We are tempted to exit Morgan Stanley, P&G; updates on our other 30 names

VaselineSeptember 12, 2024

0 9 minutes read

We are tempted to exit Morgan Stanley, P&G; updates on our other 30 names

Here’s a rapid-fire update on all 32 stocks in Jim Cramer’s Charitable Trust, the portfolio we use for the CNBC Investing Club. Jim broke down the portfolio Thursday during the September Monthly Meeting . Apple : This company is the real winner when it comes to the artificial intelligence boom, according to Jim. Apple gets to be the “ultimate free rider,” utilizing OpenAI’s well-regarded large language models for free in its forthcoming software update for newer devices. Jim also told members not to worry about hardware sales after recent mixed Wall Street commentary regarding the new iPhone 16 models. Abbott Laboratories : The lawsuits over specialized formula for premature infants haven’t disappeared — but at least recently, an overhang on the stock because of that legal risk seems to have. When Abbott Labs trades on its underlying business fundamentals, it’s an extremely positive situation. It was one of our top-five performers since the August Monthly Meeting. Advanced Micro Devices : While AMD’s technology is not close to Nvidia’s, the opportunity for AI chips is big enough for the company to make a lot of money as a No. 2 player. It also has a strong foothold in the PC and traditional data-center markets. AMD shares have caught a bid in recent days, but they’re still cheap considering the growth of its AI processors. Amazon : Shares have now erased all of their steep post-earnings declines from early August, validating Jim’s belief that the declines should be bought . Amazon is wisely investing in AI to not only support customers of its profitable cloud unit Amazon Web Services, but also to make its logistics operations more efficient with lower costs. Broadcom : Investors who don’t own any Broadcom yet should consider starting a position here, Jim said. The stock has already erased all of its post-earnings losses from last week. Bad stocks don’t recover that quickly. In addition to a compelling AI chip business, Broadcom’s acquisition of VMWare is going well and bolstering its higher-margin software segment. Best Buy : We’re sitting on robust gains in Best Buy. But it’s increasingly clear there’s more to talk about with Best Buy than just the AI personal computers theme. The stock can fly because of both its attractive 3.8% annual dividend yield, which looks even more attractive with the Federal Reserve about to cut interest rates. Best Buy’s exposure to bit ticket products needed by new homeowners should see a boost thanks to those lower rates. Costco Wholesale : The retail giant got hit with an analyst downgrade a few days ago over valuation concerns. The issue is Costco’s stock has never been cheap, Jim said, which makes it a tough reason to head for the exits now. As long as Costco’s expanding and taking a bigger piece of the consumer spending pie, this is a stock worth owning. We don’t see that changing anytime soon. Salesforce : The company’s last quarter was excellent but Wall Street didn’t really care because it operates in enterprise software, an unloved corner of the tech industry. Salesforce is not that expensive — but on its own, that’s not a great reason to own a stock. Jim said he’ll do some investigating at the company’s influential Dreamforce conference in San Francisco next week. Coterra Energy : We’re not looking to add to our energy exposure beyond our position here. The last few times we bought more Coterra, specifically, was to hedge against geopolitical risks. That captures the way we’re thinking about this position for now. It’s just a tough situation for commodity prices, which hurts Coterra’s stock price no matter how well the company is controlling what it can control. DuPont : If you don’t own this stock, it’s a great buy if it falls below $80 a share, slightly below where it’s trading Thursday. The conglomerate is getting ready to split into three companies. The stock could have a good run into 2025 as investors recognize that its three segments are worth far more separately than the current stock price reflects with them together, Jim said. Danaher : Our battle in the life-sciences stock has turned the corner, and we’re glad we fought the fight. Danaher is trading around $269 a share now. Around $280, it might be time to take a little off the table out of discipline. But we still like the company’s prospects now that expectations for its China business have been reset and biotech IPO activity picks up. Disney : The recent New York Times exposé into the power struggle between second-time CEO Bob Iger and his once-successor Bob Chapek helps explain why the company’s stock has been such a poor performer. We don’t want to throw in the towel because there’s clearly trapped value in the stock, but adding more to the position doesn’t make sense until it drops to lower levels. Dover : AI remains a key part of the Club’s investment thesis in this stock. If data center spending continues, sales for Dover’s products like thermal connectors used in liquid cooling will surely increase. Jim said Dover’s exposure to other themes like reshoring manufacturing capacity in the United States and decarbonization are additional positives. Eaton : Similar to Dover, the stock remains a solid AI play in the industrials sector. That’s because Eaton’s electrical equipment essentially creates the plumbing of a data center, Jim said. It will benefit from more investments in these computing facilities. We’re remaining upbeat on shares, especially after Larry Ellison, co-founder and chief technology officer of Oracle , indicated earlier this week that data center demand is fervent. GE Healthcare : Similar to Danaher, its exposure to China has been a drag. But we still see reasons to own the stock, including its potential to benefit from the rollout of anti-amyloid Alzheimer’s drugs made by Biogen and fellow Club holding Eli Lilly. This potential catalyst should boost GE Healthcare’s diagnostic unit because it makes an agent to detect amyloid plaques that are hallmarks of the memory-robbing disease, as well as its MRI business because those machines are used to monitor patients on the drugs. Given this is an entirely new class of drugs, though, it is taking some time to gain traction. We’re not recommending putting money to work in the stock for now. Alphabet : The search engine heavyweight has frustrated Jim for