Alright, that is a wrap for me today. Thanks for letting me join you all, even as we had some things to do over at the Portfolio. Hopefully, my comments were helpful on your trading journey.

Have a wonderful evening and feel free to drop into Portfolio Office Hours on Tuesdays (4 p.m. to 5 p.m. ET) and Thursdays (12 p.m. to 1 p.m. ET) in the Portfolio Forum.

Earnings after the close that I’ll be watching closely will be the ones from Netflix NFLX, and odds are that I won’t be alone, given the close to double the S&P500 return that the shares have put in so far this year.

Consensus expectations for NFLX’s September quarter call for EPS of $5.12 on revenue of $9.727 billion. Remember, the company is no longer guiding net adds and it will soon stop reporting several other metrics all together. When Netflix reported its June quarter, it did share that net adds for the September quarter would be lower than the 8.76 million added in the September 2023 quarter.

I’ll also be very interested in comments about the advertising model given the Portfolio’s position in Trade Desk TTD shares.

Following the updated GDPNow model we talked about earlier today…

https://www.twitter.com/NickTimiraos/status/1846915069835112755

But, as we think about that, let’s consider this tweet from Diane Swonk yesterday:

https://www.twitter.com/DianeSwonk/status/1846549058317426945

OpenAI makes a move and it’s one that I’ll be watching:

“OpenAI, the artificial intelligence powerhouse behind ChatGPT, has taken another step in its quest for ubiquity by releasing a Windows desktop application for its popular AI chatbot. The move, announced Thursday, follows the earlier launch of a macOS client and marks a significant push by OpenAI to embed its technology more deeply into users’ daily workflows.

The new Windows app, currently available in preview to ChatGPT Plus, Enterprise, Team, and Edu subscribers, allows users to access the AI assistant via a keyboard shortcut (Alt + Space) from anywhere on their PC. This seamless integration aims to boost productivity by making AI assistance readily available without the need to switch to a web browser.”

Blackstone BX President Jonathan Gray told the Financial Times that the private equity firm is "preparing to take some portfolio companies public... I would say the discussions have gone from theoretical to practical."

Per the article, the plans have progressed to the point where the firm is talking about timing, he added. The potential IPOs, though, hinge on stable equity markets.

This keeps the Portfolio bullish on a continued upturn in investment banking, which helped power strong results at Morgan Stanley MS and led us to boost our price target to $130 following that report. The continued rebound in IPOs and deal making as the Fed moves further down the rate cut curve also bodes well for the Portfolio’s BAC position.

Our thinking is that the move lower in rates will also be a catalyst for their wealth/asset management businesses as cash comes into the market from high interest savings accounts, which are already dialing back their offerings.

Following Apple’s AAPL cancelled car project, reports suggest one area that the company is looking at for future growth is the smart home. While not a new concept, the adoption has been spotty despite efforts by the likes of ADT ADT and others to bundle services on top of home security.

One such musing for Apple suggests a step beyond its current HomePod offering:

“The tabletop device, which is expected to come later, would be on the pricier side — perhaps around $1,000 — and focus on home security monitoring, advanced videoconferencing, and media playback with high-quality audio. The screen would be positioned atop a swiveling robotic limb, helping it stand out from competitors’ products.”

Should we be surprised?

Not really and I say that for a few reasons. Apple needs to grow and diversity its revenue stream. It would build on its HomePod and Apple TV presence. And this is a market that counts Google GOOGL as a player given its relationship with ADT in Google Nest Aware.

For it to really happen, Apple would either need to ink partnerships with security companies and or acquire other pieces of the puzzle that would result in a comprehensive offering.

Time will tell…

Hamas Chief Sinwar killed in Gaza, Israel says.

We’ll want to see if the response escalates things further or if something else unfolds.

Looks like we’ll have another alternative to broadcast and cable news as Amazon AMZN jumps into fray on 2024 election night coverage.

“Amazon Prime Video confirmed plans today for an election night special anchored by Brian Williams.

Election Night Live with Brian Williams will mark Williams’ first major appearance since departing MSNBC and NBC News at the end of 2021.

On the special, Williams will be joined by contributors across news and traditional media who will share poll results and commentary, according to Prime Video. They also will reference third-party news sources across the political spectrum.

The special will start at 5 p.m. ET.

Mixed with its push into live sporting events, Amazon continues to flex its Prime Video business but also its advertising one as well.

