J.D. DURKIN: Good morning, Action Alerts Plus subscribers. Chris Versace and I are back after the holiday weekend to get you ready for a busy week as Wall Street fully returns, of course, as well from the long Thanksgiving holiday. Chris, thank you for being here, as always. Hope you had a great restful few days. Now, given members may have missed an alert or two as they digested their turkey and mashed potatoes the last few days, Chris, catch us up on the portfolio. What are the biggest highlights from last week?
CHRIS VERSACE: Probably the biggest highlight, J.D. , was the trimming back of our shares of Chipotle. I mean, they have been simply a monster performer since the end of October. Our position was up, at the time, 38% from our cost basis. So again, just doing some prudent conversion of gains into profits for the portfolio, and more importantly, for members as well.
We also lifted Chipotle's price target to around $2,200, up from $2,100, again, downgrading the shares, as I said, to a 2 rating from a 1. That was probably the biggest thing. There were a number of other events that were going on. But again, if I had to single out one particular action, that would be it.
J.D. DURKIN: So let's talk John Deere. Deere struggled after issuing a disappointing outlook for 2024, Chris. What are your latest thoughts after downgrading it to a 2 and lowering your price target?
CHRIS VERSACE: So the real story behind Deere is, they have a softer outlook for the equipment market, mainly due to Brazil, but overall, some softer spending from farmers, which is understandable given where borrowing costs are. However, the key for us is going to be the company's ability to continue to deliver better than expected margins.
We've been talking about this with members. And even through the company's earnings report last week, they did do just that. But to do that further on lower volume, that means there need to be some real structural changes inside the company. And while Deere is likely to do this, from a markets perspective, it becomes a show-me story. So we're going to want to sit on the sidelines for now, let Deere put up a quarter or two.
As that happens, we could see some enthusiasm for rate cuts bubble back into the market. That might give us a stronger outlook for the second half of next year. But remember, too, in the alert that we pointed out, we're watching the $350 price level. If we see Deere shares get down to that level, the risk reward pretty favorable, given historical multiples. That's where members should be looking to perhaps add to their Deere position because that's where we're looking.
J.D. DURKIN: All right, looking ahead here, Chris, we do have Marvell reporting later on this week. What will you be watching for there in the Marvell cinematic universe after we saw those stellar results from NVIDIA last week?
CHRIS VERSACE: So we talked about that when we had our post-NVIDIA comments. And, look, NVIDIA's report was very good, a really robust data center demand. And that bodes very well for Marvell as well. We've also got some very good comments leading into Marvell's report later this week about network spending, particularly all the incremental traffic being driven by AI and the pressure that's going to put on those networks.
So again, another positive for Marvell as well. But we are kind of sitting on the sidelines. Remember, J.D. , when NVIDIA reported, they talked about some near-term weakness in their China business because of export controls. Marvell derives a large percentage of its revenue from China. So let's let that information come out. But if we see the shares retreat, call it $45, $47, $48, that could be an opportunity that we've been waiting for with Marvell shares.
J.D. DURKIN: All right, Chris, you've been clear that any challenge to the Goldilocks narrative could lead to steep selloffs in this relatively overbought market. Is the PCE data that's expected Friday, is that the biggest potential challenge on the table, you think?
CHRIS VERSACE: I would say it's one of them, J.D. . I mean, look, we need to see further confirmation that inflation pressures are waning. And of course, this is one of the data points that should show that. It's also one that the Fed watches rather closely. But we also have something like nine Fed speakers this week, with Jerome Powell speaking not once but twice on Friday. So that's going to be another hurdle.
And remember, too, on Friday, we also get the next round of PMI data, manufacturing, for November. That's going to tell us a lot more about the speed of the economy. So I think triangulating those three things for this week will tell us if the Goldilocks narrative has legs.
J.D. DURKIN: All right, not too hot, not too cold. We will see. Of course, Chris, we'd be remiss not to check in on the consumer. Of course, we have to check in with the consumer on a week like this. A strong Black Friday is already in the books. What will you be watching for this Cyber Monday, especially, of course, given the club's position in Amazon?
CHRIS VERSACE: Well, we'll be watching for more confirmation, candidly, of what we've already seen. Yes, Thanksgiving spending was up year-over-year. Black Friday was up as well. But the shift really confirms why we were bullish on Amazon all along. Really, two things, J.D. . One, when you parse the Mastercard data, digital shopping trounced in-store shopping. We saw the same thing with Adobe.
But the second thing is, we also saw a really rather large increase in Buy Now Pay Later, or BNPL. And that tells you that consumers really are looking for deals. They're trying to extend those payments. So that not only has us positive on the shares of Amazon, but it also speaks to why we own Costco and McDonald's in the portfolio as well. Remember, consumers taking advantage of deals, stretching-- stretching those dollars, excuse me, but cutting back in other areas when they can.
J.D. DURKIN: Chris, is there anything else, I wonder, that you'd like to share with members before we wrap up for this Monday?
CHRIS VERSACE: The only other thing is, we're going to have another array of retailers. And I think when we hear from PVH, Ulta, and others, it's going to give us a little more granularity on that holiday shopping that we've already had, as well as what we're likely to see ahead. Remember, the National Retail Federation and others are looking for holiday shopping sales up 3%, 4%. This commentary is going to add another layer to whether or not we're likely to see that happen.
J.D. DURKIN: All right, gobble til you wobble. That's what they say, right? That's going to do it for today, Chris. Thanks for taking the time, as always, my friend. Nice to have you back.
CHRIS VERSACE: Same here. And thank you, J.D. .
J.D. DURKIN: That man, Chris Versace, will be back tomorrow to talk a little bit more about the state of the US consumer once those Cyber Monday results start coming in. Thank you, as always, for taking the time to watch. And we will see you again soon.