J.D. DURKIN: Good morning, "Action Alerts Plus" subscribers. Chris Versace and I are now here once again to walk you through this week's game plan. Chris, good morning. You and I did not have the opportunity to talk one-on-one yesterday. So, start us off with a look at what you're watching, after Monday saw the major averages taking a bit of a breather after five weeks of gains.
CHRIS VERSACE: Yeah, look, we've been very vocal with members that, as much as we've been enjoying the move higher in the market, it's been very fierce, very fast. And typically, when we tend to see such pronounced moves like this, there's a period of digestion. We could see a bit of a pullback. And we've been preparing members for that.
But we've also been opportunistically ringing the register in the portfolio, locking in some-- I mean, to say they're pronounced gains would be a bit of an understatement. For example, when we trimmed back the shares of United Reynolds, that slice took about a 53% gain for members, locking that in. So, again, we've been prepared for this. We've been adding to the bullpen. And I welcome the opportunity to put some of that capital to work.
J.D. DURKIN: Chris, the recent uptick in bullishness has been such a major focus of yours, of course, as well as many of AAP's team members. Was yesterday, I wonder, the exception to the rule, or was yesterday a bit of a sign that the early December sell-off that Helene Meisler has been predicting is on the table, at least for this week?
CHRIS VERSACE: We're starting to see folks sort of, like, wake up, right? And what I mean by that is, we've talked with members how, as we move through and into January-- sorry, into December, January, February, and really, all of 2024 is going to start to come into much, much greater focus for Wall Street. That means taking a hard look at earnings expectations for the market, taking a look at individual company earnings expectations. But also, what's the outlook for the economy?
What's the outlook for interest rate cuts? And kind of putting it all together. And in my opinion, when you've seen, as we just discussed, such a fast and furious move in the market, it's almost priced to perfection. So, any type of questions, uncertainties, if you will, that starts to give investors, Wall Street, a reason to start rethinking things-- excuse me. And I think that's exactly where we are, J.D. . And again, from our perspective, we welcome it.
J.D. DURKIN: And if any of our subscribers missed that conversation with Helene, please head on over to the Video tab on your home page and re-watch, or watch for the first time, Friday's rundown. I think any conversation with Helene is worth watching at least once, maybe twice or three times. It was a really good talk there. OK, from a game plan perspective here, Chris, you've been noting that any sell-off should be treated as an opportunity to do a little buying, classic buy the dip. Is that still the plan, I wonder, as we kick off this week? And are there any names in particular you think we should be watching?
CHRIS VERSACE: So, you're 100% correct. That is indeed the game plan. But remember, this pullback is just starting. We saw it start to happen yesterday. It looks to continue today. It's going to take more than one or two days for us to start wading in. Remember, we want to pick up these stocks that have superior earnings growth prospects relative to the market at better prices. So, you know, again, a day or two of moving lower isn't going to be it. We're going to want to see a more pronounced pullback for names that were soft circling, if you will.
Some of them include recent additions to the bullpen, as well as other bullpen hangers on, if you will. Call it Morgan Stanley, Builders Firstsource, Labcorp, perhaps even Cisco, perhaps even Walmart. These are the names that we're looking for. Remember, though, they have to hit a favorable risk reward profile for us to start to put that capital to work. So, again, we're going to need to see more of a retrenchment in some of these stock prices for us to get off the bench.
J.D. DURKIN: Chris, let's move now to some of this week's potential catalysts. It's a big week for employment data. What are your expectations for the week's jobs report?
CHRIS VERSACE: So, normally, we would say, hmm, the market wants to see slower jobs growth. However, there's a little bit of a wrinkle, which was the settling out of the UAW strike. So, the expectation is that these numbers come in actually a little bit better in November than they were in October. So it kind of cuts one of two ways, J.D. , excuse me. If we see numbers that are far, far stronger than the market's expecting, it's going to say, wow, we started to see a rebound in the base jobs market.
That's going to have people scratching their head for this Goldilocks narrative, and the notion that the Fed could be cutting sooner than expected when it comes to interest rates. On the other hand, because of this uptick with the UAW workers coming back into the fold, if we see a much, much weaker than expected employment report on Friday, it's going to cause people to think that, oh goodness, the economy is really starting to soften, maybe more so than I thought previously.
That could start a rethink on expectations for GDP in the first half of the year. So it's going to be a very binary employment report when we get it on Friday. And, of course, as we watch this and digest this, we're also going to be paying attention to wage growth as well.