The growing use of advertising business models in streaming platforms, or to use the industry term “Connected TV”, was one of the reasons we started the Pro Portfolio’s position The Trade Desk TTD earlier this year.

With quarterly results from Netflix NFLX after today’s close, we may have a catalyst to revisit our price target.

Here’s the latest GDPNow update from the Atlanta Fed for the current quarter — revised up to 3.4% from 3.2%.

As we look at that the CME FedWatch Tool alongside that revised rolling GDP forecast, we find:

• The probability of 25-basis points cut to 4.50-4.75% at November FOMC meeting is 90.9% versus 93.7% yesterday.
• The probability of 25-basis points cut to 4.25-4.50% at December FOMC meeting is 77.2% versus 85.6% yesterday.

Let’s remember we get the September Housing Starts report tomorrow and next week brings the October Flash PMI data from S&P Global.

There's more going on with AI than you may have realized…

“As Hollywood tests the waters with artificial intelligence, Blumhouse has partnered with Meta META on a series of short films that use the recently announced Meta Movie Gen, the tech giant’s AI tools that create video and corresponding audio.

Blumhouse produced three short films that were made with the help of Meta Movie Gen from filmmakers Casey Affleck, Aneesh Chaganty (Searching), and the Spurlock Sisters. The short films were part of a pilot program run by Meta that is meant to garner feedback from the creative community about their text-to-video tools.”

The full article can be found here, and I’ll be sure to include this in our weekly weekend Signals email. If you haven’t been reading it, I would strongly suggest you do and ponder these ripped-from-the headlines confirmation points for the Portfolio’s holdings and strategies.

A follow-up comment from Taiwan Semiconductor’s TSM CFO Wendell Huang supports our decision to add some additional shares of Applied Materials AMAT to the Pro Portfolio this morning:

"For TSMC, a higher level of capital expenditures is always going to be related with higher growth opportunities in the coming years," Huang said. "And as long as our growth outlook remains strong, we will continue to invest. So it is very likely that our capex next year will be higher than this year."

Folks, sorry for a lull there but I had two “register ringing” trades to make for the Pro Portfolio. More on them later.

Chatter in the market suggests Uber UBER may be looking to acquire Expedia EXPE with Bank of America BAC liking a potential bundled offer of travel packages, including “transportation, accommodation, flights and even meals when traveling.”

My thinking is that while there are merits for why this could be considered, such a tie-up makes for a far more complicated story and valuation.

Let’s see what happens, and if it does come to pass if Lyft LYFT sticks to its ride-share business.

Dan Loeb’s Third Point 3Q 2024 investor letter has some interesting reading and tells a message that I’ve been making to Pro Portfolio folks: There is more to watch than just the 2024 presidential election:

“Whatever the outcome of the Presidential election, we have carefully studied the Senate races and believe that the Republicans will establish a majority, limiting the economic downside of a “Blue Sweep” which could theoretically usher in crushing taxes, stifling regulations, and a headwind to growth.”

Loeb’s full letter can be found here

Here are the September Industrial Production report's comments on the manufacturing economy during the month:

“Manufacturing output declined 0.4 percent in September and was 0.5 percent below its year-earlier level. The production of durable goods industries fell 1 percent, with declines widespread among its components. In addition to a drop of 8.3 percent in the output of aerospace and miscellaneous transportation equipment, declines of 1 percent or more were recorded for furniture and related products, for motor vehicles and parts, and for electrical equipment, appliances, and components. The production of nondurable goods increased 0.2 percent, as gains in the indexes of chemicals and of petroleum and coal products outweighed declines in the indexes of textile and product mills and of apparel and leather.”

The above clearly references Boeing BA issues, which along with two back-to-back hurricanes “subtracted” 0.3% in overall industrial production growth. Even with that adjustment, however, headline industrial production would have still come in flat compared to August.

Reports indicate Meta Platforms META has initiated layoffs across various divisions, specifically targeting teams within WhatsApp, Instagram, and Reality Labs.

Have to wonder if this is in advance of Meta lifting its capital spending levels yet again as the “AI arms race” accelerates per quarterly results and guidance from TSM.

The last few times META has upped its capital spending, it’s led to pullback in the shares, which could bring about an opportunity to nab some shares.

Just in time for the holidays?

