VIDEO: Why We’re Closely Watching These 3 Stocks

In today’s Daily Rundown video, Chris Versace discusses the moves we’ve made this week with the portfolio, including today’s extremely profitable trade on the shares of United Rentals URI. 

He also discusses three positions that have pulled back and have the portfolio watching them carefully. 

Finally, he shares how he sees this week’s economic data influencing what Fed Chair Powell will say next week.

Transcript

CHRIS VERSACE: Hey, folks, Chris Versace here, Friday, July 26. Closing out the week, markets looking to claw back some of the losses that we've experienced over the last couple of days. And if we take a look at what's happening, I think the market is really trying to figure out where some of the value is to be had.

We have seen the chip space really get hit hard, despite a lot of positive data, whether it's the quarterly earnings from Taiwan Semiconductor, the outlook we saw from Micron, or even the comments regarding AI adoption out of ServiceNow that led us to boost the price target for that particular holding. I do think that there's a lot of underneath-the-radar fundamental positive data points that are out there.

And that's going to keep us patient on tech, while the market's renewed enthusiasm for rate cuts following today's June PCE price index data continues to lift our more interest rate-sensitive names in the portfolio. Look at Builders FirstSource continuing to work for us. United Rentals moving past our price target that we just raised earlier this week, which, of course, led us to do some prudent register ringing, locking in another slice of, if you can believe it, triple-digit gains for this position.

So that was one of the moves that we had to make this week. We also had several others. I mentioned boosting our price target for ServiceNow. We did the same for Lockheed Martin, as F-35 deliveries have started. And as I shared in the note to you, there could be even further upside for that price target, depending on what we learn about F-5 delivery levels in 2025.

There's, of course, Waste Management, where we trimmed our price target earlier this morning. I encourage you to read that note and understand the logic there that while we continue to the business and do see it trending higher over time, the expectations for continued further margin improvement aren't quite as robust as they once were, given the amount of acquisitions that the company did during the first seven months of this year, plus some other factors in its overall mix, particularly with its industrial business.

Higher margin, but as we've seen with recent PMI data, the industrial sector is slowing again. So that's going to result in some negative margin mix against the company. But still, remember, they will see benefits of pricing and the continued rollout of automation in their residential business. The benefits just aren't going to drop as much to the bottom line.

And that's really what led us to cut our price target on Waste Management shares to $220 from $230. But be sure to read the alert because we talk about where we would potentially revisit picking up some additional Waste Management shares and potentially even revisiting that 2 rating.

Next week, we're going to have an extremely busy week. If you thought this week was busy, folks, hang on to your seats because it's going to be a lot busier. We've got a tremendous amount of earnings coming our way, including more for the portfolio. We've also got the usual start of the month economic data. And we've got the culmination of the Fed meeting. And I wanted to quickly just share a quick thought with you before we get out of here on this week for the week and tell you what my inclination is.

Well, yesterday, Thursday, we got the better than expected initial print of 2.8% for the second quarter GDP. The day before that, we got the July flash PMI that showed the overall composite PMI in the month of July, flash, but still moving higher month over month due to strength in the services economy. It did show some weakness in the manufacturing economy, which, of course, ties to my comment I just made on Waste Management.

But inside those reports, right, did we see continued improvement on inflation? We did. In the initial second quarter GDP print, not as much as we were looking for. But what we saw in the July PMI flash report said that in the month of July, it continued. So I think we're continuing to be on that downward slope. That keeps me a little more positive, compared to what we saw in the June PMI-- sorry, June PCE data out this morning that did show that, yes, headline June PCE ticked lower, but the core remained flat at 2.6%.

So let's put all this together. The economy stronger probably than some folks were thinking a few weeks ago, and inflation continuing to make progress. But the Fed is probably going to eye that flat month-over-month 2.6% reading for core PCE. And what I think Powell is going to say is this-- boy, we have continued to make progress. The economy continues to grow above trend. But we continue to want to see more data before we embark upon a rate cutting cycle.

And I think his tone will be incrementally dovish. It just may not be as dovish as a lot of folks out there are thinking he might be. And I say this because we are going to get data for the month of July and August ahead of the Fed's September meeting. And I simply do not see Powell saying, wow, we are really excited about rate cuts, either directly or indirectly through his tone and language choice, only to have to potentially walk that back if some of the data continues to flatline rather than making further progress.

So I think next week, the risk is that the market might be a little too excited about Powell's comments and that he might offer something that's just a little more restrained than what the market is looking for. So as we fade from this week to next week, we will continue to focus in on building out our shopping list. We've got some extra cash on hand from our dual exits of United Rentals this week. But we are watching some positions that have fallen back. Qualcomm is one of them-- and I'm sure you guys have seen that-- but also Costco, Trade Desk.

And we'll be watching the fundamentals for key support levels to hold. The fundamentals across all three of those are very positive. So we may make some moves next week. We'll have to see how things play out. But that's what our thinking is. So you can guess what I'm going to say, please be sure to check your emails, check your alerts. We want to make sure you're getting our latest thoughts. And if we make any trades with the portfolio, we want to make sure that you are right there with us. Thanks for watching, and have a great weekend.

At the time of publication, TheStreet Pro Portfolio was long URI.