Energy
Friday, August 11th, 2023 11:52 am EDT
During another busy week of earnings and stock market swings, we picked our spots and made six trades, including calling up a Bullpen name. We also changed two Club price targets. Here’s a day-by-day look. Monday The week started with a small Caterpillar (CAT) sale after a huge run and an initiation of a new position in DuPont (DD), which had been on our Bullpen watch list. Shortly after the opening bell, we trimmed some Caterpillar and booked some profits after the industrial giant’s blowout earnings last week. Revenue rose 22% year-over-year in the second quarter and adjusted earnings per share jumped 75%. This was, in part, due to the U.S. government’s increased infrastructure spending . Shares popped 9% on the earnings release, closing that day at a record high of $288.65. The stock was finishing this week just under that level. Jim Cramer’s Charitable Trust — the holdings we use for the Club — owns 315 shares of Caterpillar. Monday’s trade decreased CAT’s weighting to 3.03% from 3.26%. in our portfolio. Monday afternoon, we bought 375 shares of DuPont. The specialty chemical maker has a 1% weighting in the Club’s portfolio. DuPont has an attractive growth story for 2024. Management said during their second-quarter earnings call that the bottom in the company’s semiconductor business is here, a similar narrative we’ve heard in the industry landscape more broadly. We like the idea of exposure to semiconductors at a lower industrials multiple rather than the higher chip-stock multiple. Tuesday We added shares of Coterra Energy (CTRA) in the morning and purchased more Stanley Black & Decker (SWK) in the afternoon. We bought more Coterra on Tuesday’s dip, one day after the oil and natural gas producer delivered mixed quarterly results and soft guidance. We thought the decline was overdone. With West Texas Intermediate crude prices down briefly Tuesday morning due to growth scares and Coterra underperforming the group due to a mischaracterization of its quarter, we pounced on the weakness and called it an opportunity to buy small in this half oil, half natural gas production company. We own 1,550 shares of Coterra. Tuesday’s trade increased CTRA’s weighting to 1.48% from 1.1% in the portfolio. Our Stanley Black & Decker buy, which came a week after the shine came off the company’s post-earnings glow, increased the tool manufacturer’s weighting in the portfolio to 0.82% from 0.33%. With an excess of cash in the portfolio, we’re looking for stocks that are selling at a discount. Stanley Black & Decker is expected to enter 2024 with a lower cost structure, along with a clean inventory position, earning somewhere between $4 to $5 per share in 2024 from the $1 previously expected to earn next year. (On Friday, Wolfe Research downgraded SWK to underperform from peer perform (sell from hold), l argely due to valuation . Our counter is that the company is ahead of plan on its turnaround efforts.) Wednesday Wednesday was our busiest day. The Club executed two trades, trimming our position on Halliburton (HAL) and buying more GE Healthcare Technologies (GEHC), along with changing our price targets for Disney (DIS) and Eli Lilly (LLY). The Club increased our GE Healthcare position to 850 shares, bumping up its weighting in the portfolio to 2.16% from 1.91%. The medical device sector, which GEHC is a part of, has been in a steady decline recently as the aversion to health-care names this year continues. As investors, not traders, we like the company’s fundamentals. GE Healthcare, a few weeks ago , delivered an upside quarter and raised its full-year outlook. We raised our Eli Lilly price target to $600 per share from $460, maintaining our longstanding view that this is the best growth story in mega-cap pharma. Our PT hike came one day after Lilly shares surged to a new all-time high on the promise around the company’s expected obesity drug and great earnings. Despite the market attention on Big Tech, the energy sector has performed the best since mid-July. We used the run as a chance to take profits in Halliburton, which has rallying since May. We still believe in the stock and still own 1,400 shares. Wednesday’s trade only reduced HAL’s weight in the portfolio to 1.97% from 2.24%. We lowered Disney’s price target to $120 per share from $140 but maintained our 1-rating on the lagging entertainment stock. The PT reduction came shortly after Disney reported mixed quarterly results on low expectations. While we did see evidence that CEO Bob Iger’s turnaround plan is working, our previous price target for Disney was too high based on how the stock has been trading this year. Bottom line It was an active week for the portfolio as earnings season has a tendency to bring on the action as we trimmed around the edges on positions that had outsized moves to the upside and bought the dips in companies that had good quarters but were less well received. In total we put roughly $47,000 into the market, lowering our cash position to 11.3% from nearly 13%. Our cash is still at a very healthy figure, which provides some protection in case this recent market struggle extends itself into next week. If and when the S & P 500 Oscillator becomes oversold, expect us to be more aggressive in deploying the war chest we have built up over the past handful of weeks. Until then, we remain patient, gradual buyers into weakness in profitable, quality companies. (Jim Cramer’s Charitable Trust is long SWK, CAT, DD, GEHC, CTRA, DIS, LLY, HAL. See here for a full list of the stocks. Club Director of Portfolio Analysis Jeff Marks contributed to this report.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
During another busy week of earnings and stock market swings, we picked our spots and made six trades, including calling up a Bullpen name. We also changed two Club price targets. Here’s a day-by-day look.
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