We’re buying Friday’s down market, adding industrial and oil shares
We’re buying 50 shares of Emerson Electric (EMR) at roughly $80.54 and 130 shares of Halliburton (HAL) at roughly $30.20. Following Friday’s trades, Jim Cramer’s Charitable Trust will own 750 shares of EMR, increasing its weighting in the portfolio to 2.38% from 2.22% and 1,800 shares of HAL, increasing its weighting in the portfolio to about 2.15% from 2%. Another regional bank-driven selloff on Wall Street on Friday gives us a chance to make two more small buys due to our discipline with the S & P Oscillator. In essence, the Oscillator measures the buying or selling pressure in the market at the current point in time. The S & P 500 is on track for a weekly gain, but we’ve been through a really tough stretch lately with selling pressuring overpowering the buyers, resulting in an S & P Oscillator measure of minus 5.86%. Whenever this key metric falls below minus 4%, it signals oversold conditions. And, when the market is oversold, any bit of good news could push the sellers to the upside and ignite a powerful multi-day rally. For example, if the government were to explicitly say that all deposits are insured, then the market would have a lot more confidence in the regional banking system and the market would finally find a stronger footing. Or if the Federal Reserve decides next week at its monetary policy meeting to change course and back away from aggressive interest rate hikes, it could be a positive development for the stock market. The market likes to focus all day on what could go wrong with this sudden banking crisis, but we’ll never rule out the possibility of something going right. Against that backdrop, we’re adding to our Emerson Electric position. This automation-focused industrial has been tough to own ever since the company launched the hostile takeover of National Instruments (NATI), which has since gone friendly. But, the company has lost more in market value than what it offered for NATI, and that’s unjustified in our view. Additionally, if there is no second bidder, we think National Instruments will be pressured to take Emerson’s $53-per-share bid given the recent economic uncertainty. EMR YTD mountain Emerson Electric (EMR) YTD performance Emerson’s stock decline has made its valuation favorable too. When UBS upgraded its EMR rating to a buy earlier this month, the analyst pointed out that the stock traded at a 10% discount to peers despite similar topline growth and a much more favorable margin profile. Lastly, we believe the fundamentals for automation companies remain strong. Emerson plays directly into the theme of US reshoring, which is when companies bring their production and manufacturing supply chains back home. The second stock we’re bulking up on is Halliburton. Shares of this oilfield services giant have been crushed this week, falling roughly 13% as oil dropped from the mid-$70s per barrel to the mid-$60s on economic growth concerns. Although Halliburton’s revenues are not directly tied to the price of the commodity, the indirect linkage is that oil producers are less incentivized to drill when oil is lower. HAL YTD mountain Halliburton (HAL) YTD performance We understand the narrative, but the industry is still catching up from years of underinvestment and if producers want to be capital efficient, then they need to use Halliburton’s technology. And, Halliburton is practically sold out this year in the United States so that would also bolster our view. Even if we were to take a 25% haircut to the consensus EPS estimate of $3.05, HAL shares would still trade at a cheap multiple of a little more than 12x. With HAL shares down about 28% since we sold 375 shares in mid-January, we are upgrading our rating back to a 1. (Jim Cramer’s Charitable Trust is long EMR, HAL. 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.