Macy's M announced a holiday collaboration with Disney DIS with a limited-edition Disney assortment available only at Macy's and the debut of the Minnie Mouse character balloon at the Macy's Thanksgiving Day Parade.

While it may be a bit Grinch-like, call me nonplussed.

Upgrades

O-I Glass (OI) upgraded to Buy from Neutral at BofA Securities; target raised to $16

Sealed Air (SEE) upgraded to Strong Buy from Mkt Perform at Raymond James; target $42

TPG RE Finance Trust (TRTX) upgraded to Overweight from Neutral at JP Morgan; target raised to $9.50

Downgrades

Qiagen (QGEN) downgraded to Hold from Buy at HSBC Securities; target $49

SolarEdge Technologies (SEDG) downgraded to Sell from Neutral at Guggenheim; target $10

Spire (SR) downgraded to Sell from Neutral at Ladenburg Thalmann; target lowered to $60.50

Topgolf Callaway Brands (MODG) downgraded to Neutral from Buy at B. Riley Securities; target lowered to $12

Uber (UBER) downgraded to Neutral from Outperform at Daiwa Securities; target $84

Initiations

Cheniere Energy (LNG) resumed with a Buy at BofA Securities; target $215

Eli Lilly (LLY) initiated with an Outperform at Bernstein; target $1100

Exxon Mobil (XOM) resumed with a Neutral at BofA Securities; target $124

Marathon Petroleum (MPC) resumed with a Neutral at BofA Securities; target $174

Merck (MRK) initiated with a Mkt Perform at Bernstein; target $115

Moderna (MRNA) initiated with a Mkt Perform at Bernstein; target $55

MPLX LP (MPLX) resumed with an Underperform at BofA Securities; target $43

Occidental Petro (OXY) resumed with a Neutral at BofA Securities; target $57

ONEOK (OKE) resumed with a Buy at BofA Securities; target $105

PBF Energy (PBF) resumed with an Underperform at BofA Securities; target $25

Pfizer (PFE) initiated with a Mkt Perform at Bernstein; target $32

Phillips 66 (PSX) resumed with a Buy at BofA Securities; target $156

Plains All American (PAA) resumed with a Neutral at BofA Securities; target $18

Sun Communities (SUI) initiated with a Buy at Jefferies; target $160

Talen Energy (TLN) initiated with an Overweight at JP Morgan; target $268

Targa Resources (TRGP) resumed with a Buy at BofA Securities; target $182

TPI Composites (TPIC) initiated with a Hold at Jefferies; target $5

Valero Energy (VLO) resumed with a Neutral at BofA Securities; target $150

Vistra Corp. (VST) initiated with an Overweight at JP Morgan; target $178

Western Midstream (WES) resumed with an Underperform at BofA Securities; target $37

Williams Cos (WMB) resumed with a Buy at BofA Securities; target $55

Headline September retail sales are up 0.4%, ahead of the 0.3% forecast and a meaningful step up from August’s 0.1% increase.

Outside of motor vehicle and food service sales, the retail sales figure rose 0.3%, compared to the month prior, and was up 1.4% compared to September a year ago. For the September-ending quarter, retail rose 2.9% year-over-year, and climbed 1.6% compared to the previous quarter, which no matter how you slice it, says the consumer was spending more.

Where were they spending on?

Non-store retailers: up 7.0% for the September quarter and 7.1% in September

Health and personal care stores: up 4.3% and 4.6%

Food services & drinking places: up 3.7% for both periods

Grocery stores: up 2.3% for the quarter and 2.5% in September, suggesting a shift back to eating at home

Where were they not spending:

Quarterly and year-over-year declines were seen at electronic and appliance stores, gas stations (no surprise given oil prices during September), and department stores.

The report supports the Pro Portfolio’s position in Amazon AMZN and Costco COST, and we see both continuing to win wallet share this holiday shopping season.