a while now, but we continue to hold onto the stock due to the belief that a major win for its AI efforts could be on the horizon. Still, we would look to trim the position further into future strength. Home Depot : Our newest stock, initiated last week , gives the portfolio additional exposure to the uptick in housing activity that we expect during the Fed’s rate-cutting cycle. We wanted to get in before the first cut, which should arrive next week. We added to the position Wednesday. Home Depot’s larger business serving professionals is why we prefer it over chief rival Lowe’s. Honeywell : The industrial conglomerate has let us down following several quarters of little growth. Although it’s tempting to offload shares, Jim said to stick with Honeywell for now because there’s huge value in individual businesses like aerospace. To be sure, there’s only so long we can be patient. We’ll be holding management accountable to act on the portfolio reshuffling timeline CEO Vimal Kapur laid out Wednesday at an industry conference. Linde : This stock continues to impress us. We’d be buyers if Linde shares drop 5% to 10% from current levels because it’s a high-quality company with consistent earnings growth. The industrial gas supplier is levered to solid end markets like electronics, along with megatrends like the transition to clean energy. There’s little negative to say about this portfolio stock. Eli Lilly : We trimmed some Eli Lilly last week, considering the stock had run almost $400 a share without us making a sale. It felt like tempting fate to keep letting it all ride. Our investment thesis is fully in tact, though. Lilly’s obesity and weight-loss GLP-1 drugs will fuel above-average growth for years to come, with its recently approved Alzheimer’s treatment representing another avenue for expansion, though that will be a slower ramp than GLP-1s. Lilly announced Thursday plans to spend even more money to boost drug manufacturing capacity, which is good news because it means demand is still strong. Meta Platforms : Meta is deftly using all its user data to train AI systems that will help it capture as much of the digital advertising market as possible — outside of what is captured by Alphabet and Amazon, of course. Morgan Stanley : The financial stock is in no-man’s land. Morgan Stanley shares are priced too low to offload shares, and too high to pick up more. We’re sticking it out for now. But Jim is considering an exit of the position altogether for a potentially better investment banking play in peer Goldman Sachs. Microsoft : Wall Street skepticism on the sustainability of the AI craze hit the stock last week. It’s not enough to alter our view that Microsoft’s bet in the nascent tech will pay off in the long term. Jim’s conviction on the hyperscaler remains strong and the firm’s early investment in OpenAI has given the company a decent lead in the heated AI arms race. Nvidia : The AI data center buildout is anywhere near done. It only started two years ago around the launch of ChatGPT. And, it might need constant reinvention, which makes selling Nvidia now the wrong thing to do. CEO Jensen Huang drove that point home Wednesday at a conference. The stock has in recent days recovered a large chunk of its earnings related sell-off. Nextracker : Policy risk and interest rate risk have been chief overhangs. We know the Fed is about to lower rates. But at the presidential debate, Democrat Kamala Harris and Republican Donald Trump indicated they like solar energy. Signs of easing on both fronts sent the stock rallying Wednesday. Palo Alto Networks : We’re more upbeat on shares following a massive global IT outage caused by peer CrowdStrike in July. Palo Alto’s biggest competitor is under fire, which could cause some prospective customers to choose our go-to cybersecurity name instead. After a multimonth battle with Palo Alto stock — we bought and sold shares several times — we’re deciding to stay long. Procter & Gamble : Like Morgan Stanley, we’re tempted to exit this position, too. Procter & Gamble is a solid recession-resistant stock. But with monetary policy easing likely on the horizon, it’s not a great time to have a lot of exposure to defensive names. P & G did not report a good quarter. That makes us worried about giving up a great gain. Starbucks : When asked why the Club didn’t make a sale on the stock’s recent outsized run, Jim responded that there’s more upside to come with new CEO Brian Niccol running the firm . Shares are up 28% from the eve of Niccol’s appointment announcement on Aug. 13 to Thursday. We are confident in Niccol’s ability to fix Starbucks’ key issues like its China market and throughput in stores. Constellation Brands : The beer stock has underperformed the market in 2024 – up 3% year-to-date, versus the S & P 500’s 17% gains – but we’re waiting out the doldrums. The Modelo maker has stagnated, in part, because the company has had to pay down a lot of debt tied to the share-class conversion agreement with the founding Sands family . It doesn’t seem like that’s been realized in the share price yet, but we’re also not going to tolerate another six months of stock underperformance. Stanley Black & Decker : While shares of Stanley Black & Decker remain well below their Covid-era highs, we’re expecting the stock to surge as lower rates spark more housing sector activity. That can drive sales for the toolmaker. We’ll likely wait for that advance before we take profits in the stock again. TJX Companies : TJX is another stock in which it’s fair to wonder whether we have overstayed our welcome. But it seems like with each update we get, the Marshalls and HomeGoods company just keeps crushing it. It does not make sense to sell the stock of a company that is doing that well. Don’t subsidize losers with winners, Jim said. Wells Fargo : Despite the recent sell-off in bank stocks, Jim remains upbeat on Wells Fargo. He praised CEO Charlie Scharf’s leadership over the firm, including Wells Fargo’s expansion into investment banking, where activity should pick up as interest rates come down. It also pays to wait in the stock because of its juicy dividend yield. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) 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.

Traders work on the floor of the New York Stock Exchange during morning trading on Aug. 23, 2024.

Angela Weiss | AFP | Getty Images

VaselineSeptember 12, 2024

0 9 minutes read

Vaseline

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