CHRIS VERSACE: Good morning, Action Alerts Plus subscribers. I'm back to answer some of your broader questions about the portfolio. First, a new member recently wondered why we added to Qualcomm when it's rated a 2, so I wanted to take the opportunity to review our four ratings that we have with the portfolio, going through them line by line.
The first, of course, is buy now, which means it's a stock that either existing members or new members to the portfolio should be buying, as it says, now. Second is stockpile, and in this, typically we like to see either the share's pullback, or we have the development of a new catalyst and kind of springs us into action.
Third is holding pattern, where we're waiting for some new development to happen. And fourth is a position where we're planning on exiting in the near term. Typically, we tend to have 1's, 2's, sometimes 3's. 4 is probably the one that we use the rarest, because, again, it does indicate that we're getting ready to exit a position.
Now, with that set up, let's talk about Qualcomm. We initiated on the shares with a 2 rating because we were waiting, as we indicated at the time, for a pullback in the stock or news that would get us incrementally more bullish on the story. As you have seen, members, we have been getting a lot of positive data confirming the uptick in the seasonal smartphone pattern and that it had been unfolding.
We can talk about what we learned from Avago. We can talk about what we learned from Broadcom and others. But perhaps the biggest catalyst that led us to spring into action was the extension of the renewed relationship with Apple for iPhone through 2026. As discussed in a recent rundown, it meant that Qualcomm was going to participate in 2024, 2025, and 2026.
Previously, the thought was that Apple would be developing its own modem, and therefore Qualcomm would be out at the end of 2023. So here, that extension of the relationship was key to our decision to pick up shares of Qualcomm. Now, you might be wondering, well, if you established a price target of $150, why didn't we upgrade the shares to a 1? And it is a fair question.
But remember, too, that on the announcement, Qualcomm shares were running, so we wanted to take our time with that position. And it is understandable that they were running, because a big overhang on Qualcomm shares had been removed. That's usually a very big positive catalyst for the shares, which, again, is why we stepped back and bought more for the portfolio.
Second however, was that we know Taiwan Semiconductor will soon be reporting its September revenue in the next few weeks, and that's going to give us not only a very good look at Qualcomm's quarter, but it will also serve as another point of confirmation for the seasonally strong smartphone-selling season. If Taiwan Semiconductor's revenue points to just that, odds are we will revisit our 2 rating on the shares of Qualcomm.
Over to some of the other terminology that we use from time to time. For example, when we exited our position in Verizon, I understand some members were wondering what I meant by the term "dead money." Now, that's simply one of those Wall Street terms, one of those phrases, if you will, that means that the stock simply isn't going anywhere. It's dead money.
What this really means is it doesn't have growth po-- prospects. Excuse me. And it's likely to languish not just in the near term, but for a prolonged period of time. So when a stock, we say, is dead money, odds are we want to get out of it and put our capital to work in something that is a little more fruitful for the portfolio.
Now, when we refer to a stock having runway, it means-- much like the runway a plane uses to take off-- we see a clear path to it moving higher. Or said another way, we have some nice visibility. For example, Lockheed Martin continuing to win F-35 orders and other program wins, that continues to build its backlog and extend it. And that backlog gives the stock a runway.
And finally, as we continue to cover inflation da-- excuse me-- inflation data, many of you have asked what we mean when we use buzzwords like "hotter" and "cooler." Well, "warmer," "hotter," refers to a data point coming in ahead of expectations. For example, the August headline CPI was hotter than expected because it came in at 3.7% year over year versus the consensus that was looking for 3.6%. 3.7 is greater than 3.6. So that was a warmer number for inflation.
Had the August print come in at 3.4%, 3.5%, below the consensus forecast, we would have said it came in cooler or, just more simply, below the consensus forecast. I hope that helps. Please continue to send your questions into aapclub@thestreet.com. Thanks for watching.