J.D. DURKIN: Good morning, subscribers, one and all. Chris Versace and I are now back to answer some of your latest questions Chris, thank you for being here, as always. Let's start with two-rated Trinity Capital. Chris, we have a member wondering what level that person should consider picking up more shares. Talk to me. What stands out to you there?
CHRIS VERSACE: So we've been pretty vocal that we'd be really interested in picking up additional shares of Trinity Capital below $14. And lo and behold, they are. So I think the question is getting to the point of, well, why haven't we yet? And I think when we look at today's data, which was the hotter than expected Producer Price Index, our concern is that the Fed may have to do a little bit more to finally break the back of inflation.
Currently, the CME FedWatch Tool doesn't see another rate hike in the cards. It also sees the first rate cut kind of slipping forward a little bit from June to May. So based on what we see with the September Consumer Price Index report out tomorrow, if it shows something similar, odds are the recent market rally could give some of that back, potentially pressuring Trinity Capital shares a little bit more. We feel much more comfortable, confident stepping further into the shares of Trinity once we have the September CPI report behind us.
J.D. DURKIN: And Chris, I'm curious. And if I'm curious, I'm sure we have members who might be wondering this as well. What is typically the relationship between the PPI print and the CPI print? Do you take one with a grain of salt as one leads into the other? Kind of give us a sense on what we might get tomorrow.
CHRIS VERSACE: So there's a couple pieces to watch for, right. So with the PPI report, you get final demand. You've also got intermediate demand. So we like to track the intermediate component because it's a leading indicator for what we'll see on the final PPI report in the coming months. But similarly speaking, most people tend to lean into the PPI report. It's things that are being produced, not yet sold to the end consumer. Again, kind of a leading indicator of what we could see in CPI down the line.
I will tell you that we weren't all that shocked. We were a little surprised by the headline PPI data. But as members know, we've been closely tracking a lot of the other data that we've been getting so far for the month of September. And the PMI data, both from ISM as well as S&P Global, really called out the return of input inflation and output price increases. That led us to think that we could have seen a warmer than expected PPI print. Lo and behold, we saw a hotter than expected print.
Our concern is that we do see that return also for the CPI report, especially the core CPI, which everyone is watching, especially the Fed. So, again, in the very near term, we are going to take a very prudent, cautious stance and wait and see what the data tells us.
J.D. DURKIN: All right. thanks for that context, Chris. Now let's turn our attention now to earnings. You dug into PepsiCo's figures in yesterday's video. But can we get your top-line thoughts and hear if underweighted members should maybe do a little bit buying here? What do you think?
CHRIS VERSACE: Yeah. Great question. I would say absolutely if members have been underweight PepsiCo shares relative to what we have in the portfolio. As I last looked at PepsiCo shares, they were below our average cost basis. That's a great price point, especially since the company not only came out and took its expectations for the balance of the year higher. Its initial guidance for 2024 is also very supportive of the shares.
And let's remember too, the company still has-- round numbers-- 250 million left to go in its buyback that it has targeted for this year. So all of that, plus the fact that the company kind of pushed back, clap back, if you will, pretty hard on the recent sell off stemmed by the weight loss drugs, I think it's simply a great point for folks to wade into PepsiCo shares here.
J.D. DURKIN: I was wondering to what degree you were tuned in to related Ozempic-related headlines on some of these products. That's a conversation we've had a lot as of late and I'm sure we will continue to have for quite some time Chris, do you have any suggestions on what kind of cash position the average member should have in this particular market environment?
CHRIS VERSACE: So when we think about the average cash position, again, it kind of fluctuates from time to time. In a more nervous market, perhaps concerns about a slowing economy, recession, what the Fed may do, it's always nice to have a little extra cash on the sidelines to kind of help buffer any pullback or push lower in the market.
Typically, when we come out of those concerns, maybe when the Fed starts actively cutting rates, we've got a little more favorable economic data, we can kind of see those cash numbers kind of come down a little bit. So kind of rule of thumb, generally speaking, we like to have 8%, 10% cash on hand. Sometimes that can go a little lower. But times like now, we'd like to have that a little higher, which is where the portfolio is.
J.D. DURKIN: Chris, let's spend a little bit of time on one of the club's newest features. And for members who may have missed it, Chris, explain to us what panic points are. And how are you using panic points?
CHRIS VERSACE: I'm really glad you asked that question the way you did, J.D. , because I think you call out something that some folks might not have really realized, which is really over the last several quarters, we've brought a lot of new things to AAP. We've got charts of the day. We've got a standing S&P chart every Monday for members. We've interjected videos with the larger team as well. We've brought thematics in. We recently added the poll of the week.
And this latest one that you're referring to, panic points, is really bringing us with a vengeance, if you will, back into greater risk management for the portfolio. Now, in the past, AAP has never used stop losses. It's never even used panic points. And we thought that, especially stepping off of ChargePoint and some other moves that we've made with the portfolio of late, that we wanted to have a more defined policy when it comes to potentially exiting positions, hence our instilling panic points.
And these are not necessarily fixed in stone. And what I mean by that is as stock prices move higher, our panic points will move higher as well. We did that today, notably with Axon. We wound up selling some shares given the phenomenal 15% run over the last few weeks. And we took our panic point from 175 to 185 in doing so. So we'll continue to evaluate these panic points. But again, the whole reason we're doing it is to help members understand and think more. It's not just about stocks that move higher. It's about preserving capital, particularly when the market gets a little rocky.
J.D. DURKIN: So let's take that Axon example a bit further. You talk about that panic point now at 185. How do you calculate that, for people that might be looking at an Axon chart and want to better understand your own thinking on a panic point, Chris.
CHRIS VERSACE: Sure. So there's a lot of different data around where people should set these protective levels. It can be 7%. Some do it. Some do it as much as 20%. So what we're aiming to do is start a little wide because we're going into the September quarter earnings season. And we know that movements can be sometimes large to the upside, sometimes large to the downside. And we don't want to get kind of pushed out of a position if the company reports its earnings and only misses by a penny. If the underlying thesis is intact and, again, expectations are for continued favorable growth ahead, then we'll want to stay in that position.
So for that reason, we've started out the panic points probably a little wider, somewhere between 12% and 15% depending on the position. As these positions move higher, our thinking is that we will eventually tighten up those percentages, perhaps towards 10%, maybe even less, especially as they get closer to our published price targets.
J.D. DURKIN: Yeah. So it's pretty clear here panic points, they're not necessarily fixed. You'll update them depending on how a stock performs. Chris, where should we follow along for the latest updates?
CHRIS VERSACE: Well, I think it's pretty obvious. I would say members, A, you could always watch the Rundown where we give a lot of insight. But really, please be checking out your alerts which, of course, means checking the AAP website and your email inbox.
J.D. DURKIN: Absolutely. All right, folks. That's going to do it for today. Chris Versace, thank you, as always. Great to have your perspective.
CHRIS VERSACE: Thank you, J.D. .
J.D. DURKIN: Members, as always, please continue sending us all of your questions. You can do so by sending those questions over to email@example.com. Thanks for watching. We'll see you again soon.