Versace, lead manager of the TheStreet Pro Portfolio, explained his reasoning behind these trades involving the credit card kingpin, which was founded in 1850, and the workforce-automation platform, which started off as Glidesoft in 2003.
"We are once again using pronounced pullbacks in these two positions to build up the Portfolio’s position at better prices than we’ve seen in some time," he said.
"Because of the improved risk-to-reward trade-off in both AXP and NOW shares, we are also upgrading their ratings to One from Two."
Versace said ServiceNow's shares are oversold despite the growing number of signals and other data points for continued adoption of business in the cloud and growing adoption of artificial intelligence.
Recent and approaching signals point to Walmart (WMT) , Carvana (CVNA) , Booking.com (BKNG) , McDonald’s (MCD) and others using AI to enhance productivity and the consumer experience, he noted.
Bill McDermott, chief executive of ServiceNow, says the company has a leadership position in the seismic shift to agentic AI. Photo: Victor J. Blue/Bloomberg via Getty ImagesBloomberg/Getty Images
Fund manager: AI can widen ServiceNow margins
"With its position across multiple end markets, ServiceNow continues to be a cloud/AI productivity play that should see further margin improvement as AI becomes a larger part of its business mix," Versace said.
Last month, the company reported fourth-quarter revenue in line with estimates and higher-than-estimated adjusted earnings.
However, ServiceNow posted subscription-revenue growth slower than it had forecast and projected a slight decline in first-quarter growth.
Chairman and Chief Executive Bill McDermott told analysts about ServiceNow's “leadership position in the seismic shift to agentic AI.”
"Our position at the center of data, AI agents, workflow orchestration, and enterprise governance is the nexus of AI's massive value-creation opportunity," he added.
"It doesn't matter to ServiceNow who builds the models," McDermott said. "With the precipitous drop in [large language model] compute costs, there is much more capital allocation available for the business impact layer."
He told analysts that AI is the most transformative technology in decades.
"We are solidifying our leadership position as the AI platform for business transformation," McDermott said.
ServiceNow's stock is up 20.4% from a year ago but is down nearly 12% since January.
American Express says travel is up
And then there's American Express.
Versace said that comments from online travel platform Booking.com and others point to continued spending on travel, especially international travel, because of the strong dollar.
“We've seen an increase in international bookings as travelers look to maximize the value of their dollar abroad,” Michael Johnson, the president of Ensemble, a travel agency consortium, told The New York Times.
“The strength of the US dollar has made destinations in Europe, Asia and South America more attractive, as travelers get more for their money," Johnson added.
Versace said he continued to like the company’s differentiated membership business model, with membership fees driving a significant piece of its pretax profit.
American Express shares have climbed 36% from a year earlier and been essentially flat year-to-date.
Stephen Squeri, chairman and CEO, told analysts in January that travel was higher in the fourth quarter. He cited airline revenue, and particularly first-class and business-class airline revenue.
"[Travel and entertainment] was very, very strong in the quarter for us," he said.
Squeri said that American Express saw record levels of annual cardmember spending, record net card-fee revenue, and a record 13 million new card acquisitions, and "we continued to add millions of merchant locations to our network globally."
AmEx is a favorite of Buffett's Berkshire
American Express is also one of legendary investor Warren Buffett's favorite holdings.
The Oracle of Omaha's Buffett's Berkshire Hathaway (BRK.B) has continuously held American Express stock since 1991, when George H.W. Bush was president.
American Express makes up nearly 17% of the investment group's portfolio, according to its recent SEC 13F filing, second only to computer giant Apple (AAPL) , which weighs in at 28.1%.
Versace said that he was buying 135 shares of American Express at or near $295. Following the trade, the portfolio will own 385 AXP shares, roughly 2.3% of the portfolio’s assets.
He also bought 26 shares of ServiceNow at or near $935, and following the trade, the portfolio will own 198 NOW shares, roughly 3.75% of the portfolio’s assets.
