Video: AAP Daily Rundown for Tuesday

Chris Versace explains the portfolio's recent additions to its positions in Applied Materials (AMAT) , BlackBerry (BBY) and Chipotle (CMG) amid Tuesday's mixed trading action.

CHRIS VERSACE: Good morning Action Alerts PLUS members, I'm Chris Versace. Bob Lang and Katherine Ross have the morning off. It's been quite the trading week already, and it's only Tuesday, and today looks to be no different. After a mixed open, all three major indices are sharply lower as of 10:00 AM ET today, reason for that being, markets are bracing for what Fed Chair, Powell, is going to say about monetary policy as the Fed looks to fight inflation when he testifies in front of the Senate Banking Committee.

In his prepared remarks, Powell pretty much said they will pull all stops out in terms of monetary policy to make sure quote, "Inflation does not become entrenched." Remember, we do have the CPI and PPI reports for December and more comments from Fed Chair Powell on Thursday. Odds are we're going to continue to see the market digest this latest data with the concern being that we could get more dialing back of Fed policy than was expected, not only last week but certainly more than three months ago. OK.

So this morning, we've taken advantage of the recent weakness in the equity markets to add to our positions in BlackBerry, Chipotle, and Applied Materials. Starting with BlackBerry, which we've been closely watching since the hotly watched and much telegraphed closure of the smartphone business, we are waiting deeper into the shares with the why being simply that the risk reward as a result of the recent bout of misremembering what the company does really offers tremendous upside ahead of the catalyst that is the pending sale of the wireless patent portfolio, which we think is simply going to rearm the company's balance sheet to a significant degree.

And remember too, we still have not only favorable prospects for the cybersecurity business but as auto production rebounds in the first half of the year, that should also be a positive for Blackberry's automotive cockpit business, in addition to any of the other wins that we've heard about of late coming out of CES 2022.

Now, similar to Blackberry, we see a favorable risk reward scenario playing out with Chipotle. Shares since mid-November and really at the start of the Omicron unfolding, we have seen the shares pull back about 17% or so. What we think happened candidly is those expectations for how hard Omicron would hit the restaurant business were clearly overdone. Proofpoint to that is when Carrols reported their December quarter same store sales results, they came out and said that their Burger King business was up 5% November 9 point sorry-- 5% in October, 9.7% in November, and close to 9% in December. And that's Burger King.

When we think about how Chipotle is positioned not only on the digital ordering front, mobile delivery front, but also with its menu front and limited time item offerings, we continue to see Chipotle winning consumer wallet share. So we want to be positioned for that when they report.

And as far as Applied Materials, we simply continue to see multi-year demand for chip equipment outpacing where current supply is. Remember, the key point that going to want to watch for this week with Applied Materials will be when Taiwan Semiconductor reports its December quarter results, the odds are it will issue fresh capital spending guidance for 2022 to record levels. Obviously, a positive catalyst for our shares of Applied.

Also, let's talk about another chip holding in the portfolio. AMD, which caught a rating and price target boost from KeyBanc. KeyBanc said demand for AMD chips could quote, "Meaningfully outpace growth in the broader chip industry. Not really much of a surprise to us when we take a look at what they're doing in data center and cloud, but we also see that reminding us why we're positive on shares of NVIDIA and Marvell as well. And remember too that cloud, data center, 5G, AR, VR, a whole kit and caboodle of other items that we've been talking about are simply positive drivers over the long-term for semiconductor capital equipment spending. In other words, further positives to be had for our shares of Applied Materials.

And finally, yesterday, we introduced our aging of the population investment theme. Over the last three months of 2021, we did a lot of work kind of repositioning the portfolio, and we want to continue to do that in 2022 to take advantage of multiyear thematic drivers. In the case of aging of the population, we wrote about it yesterday, there is simply no stopping the father time. And this demographic shift has a greater percentage of not just the US population but the global population moves into their senior years is going to have a profound impact on how that demographic lives their lives, how they shop, and respectively,

how they get transport it around.

And we want to be prepared to take advantage of that. That's why we sat back yesterday and really did a deep dive on the aging of the population investment theme. And yes, we will continue to kick over companies everywhere from [INAUDIBLE] and health care to data center, sorry, to physician's office REITs, to assisted living REITs and everything else that kind of touches on that multi-pronged multi-year investment theme.

Thanks for joining us, and we'll see you tomorrow.

Note: A previous video was published earlier. We apologize for any confusion.

Action Alerts PLUS is long AMAT, BB and CMG.