Here’s a rapid-fire update on our stock portfolio, including the 5 names to buy
On Thursday, Jim Cramer and portfolio manager Jeff Marks hosted the CNBC Investment Club’s July Monthly Meeting. They went through each stock in the portfolio, calling out names to buy and places we wanted to cut, before taking some questions from members. One of the most important topics of the hour-long meeting: Stocks that make parabolic movements need to be cut. Emotion pushes them to unsustainable levels, and emotion may be the reason they collapse without warning. This is what has happened to some AI winners in recent days, but Jim emphasized that he does not believe the fundamentals are broken in these names. In fact, he said he sees an opportunity to buy stocks like Corning, GE Vernova and Eaton. Away from the AI business, we are also looking to add to our positions in FedEx Freight and Johnson & Johnson. On the other hand, Home Depot and Starbucks are two stocks that Jim and Jeff are discussing reducing. After the meeting ended, we took action on the Home Depot side of the business. Now let’s take a closer look at our latest thought on the portfolio. Memory buyers Jim said the big four hyperscalers are in a bind with all their AI spending: The totals have grown so much that people are worried about whether they can make enough profits to justify themselves, especially as rising memory prices increase the cost of building data centers. But there is also a concern that they cannot afford not to spend on a technology they believe is revolutionary. “No one knows how this tension will be resolved,” Jim said, “but the situation is fluid. Alphabet : Luckily, there’s Google Search, YouTube, and Google Cloud to help fund your expenses. These features also give Alphabet the ability to climb out of the data center money pit. Having Warren Buffett on his side is a nice vote of confidence. Amazon: Spring momentum has evaporated and we worry there may be enough Amazon bonds left in the debt market, raising the possibility of a share sale. We all hope Amazon starts recouping these expenses next year and beyond. Microsoft: We need to see more AI revenue from this. It shares features with Salesforce and IBM and sells software that doesn’t fit this new world. An improved Copilot, as Citi suggested on Wednesday, would help the narrative. Although we are willing to cut back, we realize there are some options. Meta Platforms: The social media giant gave us what we wanted with its move to sell computing power. Jim believed the cloud plan would guarantee a big rise in the stock as it eased concerns about excessive AI spending. That’s exactly what we’ve seen, and why it’s so hard to let go of hyperscalers. Apple: While Apple, like the other four companies here, needs a lot of memory chips for its devices, it’s the only company that doesn’t spend money on AI data centers. The market has finally come around to Apple’s low-cost AI play. Despite price increases, we think demand for its devices will be quite resilient. Own it, don’t trade it. Data center vendors Nvidia: The company remains the beating heart of the data center, but you might not realize it given its recent stock performance. We’re not giving up on that because we haven’t seen anything really wrong with his business. However, it is still imperative to step up share buybacks, borrowing a page from Apple’s playbook. Broadcom: Broadcom has nine lives; CEO Hock Tan is always trying to figure out how to get the best customers by offering the best deals. Currently, many of these customers are looking for proprietary alternatives to Nvidia. Intel: As effective as Broadcom and Nvidia are for the data center, they may soon not be as effective as Intel, which has seen demand for central processing units (CPUs) soar, and CEO Lip-Bu Tan is cleaning up its manufacturing business to become a real alternative to capacity-constrained TSMC. Intel’s national champion status is another thing in its favor. Qnity: You can’t make semiconductors without the chemicals and materials that this former DuPont segment sells. Shares have fallen sharply in recent weeks, but we do not believe the problem is demand for products. There is real scarcity value here. Corning: This went parabolic in June, leading us to profit from multiple instances. Now it’s back to Earth in a big way, and if we weren’t constrained we’d be buyers on Thursday. We sold 150 shares in June and are considering buying back 25 shares. GE Vernova and Eaton: Both companies are key to powering data centers. While GEV’s turbines convert natural gas into energy, Eaton’s electrical equipment delivers electricity to server racks full of chips. Both stocks are down on Thursday and are worth buying. Others FedEx: After spinning off its less-than-truckload division (more on that in a moment), FedEx became a more streamlined company focused on winning against UPS in the package delivery business. We love the holiday season because we think UPS will eat your lunch. FedEx Freight: We have an opportunity for internal improvement as we can now operate as an independent company with a focused management team. But what’s really exciting is that, as JB Hunt showed on Wednesday night, we’re finally emerging from a multi-year freight recession. This means that the macro also supports growth. We tend to buy more FDXF based on what JB Hunt tells us. Boeing: This trades on cash flow, not on number of aircraft delivered, and we only learn about cash flow four times a year. Despite these recessions, we know from GE Aerospace that the aerospace industry is doing well, even as war tensions flare in Iran. We can be patient with Boeing because we can’t predict exactly when the next leg of the uptrend will begin. Honeywell Aerospace: Pretty reviled for a stock that