We’re making a second sale of embattled Boeing (BA) on Thursday, exiting the position entirely by selling 275 more shares at roughly $121.72 each. At the same time, we’re buying 40 shares of Constellation Brands (STZ) at roughly $244.12 each. Following this round of trades, we’ll own 190 shares of STZ — increasing its weighting to 1.65% from 1.30%. We will no longer own any Boeing. The trades are a continuation of our strategy of “high grading” the portfolio. We explained the concept earlier Thursday, but it bears repeating. We’re talking about taking a little bit of pain on a small position that we haven’t liked for months — Boeing — and using the cash to bulk-up on something — beer, wine and spirits giant Constellation Brands — that can work in this market environment. Remember, in this recent bout of market selling on concerns about whether the Federal Reserve’s gradual approach to hiking interest rates will be enough get inflation under control, stocks with high price-to-earnings multiple, too much economic sensitivity and no capital returns are getting punished. However, shares in companies with low multiples, make stuff at a profit, pay dividends or buybacks or both, and whose businesses can withstand an economic downturn are the ones we think will be able to weather this current storm. This high-grading process will also harden the defensive positioning we’ve been espousing since early April . Constellation Brands exemplifies that strategy and so does Coterra Energy (CTRA), a natural gas play that provides us with a fantastic 8% plus dividend yield and a buyback valued at about 4% of the total market cap. Similar to what we said earlier Thursday morning in our first Boeing sale, it’s tough to part with Boeing at these prices. We took a loss earlier when we sold BA at a higher price and we’re taking another one in the afternoon of about 37%. However, you don’t have to make your money back the way you lost it. We would rather put this money to work in a company like Constellation Brands and bank a little extra cash. Constellation Brands is a premium beer, wine, and spirits company. It’s best known for its Mexican beer portfolio, which includes Corona, Modelo, and Pacifico. We are in uncertain times right now with questions about the economy and consumer spending. But it sounds like there’s been no slowdown in Constellation Brands’ beer business based on a research note published by Jefferies on Thursday morning. The note followed a meeting with company management, who according to Jefferies, said that fiscal year 2023 is off to a “great start,” with momentum continuing from last quarter. These comments are in line with our thinking because people love to drink Constellation’s beers when the weather warms up and throughout the summer months. Lastly, we believe this is a GARP, growth at a reasonable price, type name for a consumer staple company. Shares currently trade at roughly 22x forward earnings per share on expected 10% earnings growth. As a comparison, Monster Beverage currently trades at 31x forward earnings on about 6% expected growth. We think this discount to a beverage peer is too big and should narrow over time. (Jim Cramer’s Charitable Trust is long STZ. It was long BA before the trade. 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.
