We’re shifting money from an outperforming defensive to a bargain-priced oil stock
Shortly after the opening bell, we’ll be selling 100 shares of Procter & Gamble (PG) at roughly $155.83 each and buying 75 shares of Pioneer Natural Resources (PXD) at roughly $209.25 each. Following Friday’s trades, Jim Cramer’s Charitable Trust will own 615 shares of P & G, decreasing its weighting in the portfolio to 3.69% from 4.27%. The Trust will also own 250 shares of PXD, increasing its weight to 1.98% from 1.39%. Now that our trading restrictions have cleared, we are making the trim of Procter & Gamble . As we talked about Thursday , P & G has made a great run over the past few weeks, rallying from the high $130s into the mid-$150s. PG YTD mountain Procter & Gamble YTD performance A resilient business and a strong quarter , where organic sales increased 7% and gross margins inflected will do that. In what has been a tough market lately, P & G has held up, thanks to the defensive nature of its business. This is why we bought shares in the first place and continued to add at much lower prices when the stock was out of favor. But with shares trading not far from their 52-week highs, we believe it’s prudent to make a sale and recycle that cash into other positions that may have more upside. From this sale, we’ll realize a very small loss of about 1% on stock purchased in April 2022. With the S & P Oscillator getting close to oversold (minus 3.22% after Thursday’s decline) and three of the market’s four hurdles cleared (we still need to get through the debt ceiling crisis), we’re taking the cash raised from the P & G sale and moving it on an almost one-for-one basis into Pioneer Natural Resources . (The three hurdles cleared are the Fed’s latest interest rate hike, Apple’s (AAPL) earnings and Friday’s employment report.) Recession fears have crushed the price of oil over the past three weeks, sending shares of energy stocks down along with it. But with the price of West Texas Intermediate hanging around $70 per barrel and Brent near $75, we think the risk-reward on energy has become a lot more attractive. If oil were to break below $70 and stay there for an extended period of time, we would not be shocked to see OPEC+ cut output again to support prices. Could oil drop further to the low $60s? Sure. But the international organization is motivated to get prices higher, which could mean oil could have $5 of downside but $15 to the upside. PXD YTD mountain Pioneer Natural Resources YTD performance With Pioneer, this is our “oily” energy play that now pays out a healthy annual dividend yield of about 6.48%. This yield may not be the 10% we were collecting last year, but there is a good reason why. Management indicated last week they want more flexibility to repurchase stock instead of paying out variable dividends. This new strategy is a better way to create long-term shareholder value. (Jim Cramer’s Charitable Trust is long PG, PXD, AAPL. 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.
