J.D. DURKIN: Let's look at this, reds and greens, as it should be for the holiday season. Chris, let's kick things off here on a high note and talk a bit about some of the biggest wins of the year. We had to do a little homework. So let's begin our conversation in the world of infrastructure and united rentals. Infrastructure, Chris, such a focus of yours heading into this calendar year. And united rentals up 40% year to date, certainly something to celebrate. Chris, what did you get right here?
CHRIS VERSACE: Well, we identified the big push that would be coming and unfolding just beginning in 2023, continuing into 2024-2025 for non-residential construction. There's a variety of things that are powering, it everything from the Biden infrastructure law, the Inflation Reduction Act, and we're going to see some other things come on stream in 2024 as well, including what we saw earlier this week, which was the first award of the CHIPS Act.
And we expect that to accelerate, again, in the coming quarters. And there are some other things in the background as well. But I would say, J.D. , it was really recognizing that big pickup in non-residential construction.
J.D. DURKIN: Given the time of year, Chris, we've spent an awful lot of time talking about the consumer and retail stocks. Let's talk Costco, Chris. What stands out to you about that name?
CHRIS VERSACE: Well, I mean, first off, Costco is a great, great company it's got a very differentiated business model. Not only does it sell stuff at great prices and in bulk for cash strapped consumers, but it has that membership business model, very high margin. And that continues to grow as the company expands its footprint.
But I think for us, the greatest thing about Costco is not only are we at the AAP club consumers at Costco so we get a lot of first-hand boots on the ground view on what's going on at Costco, but the strategy behind the company's retail facing business really plays into what we were seeing develop with the consumer.
A lot of inflation built into the system. Consumers taking on piles and piles of credit card debt, feeling the pinch, if you will. And just looking for ways to extend the shopping dollars they had. And that's right in Costco's wheelhouse.
J.D. DURKIN: Yeah. The stock is up 40%, year to date. I'm a big fan of the Costco churros, as you know. And I know I'm not alone in that. Chris, it's been a while since you talked about Axon in a video. So let's talk Axon. Not necessarily a bad thing, given the fact that it has been a bit of a silent sleeper success story. Chris, what is that story?
CHRIS VERSACE: So there's really a couple pieces to it. First and foremost, when we identified Axon for club members, we were talking about the incremental spend for public safety. There was a big bill passed by President Biden in 2022 that was going to start to come on stream in 2023. But there's also state and local spending. There's also spending outside of typical law enforcement as well that really speaks to the adoption of, not so much tasers, but body cameras and the cloud services behind them.
That's been the bulk of the story. But what we're seeing now as we start to move into 2024 is the incorporation of AI into Axon's offerings. And what I like about this is that we've heard a lot about AI over the last year, certainly with the Magnificent Seven. But when we look at how Axon is using it to drive real productivity, I think it's just a great example of the potential promise for AI.
J.D. DURKIN: All right, Chris. Let's conclude the highlight reel portion of the members call with a name that's not even any longer in the portfolio. Chris, how did you know when it was the right time to exit Ford and what has happened since?
CHRIS VERSACE: So if you look back when we exited Ford, we had been telegraphing to members that, wow, we certainly have a big win in this particular name. But as we look forward, there were a lot of things that were really flashing signs that were-- sorry, warning signs that were flashing. Everything from the UAW contract, which looked as if it was going to be a big item that, not only Ford, but General Motors and Stellantis would have to deal with. But we were concerned about EV adoption. We were concerned about the company's ability to deliver its targeted margin improvements as it continued to invest so much.
And there were some issues about the consumer that we were concerned as well. So when you put all that together from our perspective at least, we're sitting there with a big win, hard to see much incremental upside in the shares. A lot of potential downside if those things I just mentioned went wrong. We said we're better off taking the win and moving on. And I'm glad we did because when we sold the stock at around 1,360, 1,370, something like that, again, big win for the portfolio. The shares haven't touched that level since.