Tuesday’s market bounce allows us to raise some cash to buy in the next downturn
We’re trimming 65 shares of AbbVie (ABBV) at roughly $143.16 each and reducing our Wynn Resorts (WYNN) holding by 100 shares priced at roughly $55.01 each. Following Tuesday’s trades, the portfolio will own 300 shares of ABBV – decreasing its weighting to 1.57% from 1.91%; and 300 shares of WYNN – decreasing its weighting to 0.62% from 0.82%. We’re making a couple of sales in the portfolio Tuesday morning, raising an amount of cash that’s about equal to what we put to work last Friday through three trades when the market was much lower. The market is still in oversold territory based on last Friday’s S & P Oscillator reading of minus 9.37%. Anything below minus 4% means the market is oversold and may be positioned for a bounce. We believe it’s prudent to trim into Tuesday’s strength because our cash position is running at a historically low level, which was exactly how we wanted it when the market became its most oversold. But now, we must look ahead and give ourselves more flexibility to buy into the next decline. For AbbVie, we’re not trimming the position at our highest sale price to date, which happened in March and April when we took off stock twice at around $158 per share. However, we’re making a sale Tuesday that will lock in a fantastic average gain of about 77% on stock purchased in April and December 2020. The low price-to-earnings multiple AbbVie enjoys and its nearly 4% dividend yield may have the defensive qualities we like in an economic slowdown, but we are making a small trim to our position because one key part of the growth story here centers around the aesthetic franchise, which is best known for Botox. Although this business has a great long-term outlook because people love to look their selfie best, we would not be surprised to see it go through some near-term bumps as consumer spending pulls back in a weakening economic outlook. In the large-cap pharma space, we continue to prefer Eli Lilly (LLY) and Johnson & Johnson (JNJ). We continue to view Wynn Resorts as a source of funds due to the challenges the casino gaming operator is facing in Macau, a Chinese special administrative region that has been plagued by travel restrictions due to the mainland’s zero-Covid policy. While Wynn’s properties in Las Vegas and Boston have performed at a very high level, the company’s earnings recovery has been unable to gain any meaningful traction — due to the constant two-steps forward, one-step back Covid-related travel restrictions. The latest example happened was Tuesday when hundreds of guests at the Hotel Fortuna casino in Macau were put under lockdown due to the spread of infections. Due to our low visibility into when China will move past its zero-Covid policy, we’d prefer to make this sale so that we have more capital on hand to deploy into more profitable, higher-quality companies with less international risk and more capital returns. Of course, selling today runs the risk of parting with a stock that would materially benefit from China moving away from its zero Covid policy for good. However, we cannot be afraid to lock in this tough loss of 54% because in the event a policy shift happens, we believe we would capture plenty of upside from so many different parts of our diversified portfolio, ranging from our numerous semiconductor positions to Apple (AAPL) to Cisco Systems (CSCO) for supply chain reasons and even energy due to a related increase in demand for oil. (Jim Cramer’s Charitable Trust is long ABBV, WYNN, LLY, JNJ, AAPL and CISCO. 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.
