J.D. DURKIN: Good morning, subscribers. One and all, Mr. Chris Versace. Ah, yes, the one and only. He is now with me, back once again to answer some of your biggest questions of the week. Hi, Chris. Good morning.
CHRIS VERSACE: Good morning, JD. Hope you're having a good Wednesday on the floor.
J.D. DURKIN: I'm having a great Wednesday. I hope you are as well. Before all that, of course, let's dig into this Wednesday morning's actions. Chris, why was now the moment to add to the club's position in Marvell?
CHRIS VERSACE: Sure. So as we telegraphed when we first added the shares of Marvell, we wanted to patiently build this out. We knew that the tech landscape could be a little challenging in the first half of the year, and over the last few days, we've seen Marvell's shares kind of retreat, moving well below our average cost basis. So of course, they were on our radar. We like building out positions at levels that help us improve our cost basis.
But last night, we heard some really good things out of Alphabet and Microsoft as it relates to their cloud business. Both were up 27%, 28% year over year. We also had some favorable data center comments out of Juniper Networks. And we put it all together. The pullback in the shares in our opinion offers a very low-risk entry point. We continue to like the data that we heard.
Plus, it also reaffirms our long-term view that data traffic is going to continue to grow as we continue to move further into our digital lifestyles. But also, we have the added benefits of IoT and eventually AR, VR, and other data-heavy applications. So that's the reason why we opted today to wade deeper, as we like to say, into the shares of Marvell.
J.D. DURKIN: Ah, yes, Chris. Of course, we would also be remiss not to hit on this last night's earnings. Oh, last night's earnings, which clearly have you excited, what led to lifting your price targets on Microsoft and Chipotle. I always get hungry after we talk Chipotle, but what should we know about those two names?
CHRIS VERSACE: Well, in terms of Chipotle, pretty much everything that we were looking for kind of came through. Better than expected bottom line results, revenue topped expectations. We saw an acceleration in comp sales.
And the key point that we've been making with members is that pricing action taken in 2022 would start to become margin drivers. And we saw that in a very big way. So we like all of that.
We've of course adjusted, as we pointed out in our note this morning, our price target higher. We're still going to keep the shares rated at 2, though. As we indicated, if the shares kind of come back after such a phenomenal run year to date, and again, this morning, if they come back around the $1,800 level, that's where we would look to get even more bullish on the name.
J.D. DURKIN: As a programming note, keep an eye on your alerts, of course, for Chris's full breakdown of those earnings, as well as so much more. Now, Chris, we turn the page onto this week's questions-- that's me turning the pages, that's how I do it-- with UPS now rated as a 4, signaling an exit ahead. Chris, are you planning to replace it with a new stock, I wonder?
CHRIS VERSACE: Ooh. This is a great question, and it could very well be. You know, we do have some newer positions that we want to continue to build out like we did today with Marvell, like we hope to do with the shares of Trinity Kaplan, maybe one or two others.
But as we've talked with members, there are two or three that are kind of on the periphery, everything from Universal Display to Applied Materials. And of course, as we get closer to the eventual catalyst that is the split in Kellogg's shares into two businesses, we of course want to have some Kellogg representation in the portfolio.
So I do think that we'll get those positions in over time. As to whether or not we do those ads first or we make some other additions in either Marvell or Trinity Capital, we'll have to see what the coming days bring to us.
J.D. DURKIN: Time now for our most asked about stock. Chris, is there any update on ChargePoint?
CHRIS VERSACE: [LAUGHS] So let me talk about this in two ways. You know, we continue to have a number of favorable data points for ChargePoint. And again, I get emails from members, and I understand the frustration. I don't mean to be flip here. I feel the exact same frustration. It's very challenging when you see so many favorable data points line up, but the stock continues to move-- let's be honest here-- either nowhere or incrementally in the wrong direction. So trust me when I say, I am right there with you, feeling the pain of watching this.
However, would we be willing to throw in the towel on this name here? Candidly, there's just too much opportunity to be had. And while this may take out longer than we originally thought, you know, again, we're talking quarters here. Not days, not weeks, not even months, but quarters.
I think as we heard from our conversation last week with the folks at Orion Energy, as we move through the year we're going to see more funds flowing towards EV charging stations and the build-out of that national network. That's a multiyear event.
So I think that as we move through 2023, the shares will continue to-- the outlook for the shares will continue to solidify. The shares will improve as we go through there. It would be such a shame to jettison the shares here out of a point of frustration rather than let that thesis play out, and that's what we're inclined to do.
And consider the note that we had two members yesterday discussing General Motors and their earnings. The key for us was what they said about the EV business and the continued shift in their business towards that with ramping production. That obviously speaks to our-- or at least part of our thesis for ChargePoint shares, which is the growing pain point as more EVs on the road necessitates the need for more EV charging stations.
So that's the latest update. But I expect that as we go through earnings and we hear from other auto manufacturers and other EV charging companies, we'll have a lot more that solidifies our thesis.
J.D. DURKIN: Are there any stocks that are not working or are moving contrary to your thesis, Mr. Versace?
CHRIS VERSACE: Hmm. So we just discussed ChargePoint. Obviously, the movement in that stock doesn't really support the thesis. Again, as I just explained, we're going to continue to hold on that.
We've seen some other names kind of move in opposite directions lately. Ford. But we've discussed with members in our notes why we're increasingly concerned about that particular position.
The only other one or two that I would say would be, at least in the near term, Vulcan Materials. And again, we're seeing accelerating flow of funds regarding infrastructure. We're seeing more infrastructure projects being announced. And even the weekly rail car traffic data that we talk about for aggregates remains positive.
So here too, I think we're going to be inclined to be patient. What ChargePoint, United Rentals, Vulcan Materials, what they all have in common, of course, is the stimulus spending out of Washington that's expected to ramp not only throughout this year, but even more so in 2024. So on the back of all of that, we will take the patient route and just continue to hold the shares.
J.D. DURKIN: The patient route. Ah, yes. Finally, let's touch on a subject keeping many of us up at night, whether or not we want to be. We hit on this last week, but let's get your latest thoughts on the debt ceiling from your perspective. You referenced it there a moment ago. As of this moment, how likely, Chris, is a mid-June Treasury default?
CHRIS VERSACE: Oh, a default on the Treasury. I thought you were going to ask me, how likely are we to get a debt ceiling deal? And look, we've been around this a number of times. I think even you, JD, in your former life covering Washington, you've seen these shenanigans, these games. Where it really counts, when it really counts, down at the wire, will we get a deal or a likely extension? More likely than not. So I'm not as worried about the mid-year default. I just unfortunately see this as more Washington games as usual.
J.D. DURKIN: Yes, that's right. We do love our 11th hour Friday night parties where we're all watching C-SPAN as these votes come across the wire. No one else? At least I do. Thanks for that, Chris. The great Chris Versace. Thank you as always.
CHRIS VERSACE: Thank you, JD.
J.D. DURKIN: Members, please keep sending us your questions. And you could do so by sending those questions over to firstname.lastname@example.org. Have a great day. We'll see you again soon.