We're Exiting a Three-Rated Position, Adding to Two Other Holdings
AI and capital spending comments from Taiwan Semiconductor confirm our thinking.
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| Symbol | Transaction Type | # Shares Traded | Recent Price $ | Shares Owned After Trade | % Portfolio |
|---|---|---|---|---|---|
ELV | Sell | 230 | 432 | 0 | 0 |
AMAT | Buy | 163 | 190 | 790 | 3.1 |
ESTC | Buy | 595 | 83 | 1,755 | 3.0 |
After you receive this Alert, we will make the following trades:
-- Sell the remaining 230 shares of Three-rated Elevance Health ELV at or near $432. This will close out the portfolio’s position in ELV, with a 7% loss for the remaining shares.
-- Buy 163 shares of Applied Materials AMAT at or near $190. Following the trade, AMAT shares awill account for roughly 3.1% of its assets.
-- Buy 595 shares of Elastic N.V. ESTC at or near $83. Following the trade, ESTC shares will account for about 3.0% of its assets.
Following disappointing quarterly results from Elevance Health and guidance that suggests more to come, at least in the current quarter if not into 2025, we are opting to move on from this Three-rated position. While the exit price means we’ll absorb a modest loss on our remaining shares, that is offset by the more than 15% gain we booked when we sold and downgraded the stock in late August.
We will put some of the returned capital into our newest position, Elastic N.V., and also use the fallout from ASML Holding's ASML weak September-quarter bookings and trimmed 2025 outlook to add to our Applied Materials position.
The decision to make this addition to AMAT is being prompted by comments from one of Applied’s largest customers, Taiwan Semiconductor TSM. In addition to reporting stellar September-quarter figures and robust December-quarter guidance, as we suspected, strong demand for AI and data center over the last several months and the rebounding smartphone and PC markets are leading TSM to up its capital spending. Our view that ASML was impacted by woes and restructuring efforts at Intel INTC looks to be spot on as well.
On its earnings call early this morning, TSM said:
“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.”
The next catalyst for AMAT shares will be capital spending comments from Samsung when it reports its full September-quarter results.
On the housekeeping front, after we make these three trades, our cash position will rise to over 10%, a level that we find comfortable for the time being. We’ll have more detailed comments on TSM’s quarter and how it supports our positions in several portfolio holdings in another Alert to you later today.
(Please note that we are looking to execute these trades at or near the share price mentioned above. Once the trade is completed, subscribers can see the trade's executed price here. Be sure to click on Closed Trade Gain/Loss and toggle the chart to sort by Purchase Date.)
At the time of publication, TheStreet Pro Portfolio was long ELV, AMAT and ESTC.
