J.D. DURKIN: Good morning, Action Alerts Plus subscribers. Chris Versace, the one and only, joins me now here at the New York Stock Exchange. It's not CGI. It's not AI. He's actually here with me in person for a look at the week ahead. Chris, good morning. Thank you for being here.
CHRIS VERSACE: Good morning, J.D. . Happy Monday. Happy to be with you.
J.D. DURKIN: Happy Monday. Happy fill-in-the-blank day, whatever it is. It's great to have you here in person for the conversation today. Taking a look back to last week, you added to the Club's position in Clear Secure, a name you and I have talked about many times. We've had some members a bit worried, perhaps, that this-- above the name. So remind us of your thesis and why you viewed recent weakness in the name as a chance to buy the dip.
CHRIS VERSACE: Sure. So there are several things about Clear Secure that we want to talk about. First and foremost is the continued growth and concern about data privacy, protecting your identity. They are a digital identity solution company, so first and foremost.
But in terms of why we like the company, it's the continued expansion across airports. There are right around 53 airport partners today. They're tackling and aim to be at the top 75. So we have more to go there. And as that happens, much like Costco when it opens a new warehouse, with each incremental airport, it opens the way for Clear to gain more subscribers.
And that is, of course, the nature of their business model. We also look for other growth opportunities outside of airports, other airline partners. They recently added Alaska Airlines. And there are opportunities outside of transportation as well pertaining to digital identity.
So that's the general thesis of it. As for why we opted to pick up more shares last week, one, it's trading below our then cost basis, so we wanted to improve that for members. But we also recognize two other things.
One, small cap stocks have been particularly hard hit of late as Treasury yields have moved higher. But when we think about Clear Secure's business, a few things-- one, a lot of cash on the balance sheet. They recently started paying a recurring dividend, not any more special dividends but a recurring dividend. And they have a buyback plan, which will allow them to further shrink the share count.
So with all of those two things, our thesis and those financial aspects to the name, we also wanted to take advantage of that dip, like I mentioned. So for that reason and because TSA travel numbers remain robust in 2023, we waded further into the shares.
J.D. DURKIN: I was hoping we'd get one usage of the word robust in our conversation. I knew it would come early on. Do you use Clear Secure?
CHRIS VERSACE: I do.
J.D. DURKIN: There you go.
CHRIS VERSACE: And not only do I use it, but it has saved me more times than I care to admit.
J.D. DURKIN: See, folks? He uses the product and then can speak about it--
CHRIS VERSACE: Due diligence, J.D. . Due diligence is key.
J.D. DURKIN: That's what it's all about here. On the same note, you also added to Coty after disappointing earnings commentary from management. Where do you see the silver lining for C-O-T-Y-?
CHRIS VERSACE: So I would say it was not a disappointing report when we kind of dig into it, especially if we compare contrast to Estee Lauder, which reported earlier. And they had issues, one, in China, two, in travel retail. We dug into Coty. They didn't have any of those issues.
More importantly, their prestige business continues to grow. And I would argue that management's strategy under CEO Sue Nabi continues to deliver. What's the company-- excuse me-- they're going to continue to leverage prestige, move into skincare. They're leaning into clean beauty, which is a key part of their consumer beauty business.
And when we track comments from others, including, say, Ulta, we have confirmation that all of that is where Coty wants to be. So last week, we actually bought the shares not once but twice, before earnings, after earnings, because we continue to believe in the Coty story.
J.D. DURKIN: Do you use any Coty products?
CHRIS VERSACE: Now, that is a good question.
J.D. DURKIN: Ah.
CHRIS VERSACE: That is a good question.
J.D. DURKIN: Due diligence, my friend.
CHRIS VERSACE: So I would say that there's a good chance that someone in my household is using Coty products.
J.D. DURKIN: There you go. See, listen. For TV makeup and makeup wipes, we're not that far--
CHRIS VERSACE: Are you using any Coty products?
J.D. DURKIN: Due diligence, my man. OK, let's talk about this. This is Marvell. This is top of conversation between Sarge, myself on Friday, as you know. He cited profitability and technical concerns come to mind. I wonder if you're on the same page as Sarge. For those who may have missed your alert, breakdown AP's game plan for Marvell moving forward.
CHRIS VERSACE: So I would say Marvell's report was a good one, especially when we compared it to the overlying end markets that it serves. Did its cloud business grow sequentially? Yes, it did. Is AI growing sequentially? Yes, it did.
I think the two big issues that people have to realize with Marvell is, one, it guided within what Wall Street was looking for. So the upside wasn't there relative to what NVIDIA delivered. And to be fair, NVIDIA delivered some stellar, stellar guidance on the back of AI and cloud. So I can understand the shortfall there, relative to expectations and hype, if you will.
But the bigger issue-- and we share this with members because remember, Marvell is a three-rated stock. We are aware that there is a gap that Marvell shares have to fill, and we're closely watching it. So in our roundup on Friday, we said, look, if Marvell shares come in a little bit, we might reconsider our three rating. If they come down even further and fill that technical gap against the backdrop of the fundamentals, we're more likely to consider an even bigger upgrade. So we're kind of in wait-and-see mode right now.