hit the market just a few weeks ago. As with Boeing, the Iran war is creating some noise and it faces some questions about its supply chain. However, we know it has great potential as one of the few pure aviation names operating in the aviation space. Goldman Sachs: We liked the Goldman quarter as of Tuesday morning and still believe there is more upside to come from current levels around $1,100. This moment is perfect for the investment bank. Wells Fargo : After a succession of weak results, Wells did enough to remain in the portfolio on Tuesday. CEO Charlie Scharf’s efforts to become a bigger player in M&A and stock underwriting are smart, even if the analyst community is still focused on interest income. At less than 12 times 2027 earnings estimates, we can afford to be patient. Capital One: This bank stock remains cheap at roughly 9x earnings, and consumer credit trends remain healthy. While we believe in the long-term benefits of the Discover acquisition, management needs to better articulate the earnings power of the combined company. If so, we think the stock has meaningful upside. Johnson & Johnson: The healthcare giant’s second quarter was blighted by a $150 million loss in revenue from its Abiomed heart pumps subsidiary. This is a $100 billion annual sales company, and with the pharmaceutical business doing so well, we’re not going to let this little episode shake us down. We want to buy more. Eli Lilly: Despite headlines this week that Lilly is falling behind Novo Nordisk in the obesity pill race, we don’t want to give up on Lilly. He always seems to have something up his sleeve. It has also made so much money from its injectable GLP-1 success that it is able to acquire many smaller companies in other fields. That includes Thursday’s acquisition of a psychedelic drug maker. Cardinal Health: We were right to buy more Cardinals after the post-earnings sell-off this spring. Now the shares are stuck on a warning from hospital operator HCA Healthcare. Even though Cardinal is doing business with HCA, we’re not worried about saying goodbye, given the entire mosaic of the business. Linde: While some of our regular old industrialists may be testing our patience (more on this below), the same cannot be said for Linde. The industrial gas supplier delivers a consistent performance in good times and bad. But it really shines when economic growth accelerates. DuPont and Dover: We are bringing these two industrial players together because our views are similar. We need to see evidence of life. They are not as exciting as other AI-related industries and need to show us that they are still worth keeping. Dover will report next Thursday morning. DuPont is scheduled for early August. Honeywell Technologies: This is the remaining Honeywell after the separation of Honeywell Aerospace. CEO Vimal Kapur is motivated to do something to improve his portfolio (unlike Dover and DuPont, apparently). For now, Honeywell Technologies is benefiting from the resumption of production to the US. It sells fire prevention systems, advanced sensors used in industrial facilities, and control systems for oil and gas facilities. Costco: The members-only retailer continues to operate, but its valuation remains the biggest hurdle. A stock at more than 40 times earnings has little margin for error. We’re confident the business will eventually hit its premium multiple, but we’re cautious about how the stock stagnates. TJX Companies: Recent weakness has been frustrating given the company’s strong fundamentals. We continue to believe that the low-price retailer behind TJ Maxx, Marshalls and HomeGoods is well positioned to capitalize on value-conscious consumers, and we’re willing to be patient until inventories catch up. Starbucks: We were rewarded for our patience as the coffee chain’s turnaround gained momentum. While we are considering cutting back after the recent rally to preserve our earnings and right-size our position, we still like the long-term trajectory of the business under CEO Brian Niccol. Procter & Gamble: Tide’s creator hedges against economic slowdown. As we took advantage of the move away from AI names, we luckily cut some stocks at higher levels. We continue to wait for clearer signs that management can revitalize the top and bottom lines. Home Depot: The home improvement retail giant is inextricably tied to interest rates. We still think low inflation and the Fed’s eventual expansion cycle could stimulate housing demand. But until that happens, capital can be better allocated elsewhere. We made some cuts on Thursday as the stock put together a few good days in a row. Salesforce: Our smallest position is struggling with the same software outage concerns as Microsoft. We know it’s a tough climb, but we’re willing to wait a little longer to see if CEO Marc Benioff can deliver on his promise of acceleration in the second half. CrowdStrike and Palo Alto: Our bullish thesis on cybersecurity remains valid. While fears initially emerged that generative AI models would disrupt the industry, the need for reliable cybersecurity vendors has instead grown. IBM’s latest pre-earnings announcement further supports this view. However, after both stocks rose sharply, we will wait for a pullback before taking any positions. (See here for a complete list of stocks in Jim Cramer’s Charitable Trust.) When you subscribe 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 trading alert before buying or selling a stock in his charitable foundation’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trading alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH THE DISCLAIMERS. NO CIVIL OBLIGATIONS OR DUTIES EXIST OR SHALL BE RESULTING FROM YOUR RECEIVING ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULT OR PROFIT CAN BE GUARANTEED.