J.D. DURKIN: Let me do a quick follow-up on this. Unemployment is something we'll also closely follow. We have not had 4%, I believe, since January of 2022. We are at 3.9%. How closely will you be following that particular part of Friday's information dump, so to speak, from the Bureau of Labor Statistics? And what do you think our members should be tracking?
CHRIS VERSACE: So, the unemployment report is kind of a tricky thing because you've got to measure a couple puts and takes, the number of people coming into the labor force. But it's also the number of people that are dropping out of the labor force. So, there are a few-- excuse me, a couple of different metrics that you can watch. There's the reported one. There's the U6 number. You also have to triangulate that with what the household survey has to say. So, I tend not to put stock in any one particular data point. Just like when we try to value stocks, we want to triangulate several data points to give us a better picture of what's really going on in the economy. And I would say the exact same thing here as well. That's what I think.
J.D. DURKIN: You don't put too much stock in one data point. I see what you did there, Chris Versace. You are a man of great puns. I'm not going to let a good pun slip by in our conversations. Chris, let's quickly revisit a conversation you and I touched upon last week, JP Morgan joining the fray of firms issuing S&P targets for next year, a bearish 4,200 projection, some analysts going as low as 3,500. Could challenges to the Goldilocks narrative in the new year lead us into that direction?
CHRIS VERSACE: I think that's right. And a few weeks ago, we kind of said to members, again, earnings expectations are going to be a big deal. The market has been-- sorry, the consensus forecast of the market is 11.5% year-over-year in 2024. We tend to see the initial cut for forward earnings be low double digits. Yes, we're seeing that again. More often than not, it doesn't play out.
And again, we touched on this earlier in our conversation today. The market is starting to shift back and say, hmm, how likely is this, given what we're seeing with interest rates, what we're seeing with the economy, not just in the US, but outside of it as well. And the big rethink is afoot, J.D. . And as that happens, people are going to start to question earnings multiples, but on that overall S&P 500 EPS target for 2024 in terms of earnings.
So, there's a lot of dancing back and forth. And candidly, while there are some expectations for the S&P 500 to end 2024 at 3,500, there are some that are 4,200, 4,500, 5,100, and as high as 5,400. In short, they're all over the freaking map. What I would tell members is, think of it this way. We do not buy the market. But we have to be mindful of where the market is, and where the market multiple is as well.
If anything, this conversation has us doubling down on focusing with companies that are poised to deliver superior earnings growth, i.e., faster than the market, because when that happens, we tend to get multiple expansion. That combination drives, historically, superior stock price performance. That's where our head is going to be.
J.D. DURKIN: Yeah, and a quick scorecard check for those following along at home. As we're having this conversation, the S&P is at 4,565, so kind of more or less in the middle of that range of those projections you threw out there. Chris, is there anything else that you want to share with members before we leave it for today?
CHRIS VERSACE: Yeah, I would, actually. So, J.D. , at the top, you alluded that we did not speak like we usually do on Monday. And the reason for that, members, is I got way laid in terms of travel coming back from Las Vegas. It was a nightmare, folks. But there was some interesting learnings. And let me share this with you. So, I wound up being in three major airports, International Dulles at Washington, Chicago O'Hare, and Las Vegas Airport.
And I can tell you that the lines in all three airports were simply huge. To say they were pronounced would be an understatement. The only place I saw longer lines than at the TSA Pre-line were the lines at CLEAR. That's right, folks. The service operated by Clear Secure, the lines were so long and not moving that all I heard as I passed by was folks that were not going to renew their membership. Now, if this was what happened at one airport, I'd be kind of filing it away, going, hmm, something to pay attention to.
But when I see it at three major airports, that's a bit of a warning sign to me. And while we, at the portfolio, sold our shares of Clear Secure, ticker symbol YOU, several weeks ago, for those members that continued to hang on to their Clear Secure shares, I would suggest that you consider using the more recent pronounced run in them to take some of those chips off the table, if not exit the position. We're going to have a technical look at Clear Secure later today. And yes, the shares are extended. So, J.D. , that's my one other thing for today.
J.D. DURKIN: Up close and personal, individual observations are always welcome. Usually, I'd say I have tremendous sympathy for anyone flying out of Dulles. But I feel like you're probably more of a fan of Dulles than I am, given my years in Washington. But I'm glad you got back safely, Chris. It's nice to have you. Thanks for taking the time.
CHRIS VERSACE: Thank you.
J.D. DURKIN: That's going to do it, folks. We both will be back, that man and myself, tomorrow, with some of the answers to your biggest questions of the week. Until then, happy trading. Have a great day. And we will see you again soon.