J.D. DURKIN: All right, absolutely. Moving on to your latest poll of the week, why have you been so focused on social media? And what have you found out as you've sought to poll our members online?
CHRIS VERSACE: So we like doing the poll of the week to tap into the collective wisdom of the AAP membership. And so far, I have to say, they are spot on so why did we ask this question about where might you social media if you do? What we're trying to track is, is there a potential shift in digital advertising spend? Because we know that that's very key for our shares of Alphabet as well as some other growing businesses, whether it's Apple, Amazon.
And I have to say that there was no shift away from X over to Threads. And I was a little surprised by that.
J.D. DURKIN: So X marks the spot. So let me ask you on this because I did see a few people in the comments say-- remind me. You did not have TikTok as one of the choices.
CHRIS VERSACE: You're correct.
J.D. DURKIN: You did not have Instagram.
CHRIS VERSACE: Well, that's not by my design.
J.D. DURKIN: Oh, no, no, no. But I was asking, but there was some response to say, hey, I actually used a couple other platforms as well, not the lion's share here. You're talking 67% to the artist formerly known as Twitter but maybe some usage out there for people who look up TikTok finance.
CHRIS VERSACE: So I did see those comments. And my response was you to take it up with Elon Musk because you're only allowed four choices.
J.D. DURKIN: Yup, correct. I appreciate that, and you're not wrong at that as well, though interesting there. See Facebook at 21%.
CHRIS VERSACE: I was a little surprised to see that as well.
J.D. DURKIN: Us too. Interesting. OK, last time we checked in, you took a pass on our weekly hindsight check in. Are you getting on a hot streak? Or is there something or anything you'd like to do over if you could?
CHRIS VERSACE: The one thing I would have done over last week is I probably would have waded into a little more shares of McDonald's. They were right at the point, and then we had that quick rally on Friday. Not sure it's going to be sustainable, given all the things that we have coming this week, especially with the technical issue with the S&P 500. Really closely watching that 4400 level that I talked about in this morning's AAP morning comments.
J.D. DURKIN: We'll get some data this week. How important is PCE after hearing from Mr. Powell in Jackson Hole last week?
CHRIS VERSACE: On a scale of 1 to 10?
J.D. DURKIN: Yeah.
CHRIS VERSACE: Probably about a 10.
J.D. DURKIN: A 10? OK.
CHRIS VERSACE: Yeah.
J.D. DURKIN: What will you be following for, you want our members to follow along with as well?
CHRIS VERSACE: So as you mentioned, it's going to be the core PCE number. Is it hotter than expected? The Cleveland Fed Inflation Index seems to be-- or sorry, Inflation Nowcasting model points to it being rather sustained. That could be somewhat worrisome.
But we also have a few other things. We're going to have several looks at the jobs market, both with the July JOLTS report, ADP's August report, and, of course, Friday's big monthly employment report. Now, tucked inside all of that, how tight is the labor market? What type of wage pressure are we continuing to see? Those are the puts and takes that we have to watch for.
J.D. DURKIN: This is like a turducken of economic data. It's like you look inside one thing. There's something else to see.
CHRIS VERSACE: Well, let me give you the gravy on top of that, Mr. Turducken.
J.D. DURKIN: Yeah.
CHRIS VERSACE: It's going to be Friday's final manufacturing PMI data, not just from S&P Global but--
J.D. DURKIN: On fire.
CHRIS VERSACE: --ISM as well. So it's going to be a very big week. Remember, last week, the Atlanta Fed upped its-- sorry-- GDP Now model to 5.9% for the current quarter.
J.D. DURKIN: Oh, I know.
CHRIS VERSACE: Big issue, though, is it's a rolling forecast. So as we get more of these data points coming in, we'll have a much better sense of what the economy is really humming at or not. And that is going to have some repercussions for what the market is going to think about what the Fed may or may not do.
J.D. DURKIN: Is there anything else you would like members to keep an eye on before we head into the holiday weekend? I didn't realize until late last night we have off next Monday. It's Labor Day.
CHRIS VERSACE: Is that right?
J.D. DURKIN: Yeah, that's true.
CHRIS VERSACE: So what I would say is this is the last week of the summer. Traditionally, folks are trying to sneak in that last bit of summer vacation ahead of the Labor Day weekend. So I would expect-- and this is what we have to watch for-- trading volumes to get thinner as we move through the week. That could lead to some pronounced moves on lower trading volume. We're going to take the prudent path that we always do with the portfolio, perhaps using some of it to scoop up some shares that are on our shopping list, something, again, we talked about Friday's roundup.
J.D. DURKIN: Absolutely. All right, folks. That is Chris Versace. I am J.D. Turducken. That's going to do it for today's edition of AAP. Thanks for watching. We'll see you again soon.