We're Trimming Costco, Qualcomm and United Rentals After Big Gains
All three names have outperformed on the market's sharp rebound. Here's what to know.
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| Symbol | Action | # Shares Traded | Recent Price | % of Portfolio* | Shares Owned* |
|---|---|---|---|---|---|
SELL | 95 | $128.7 | 3.5% | 1005 | |
SELL | 35 | $479.5 | 3.9% | 300 | |
SELL | 22 | $587.5 | 3.8% | 240 |
* We're taking some profits in United Rentals, Costco and Qualcomm due to their recent sizable outperformance.
* We're downgrading United Rentals to a Two from One.
* Our medium to longer-term view on all three names is unchanged.
* Retail earnings showcase why we favor Amazon and Costco.
After you receive this Alert, we will make the following trades:
-- Sell 22 shares of Costco COST at or near $587.50. Following the trade, COST shares will account for roughly 3.8% of the portfolio.
-- Sell 95 shares of Qualcomm QCOM at or near $128.70. Following the trade, QCOM shares will make up around 3.5% of the portfolio.
-- Sell 35 shares of United Rentals URI at or near $479.50. Following the trade, URI shares will account for about 3.9% of the portfolio.
Following the substantial run-up in the stock market over the last few weeks, which now has it overbought, at least in the short run, we are making some prudent moves with the portfolio. We're locking in a slice of sizable gains for our positions on United Rentals, Costco, and Qualcomm after the market's sharp rebound.
All three of these Action Alerts PLUS stocks have either zoomed higher (URI and QCOM more than doubled the S&P 500's 9.5% move over the last 14 trading days), or are in overbought territory. Our medium to longer-term view on all three names remains unchanged, but it would be irresponsible of us to not lock in a portion of those gains, especially since URI and COST have become two of the portfolio's largest positions, at more than 4.2% each as of last night's market close.
In keeping with this move and following our lifting Costco's panic point to $525 yesterday, we are adjusting our panic points for URI and QCOM shares as well:
* Qualcomm's panic point goes to $108 from $105.
* United Rentals' panic point increases to $410 from $380 and compares to the portfolio's average cost basis of $297.97 for the shares.
Also, as URI shares have moved above our price target, we will also downgrade it to a Two rating, from One. We will look to revisit our URI price target as new information becomes available,much the way we did yesterday for our positions in Mastercard MA , Chipotle CMG , and Costco COST .
To be clear, even though we are locking in some gains on Costco this morning, retailer earnings out last night and this morning from the likes of Shoe Carnival SCVL , Children's Place PLCE , Bath & Body Works BBWI reaffirm the power of Costco's differentiated business model.
Comparing the negative same-store comps reports by Home Depot HD and Target TGT against Walmart's WMT positive same-store comps for the October quarter confirms our view that shoppers are turning to places where their dollars go further. That sits at the heart of our bullishness on Costco as well as Amazon AMZN . We see a far better risk-reward trade-off in COST near $555.
As we noted above, the market is overbought in the near term following the clearing of several hurdles we laid out in last Friday's Weekly Roundup. The quick move from being oversold to overbought means there are far fewer compelling opportunities in the very near term for our cash. This means we will be updating our shopping list for existing positions and ones in the Bullpen as we look for fresh meat to consider.
(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 pricehere. Be sure to toggle the chart to sort by Purchase Date.)
At the time of publication, Action Alerts PLUS was long URI, QCOM, COST, MA, CMG and AMZN.