Energy
Friday, June 17th, 2022 6:48 am EDT
We’re buying 25 shares of Constellation Brands (STZ) at roughly $228 each. In addition, we are buying 15 shares of Pioneer Natural Resources (PXD) at roughly $240 each. Following Friday’s trades, the portfolio will own 330 shares of STZ – increasing its weighting to 2.79% from 2.58%, and 190 shares of PXD — increasing its weighting to 1.70% from 1.58%. We are putting a small amount of cash to work in two current holdings in Jim Cramer’s Charitable Trust on Friday morning because of how oversold the S & P Oscillator indicates. After Thursday’s 3.25% plunge in the S & P 500 , the oscillator moved to minus 10.51%, a threshold that indicates the market is technically oversold . When the oscillator moves this deep into oversold territory, our discipline states that we must hold our nose and do a little buying no matter how painful it feels. Of course, the market can still get more oversold from here. It always can. But for some perspective of where things are, this is one of the most oversold readings we have seen all year. To find a more oversold moment you have to go all the way back to Jan. 27, which was when the oscillator was at minus 10.72%. As it turned out, buying the last time the oscillator was this oversold proved to be a good move in the short-term because the market rallied about 6% over the next four sessions. For Constellation Brands, we are adding to our position in this beer, wine, and spirits maker to average down our cost basis. There are a lot of valid concerns about a slowdown and a recession right now, but history has shown that beer sales tend to be resilient during economic downturns and are not correlated to gross domestic product. That’s why we like STZ so much. The market is currently struggling to figure out what companies will earn over the next 18 months in a recessionary environment. Still, if beer sales trends do not change in a slowdown, then Constellation’s earnings plan should remain relatively intact. The company’s Mexican beers — Corona, Modelo and Pacifico — are particularly appealing for consumers in the summer. For Pioneer, we are buying shares of this oil producer to lock in the large dividend yield. To combat this inflationary environment and the Federal Reserve aggressively raising interest rates, we continue to believe investors should prioritize cash flow generating, dividend paying stocks with great balance sheets like Pioneer. If you annualize Pioneer’s most recent base plus variable quarterly dividend of $7.38 per share, the dividend yield at the current share price would be about 12.2%. That means PXD pays shareholders nearly quadruple Friday’s benchmark 10-year Treasury yield of around 3.2%, a Wall Street yardstick for a safe return. In addition to the dividend, Pioneer also regularly repurchases of its stock, which reduces the outstanding shares and gives investors a bigger ownership in the company even if they don’t buy an more shares. Last quarter, Pioneer company bought back $250 million worth of stock. (Jim Cramer’s Charitable Trust is long STZ and PXD. See here for a full list of the stocks.) 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.
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