Daily Rundown: May 3

CHRIS VERSACE: Good morning, Action Alerts Plus subscribers. As you can see behind me, I am still on the road. But I wanted to take the opportunity to address the stocks that, you, members, have been asking about most this week. Let's get started with ChargePoint.

I know the shares have been moving lower this week yet again. Small cap stocks are getting hit amid prospects for higher interest rates for longer ahead of this afternoon's Fed meeting. We also have to remember, too, that there is some concern over the recent bank failures and tighter credit conditions that are also likely weighing on the shares of not only ChargePoint, but all of the EV charging station manufacturers. However, as we recently learned from our conversation with Ryan Energy, private funding is flowing for the buildout of EV charging stations, and public funding programs are starting to flow.

Now, the biggest criticism, I think, that can be leveled against us-- and it's a little fair-- is that perhaps we may have entered ChargePoint shares on the early side, given the expected ramp in the EV charging buildout. However, I would counter and say you saw the banking issues that have developed and the impact that has weighed on the market. I mean, as we think about it, a lot of this closely resembles what we've seen unfolding with non-residential construction and infrastructure spending and what we're likely to see with the shares of semiconductor equipment manufacturers, like our own recently added Applied Materials and the Chips Act.

As the flow of funding accelerates, we're likely to see rising prospects for not only our shares of United Rentals, Vulcan Materials, and Applied Materials like I just mentioned, but also the shares of ChargePoint. As such, while I know painful to members and to the portfolio, we are going to endure this short-term pain for the longer, larger returns to be had over the coming quarters. Now, let's move over to the shares of cyber.

They lagged the NASDAQ in April. The question I think most members are asking is, Chris, is the thesis for cybersecurity still intact? Now, first things first, the NASDAQ, we have to recognize, was spurred higher by really just a handful of companies, really big tech. Some of those include Meta Platforms, of course, but also Microsoft and Apple. As you know, we own two of those three. And the portfolio did benefit from those increases.

However, what's been hitting the cybersecurity stocks despite the plethora of headlines that we share with you about increasing number and variety of cyber attacks, it's the concern about the speed of the economy, and again, higher interest rates as the economy begins to slow. Again, we're not seeing any slowdown in attacks. So as we go through the current earnings season and the cybersecurity companies continue to report, we will be watching a couple of different metrics. One of which we pointed out recently is deferred revenue.

We like this because it shows booked revenue that is not recognized, and really points and underscores the forward view on revenue growth and earnings growth. So we're going to continue to watch that. If we continue to see favorable dynamics as the basket of cyber constituents report, we're likely to use the recent pullback in cyber shares to pick up more. Again, below 40 is really kind of the sweet spot.

I will share, however, we do want to get past today's Fed meeting before we start to make those moves. And we do want to see a few more constituents report their quarterly results. Now, let's also check in on the shares of Clear Secure. Here, too, the shares have pulled back despite the overwhelmingly positive comments from airlines, credit card companies, and hotels that all point to continued spending on travel. Even the quarter to-date TSA travel checkpoint data confirms this.

Let's remember what's going on with Clear Secure. They are continuing to grow their footprint in much like we've discussed with Costco in the past. As the footprint expands, it opens up the opportunity for more membership growth. As the membership grows, so too do the revenues, so too do the earnings. So from our perspective, we continue to see the pullback of late in the shares of Clear Secure as a good entry point for members to add to the position. And it's one that we are looking to add to as well.

Now, we'll end our conversation today looking at our inverse ETFs. We've talked a little bit about these before, but it's been a bit. So let's quickly revisit the strategy. The inverse ETFs, SH and PSQ are tactical positions. These are not long-term positions that we'll be holding for multiple of years. Rather, we use them to limit downside in the market. If we manage to make some profits on that, that is gravy.

As we've seen over the last few quarters, it's been a challenging time. And on a periodic basis, the inverse ETFs have been doing their job, especially when it's time for the market to catch up what's been really happening and unfolding between the Fed, the economy, and earnings expectations. Near term, we expect to hold these defensive positions. And, of course, members, we will have a close eye on today's Fed decision.

Keep an eye on your Alerts for our latest analysis this afternoon following the formal press release and Fed Chair Powell's press conference. That'll do it for today. And members, please keep sending your questions to aapclub@thestreet.com. Thanks for watching, and have a great day.