We’re buying 50 shares of Salesforce (CRM) at roughly $159.17 each, and 50 shares of Johnson & Johnson (JNJ) at roughly $175.63 each. We’re also selling 150 shares of PayPal (PYPL) at roughly $81.97 each. Following Friday’s trades, the portfolio will own 405 shares of Salesforce, increasing its weighting to 2.21% from 1.94%, 200 shares of Johnson & Johnson, increasing its weighting to 1.22% from 0.92%, and 250 shares of PayPal, decreasing its weighting in the portfolio to 0.72% from 1.14%. We’re making a few trades in the portfolio Friday, selling a less favored name to buy higher quality stocks. These are the latest moves in our six-week process of high-grading our portfolio Through these trades, we want to be roughly cash-neutral to net-in because the market is still in slightly oversold territory, per the S & P Oscillator, and it’s about to enter a seasonally stronger period for stocks. For Salesforce, we managed to sidestep a pretty steep decline by selling 50 shares on March 31 at around $215 per share. After waiting for the stock to fall about $45 per share, we started to buy back what we sold higher on April 25 at $171 . We started buying too early as CRM has fallen roughly 8% since that trade. But that’s why we always stress the importance of never buying everything all at once. With shares down to the $150s, we’re buying back the second 25 shares tranche and adding some extra because we think the stock has gotten too cheap relative to the quality of the franchise. Backing up our view of how discounted this stock has become was Friday’s research note from JPMorgan. Analysts there called CRM “too cheap to ignore,” and said, “we view valuation as more depressed / defensive for CRM shares than for the broader software industry, at ~4x CY23 revenue and 20.2x CY23 FCF, likely undervaluing this sticky $32B cash-generative recurring revenue stream with expanding margins.” (CY stands for calendar year. FCF stand for free cash flow.) For Johnson & Johnson, we’re making our second buy since initiating the position on Wednesday . J & J is the type of stock we believe can weather the current market volatility and macro uncertainty because its pharmaceutical, medical device, and consumer product businesses have defensive qualities and should remain resilient, even in the face of the Federal Reserve aggressively raising rates to kill inflation. J & J also has one of the best balance sheets of any publicly-traded company in the country — only Johnson & Johnson and Microsoft (MSFT), also a Club name, are AAA rated. Lastly, we like the breakup story here and believe the separation of the consumer product business from the pharma and medical devices business will create value for shareholders. Shares were down about 6.5% from its April high. Financing these purchases will be a trim of PayPal. The market may be down for the week, but PYPL has shown some signs of life after gaining slightly more than 5% on Thursday. We believe this recent strength is an opportunity to pare our position back and recycle those funds into higher quality companies whose businesses are less impacted by slowing consumer spending. Again, this furthers our moves to high-grade our portfolio. PayPal’s business is heavily tied to e-commerce, and until there’s evidence that online spending has normalized after lapping tremendous gains from the Covid pandemic, we think this stock could struggle to meaningfully work. We’ll take a disappointing loss of about 60% on this sale. (Jim Cramer’s Charitable Trust is long CRM, JNJ, MSFT and PYPL. 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.