Upgrades:

American Woodmark (AMWD) upgraded to Buy from Hold at Loop Capital; target raised to $119

Ardagh Metal Packaging S.A. (AMBP) upgraded to Buy from Underperform at BofA Securities; target raised to $5.10

Avery Dennison (AVY) upgraded to Buy from Underperform at BofA Securities; target raised to $250

The Baldwin Group (BWIN) upgraded to Outperform from Mkt Perform at William Blair

Cohen & Steers (CNS) upgraded to Neutral from Sell at UBS; target raised to $102

Enphase Energy (ENPH) upgraded to Neutral from Sell at Guggenheim

Fortinet (FTNT) upgraded to Positive from Mixed at OTR Global

Host Hotels (HST) upgraded to Buy from Neutral at Compass Point; target raised to $22

Illumina (ILMN) upgraded to Buy from Hold at HSBC Securities; target $180

Littelfuse (LFUS) upgraded to Outperform from Perform at Oppenheimer; target $310

Downgrades:

Brinker (EAT) downgraded to Mkt Perform from Outperform at Raymond James

Capri Holdings (CPRI) downgraded to Equal Weight from Overweight at Wells Fargo; target $42

Fortinet (FTNT) downgraded to Underperform from Neutral at Mizuho; target $68

Grainger (GWW) downgraded to Perform from Outperform at Oppenheimer

Initiations:

AbbVie (ABBV) initiated with a Mkt Perform at Bernstein; target $203

AirSculpt Technologies (AIRS) initiated with a Neutral at BTIG Research

Alumis (ALMS) initiated with a Buy at H.C. Wainwright; target $30

Amgen (AMGN) initiated with an Outperform at Bernstein; target $380

Apyx Medical (APYX) initiated with a Neutral at BTIG Research

Bristol-Myers (BMY) initiated with a Mkt Perform at Bernstein; target $56

Cheniere Energy Partners (CQP) initiated with an Underperform at BofA Securities; target $46

Chevron (CVX) resumed with a Buy at BofA Securities; target $168

Constellation Energy (CEG) initiated with an Overweight at JP Morgan; target $342

Crane NXT (CXT) initiated with an Outperform at Robert W. Baird; target $77

Curbline Properties (CURB) initiated with an Overweight at Piper Sandler; target $28

Delek Logistics Partners (DKL) initiated with an Underperform at BofA Securities; target $36

Delek US Holdings (DK) resumed with an Underperform at BofA Securities; target $15

Energy Transfer (ET) resumed with a Buy at BofA Securities; target $20

Enterprise Products (EPD) resumed with a Buy at BofA Securities; target $35

Equity Lifestyle Properties (ELS) initiated with a Hold at Jefferies; target $72

First Watch Restaurant Group (FWRG) initiated with an Overweight at Stephens; target $20

Formula One Group C (FWONK) initiated with a Neutral at UBS; target $85

Gilead Sciences (GILD) initiated with an Outperform at Bernstein; target $105

GRAIL (GRAL) initiated with a Neutral at Guggenheim

InMode (INMD) initiated with a Buy at BTIG Research; target $25

Kinder Morgan (KMI) resumed with a Buy at BofA Securities; target $27

From Taiwan Semi’s TSM earnings call:

“As the strong structural AI-related demand continues, we continue to invest to support our customers' growth. We now expect our 2024 CapEx to be slightly higher than $30 billion U.S. dollars. Between 70% and 80% of the capital budget will be allocated for advanced process technologies.

About 10% to 20% will be spent for specialty technologies, and about 10% will be spent for advanced packaging, testing, mass making, and others.”

This should help take some of the edge off from ASML’s ASML booking shortfall, which was likely for due to issues related to Intel INTC.

Parsing Taiwan Semi’s TSM September-ending quarter revenue, we find the following for its reporting segments:

HPC: up 65% YoY, 10.7% QoQ

Smartphone: up 18.6% YoY, 16.3% QoQ

IoT: up 5.8% YoY, 31.7% QoQ

Auto: up 36% YoY, 12.9% QoQ

The next quarter's (December-ending) quarter revenue guidance of $26.1 billion-$26.9 billion implies 11%-14.5% sequential growth and 33%-37% year over year.

Good morning, everyone. We’ve got a busy day of catching up with overnight news, including better-than-expected quarterly guidance out of Taiwan Semi TSM that is lifting tech stocks this morning. Other earnings reports for this morning are starting to trickle in, too.

We also have September-ending quarter retail sales on deck as well as September industrial production. In between those reports, the European Central Bank will hold its press conference to discuss its 8:15 a.m. ET interest rate decision.

Ahead of the retail sales and industrial production figures and today’s next update, the Atlanta Fed GDPNow model sits at 3.2% for the current quarter.

As I refill my cup of morning go-juice, go get yours and I’ll see you back here shortly.