On today’s Daily Rundown video, Chris Versace recaps today’s portfolio moves.
He also shares why comments made on Target’s (TGT) earnings call are positive for two Portfolio holdings and a Bullpen resident.
Transcript
CHRIS VERSACE: Hey, folks. Chris Versace here. Wednesday, May 22nd. And while we wait for the Fed's latest meeting minutes to drop around 2:00 PM this afternoon and earnings from NVIDIA, as well as Elf Beauty after the close today, I wanted to catch you up on our latest move with the portfolio. I'm referring to the trimming back and locking in of meaningful gains in the shares of Qualcomm and are picking up some additional shares of Axon.
Now look, we continue to see further upside in the shares of Qualcomm as the company continues to benefit from the AI on device upgrade cycle, both for PCs, as we talked about yesterday when we boosted our price target to 230 from 210, but also in the core smartphone market. So just thinking about our move, Qualcomm shares are up about 93% since late March.
So that surge in the shares over time obviously benefited the portfolio. But it also meant that the position size for Qualcomm was around 4.8%, making it our largest position by far. So what we opted to do was do some prudent portfolio management, lock in a slice of the gains, keep a sizable position to capture further upside in Qualcomm shares. Pretty simple, just a prudent move. Again, we like to be disciplined investors when it comes to the portfolio. Walking, as I like to say, the prudent path.
Now we took some of those proceeds, not all, but some, and we used it to top off our position in Axon. Why did we do this? Well, it's no secret that the shares have been under some pressure lately. After the company reported its recent quarterly results, we and others boosted their price targets on Axon. We continue to see very good growth prospects there, especially as the business continues to shift towards the higher margin, recurring revenue cloud business.
So what was the catalyst, the kind of weight on the shares? Well, this mini wave of insider selling. But as I discussed in the followup trade alert note to you, when we aggregate the shares across these 10 directors, it was easily less than 8,300 shares. In other words, very small relative to the overall trading volume that we see with Axon.
Now started off the week sharing that, one, the market mood, back in greed. And it's hit that euphoria level on the Citibank, euphoria and panic model. So that tells us that the market's going to be very sensitive to things. And as we know, Axon is not really one of those companies that churns out a lot of press releases.
So when the market sees something like this, it's going to act hastily. You know, we kind of sat back on the sidelines, waited. We knew that company was presenting at the JP Morgan Conference. We digested those comments. We shared them with you today. And that presentation, along with the pullback and the larger opportunity in Axon shares, is really what led us to scoop up this potentially last slug of Axon shares.
So that's the rationale behind the trades that we did today. But I also wanted to touch on some of the learnings coming off of Target's earnings conference call. We talked a little bit about Target's initial results in our opening comments today, but I did want to follow up because there are some implications for some of our holdings. So let's get to it.
First and foremost, if you take a look at the negative comp sales that Target posted for the quarter, match them up against the positive comp sales at Costco, there's little question that Costco continues to take market share in certain categories away from Target, most likely food and grocery. Costco has a very, very strong position in that particular market. But it is one that sizing up those numbers keeps us incrementally bullish on the shares of Costco.
Remember, we continue to wait for the company to announce its membership price increase, a matter of time. That'll be a big catalyst not only for us but others to revisit Costco price targets with an upward bias. The second thing I want to talk about was a comment that target made about its private label food business. They said that as we move into the summer, they'll be bringing about 125 new items across their two different private label food brands.
Now we know that they have a relationship with treehouse foods. This is another reason for us to go back and rethink THS shares that we recently put into the bullpen. Paired with the pending launch of Walmart's new private label product, we could see some positive things on THS shares, and we want to get prepared for that.
So what does this mean? Well, last week, we did a deep dive in valuation work on the shares of Eaton. Yesterday, we shared something similar with the shares of Meta Platforms. Next up, it's going to be THS or Treehouse shares. So we'll be working on that and sharing our in-depth thoughts about a potential entry point for that bullpen candidate with you in the coming days.
And then finally, as it relates to Coty, there was a comment that we shared earlier with you that target called out its beauty business as a very, very strong one, calling it, quote, an outperformer. Well, on the earnings call, they gave a little more color on that. What did we learn? Their overall beauty business was up low single digits, led by the business with Ulta or Ulta Beauty at Target, which tends to be more premium-focused.
Now my initial reaction when I read the Target earnings release is hmm, that beauty comment is probably very good for Coty's consumer beauty business, but the layering in of Ulta says it's also positive for Coty's bread and butter business, which is North American and Prestige.
Now coming up after the close, we do have quarterly results from Elf Beauty, so we're going to want to pay attention to that. And if they have positive things to say about the premium segment for cosmetics, skincare and other body care products or beauty products, and positive comments for the overall North American market, again, the bread and butter business for Coty, that could lead us to potentially pick up some incremental shares of Coty, largely because, one, we continue to see the strategy that the management team is working is starting to pay off market share gains, as well as reduced debt leverage, but also their near our cost basis.
And we do like to improve our ownership positions when we can near the cost basis, especially on the back of favorable commentary. So with that, I would just remind you, please, please check your alerts. Check your emails. We want to make sure you're getting our latest thoughts, as well as any other thoughts that we might have when it comes to the portfolio and making any moves.
And remember, it's going to be a busy set of trading hours before we get out of here for the holiday weekend. Fed meeting minutes, NVIDIA earnings, and tomorrow, we have the Flash May PMI data. It's going to tell us quite a bit about the speed of the economy, next look at inflation. So again, please be sure to check your alerts. We want to make sure that you are right there with us. Thanks for watching.
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At the time of publication, TheStreet Pro Portfolio is long QCOM, AXON and NVDA.