Energy
Monday, October 3rd, 2022 8:14 am EDT
We’re selling 25 shares of Pioneer Natural Resources (PXD) at roughly $231.09 each, and we’re buying 30 shares of Estee Lauder (EL) at roughly $216.20 each. Following Monday’s trades, Jim’s Charitable Trust will own 100 shares of PXD, decreasing its weighting in the portfolio to 0.86% from 1.08%; and 105 shares of EL, increasing its weighting to 0.84% from 0.60%. This trade will result in a nearly dollar for dollar switch out of energy and into a name we think stands to benefit from a Covid policy change in the works in China. Pioneer Natural Resources saw an outsized move to the upside following news that OPEC+ may look to cut production by more than a million barrels per day this week. The oil cartel, along with its international allies including Russia, is set to meet on Wednesday to discuss the topic. Should that number come to fruition, it would mark the largest cut since the Covid pandemic began. With this PXD sale, we will take a roughly 15% loss on a weighted average basis on shares purchased back in May and June. The original PXD initiation on May 16 was for 100 shares at $268.85. Due recent sales, that lot was whittled down to 20 shares. So Monday’s trade will sell those shares, plus, five shares from a 50 share buy on June 7 at $283.32. At the same time, we’re going to reallocate the funds directly into our newest holding, Estee Lauder, which was bucking the broader market upswing Monday and providing us an opportunity to increase our exposure while reducing our overall cost basis. As noted in our initiation alert , with signs that China may finally be set to ease up on its zero-tolerance approach to Covid, we like EL because we think shares are simply down too much should China be on the verge of rebounding. Estee Lauder isn’t cheap at about 29x the next 12-month earnings, but the multiple is now back at its pre-pandemic levels despite the company’s stronger positioning. The stock traded around 46x earnings at the time of our December 2021 sale. Lastly, we want to call out that as of the close on Friday, the S & P Short range Oscillator, which we look to for help in determining the near-term setup, stood at minus 10.77, an extremely oversold reading. It is for this reason that we favor a dollar for dollar exchange to EL from PXD, as it allows us to recalibrate our exposure to what we think is a more favorable setup without reducing it on a net basis. (Jim Cramer’s Charitable Trust is long PXD and EL. 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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