Energy
Wednesday, August 31st, 2022 12:25 pm EDT
We’re buying 35 shares of Danaher (DHR) at roughly $270.33 each, and selling 25 shares of Pioneer Natural Resources (PXD) at roughly $254.87. Following Wednesday’s trades, Jim’s Charitable Trust will own 485 shares of Danaher, increasing its weighting in the portfolio to 4.5% from 4.19%, and 125 shares of PXD, decreasing its weighting in the portfolio to 1.11% from 1.33%. We’re making a couple of more trades for the portfolio late Wednesday afternoon, with the net effect of putting more cash to work into the market than taking out due to the oversold nature of the S & P Oscillator. First, we’re adding to our position in Danaher and upgrading our rating to a 1. Shares have pulled back about 7.5% since we sold 65 shares in late July and nearly 10% since we sold 35 shares in mid-August at what turned out to be the near-term high. Given a pullback of this degree, on no news whatsoever, and the high-quality nature of the business — defensive, secular growing end markets, and about 75% of sales are recurring — we will gladly start buying back some of the stock we sold at much higher prices. It’s not like us to sell anything when the market is this oversold. But the energy group had a nice reversal Wednesday. The small trim in PXD is how we’re taking advantage of it. After opening down about 2% to roughly $249 per share, this oil and gas exploration company recouped most of its losses and at one stage was slightly higher. There were two bullish events for oil First, the U.S. Energy Information Administration (EIA) reported that U.S. commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, decreased by 3.3 million barrels from the previous week. Second, Bloomberg reported that the OPEC+ panel cut its forecast for this year’s supply surplus in half, and now projects a deficit of 300,000 barrels a day, citing members inability to hit their output targets. We have also written several times over the past few weeks, we view oil stocks as a hedge to the rest of the market. When energy prices rise, the market tends to fall; higher energy prices mean more inflation and a more hawkish Federal Reserve. The flip side is that when energy prices decline, the market tends to rise because it shows that the Fed’s plan is working. The recovery in energy stocks Wednesday came despite the continued pressure on crude and a broader stock market slide. Given how overweight we are in energy, we are making strides to pare back our exposure into strength so that we do not let our hedge tip too far out of balance. Also keep in mind that we are still in a bear market for tech stocks and we want some extra cash from selling energy high to buy shares of the profitable tech survivors at lows. Lastly, we note Pioneer’s next dividend ex-date is this Friday, Sept. 2. When we have made sales before ex-dates in the past, we often get asked why not wait for the dividend? Our reasoning is that when we want to sell something, we’d rather not wait. We’ll realize a small loss of about 5% on this sale. (Jim Cramer’s Charitable Trust is long DHR 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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