We’re booking profits in an energy stock on strength after adding to another

Energy
Monday, July 25th, 2022 11:46 am EDT

We’re selling 80 shares of Chevron (CVX) at roughly $148.31 each. Following Monday’s trade, Jim Cramer’s Charitable Trust will own 145 shares of CVX, decreasing its weighting in the portfolio to 0.75% from 1.16%. Consistent with our broader portfolio management strategy of scaling back our heavily overweight energy exposure into strength, we’re booking a gain of about 28% on CVX shares purchased in December 2021. We continue to view energy and oil stocks as an inflation hedge in our portfolio as the group will benefit from escalated tensions between Russia and the rest of the world or if the Federal Reserve struggles to stamp out commodity inflation. These two scenarios would be negative for the broader stock market and society at-large but positive for energy-related companies. On the other hand, if oil declines meaningfully from here — either from a Russia-Ukraine or the Fed wins its battle against record inflation — then we could see energy lagging behind a rally in the rest of the market. After seeing our big gains in energy get washed away in early June after the price-per-barrel of West Texas Intermediate crude fell from $120 to the mid-$90s, we have taken a more disciplined and protective approach to upside moves in the group. That explains why with this sale we are raising more cash than what we put into energy earlier in the day with our buy of more Halliburton (HAL) shares — so the net/net effect of these two trades is a little less exposure to energy. We believe this is appropriate given the sector’s significant outperformance Monday. While we don’t want to make a call on Chevron’s second-quarter earnings report, which is scheduled to be released before the opening bell Friday, we are aware that the reaction to a handful of CVX’s recent earnings reports has not been kind for shareholders. Shares of the oil giant have fallen in six of its past eight quarterly earning days. Again, we are not making a prediction one way or the way with this trim, but what this does is highlight the fact that even a company that’s delivering historic levels of profits and free cash flow can still stumble on its earnings day. (Jim Cramer’s Charitable Trust is long CVX and HAL. 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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