the Fed is likely to continue on its course. It might correct a little bit here and there. 25 basis points here, maybe pause at some point, but I don't think they're going to back off entirely until, as Powell likes to say, the job is done.

JD DURKIN: We will stay the course until the job is done, the man has said it once, he said it twice, he has said it dozens of times at this point. And I suspect we'll hear that once again come Wednesday. The Fed may be taking center stage for Fed Week, of course, Chris, but I wonder, is there anything else that you're watching for the days ahead?

CHRIS VERSACE: Yeah, I mean, there's a couple of things. There's always-- JD, there's always something because we're constantly mining and turning over, not only data, hard economic data, but also what customers, competitors have to say about the portfolio holdings.

And with that in mind, EVgo is going to report later this week. We're, of course, going to tear into what they have to say, both for their quarter, as well as their guidance. And most importantly, what they're seeing on the flow of Fed funds for EV charging stations.

All of that, we're going to use with regard to our holding in ChargePoint. I know that position has been volatile. I know people are frustrated, I am too, but everything that we continue to read, and what we shared in Friday's weekly roundup, all points to funds starting to flow.

Now we want to see how fast that is. And if we hear something that we like, we do have room to add to our ChargePoint shares. So members, we'll be talking a lot more about this later in the week.

JD DURKIN: We certainly will. That's going to do it for today. Chris, we'll be back tomorrow for a closer look at the data the Fed will be focused on in its ever data dependent states that Chris appropriately pointed out that it seems to always be in. And we'll focus on that later on in the week. Thanks for joining us, Chris. Thanks a lot.