We’re shorting multiple technology stocks and buying more catalyst names
We sell 205 shares of Palo Alto Networks at about $183.32 and buy 30 shares of Honeywell at about $210.68. After the transaction, Jim Cramer’s Charitable Trust will own 245 shares of PANW, reducing its weight in the portfolio to 1.2% from about 2.20%. It will also own 420 shares of HON, increasing its weight in the portfolio to 2.35% from 2.20% The best cybersecurity stocks – CrowdStrike and Palo Alto Networks – continued to pull back from their sell-off earlier this year. The market is finally realizing that artificial intelligence will accelerate their businesses, not disrupt them. For Palo Alto Networks, the stock is now near its lowest for the year after falling 23% since Feb. 24. With the stock back in the $180s, we’re following through on our previously stated goal of cutting back and consolidating our cybersecurity exposure around CrowdStrike. This is not a knock against Palo Alto. It is still a top name in the industry, led by banking CEO Nikesh Arora, who has successfully positioned the business in the AI era. Rather, it reflects the discipline of portfolio management. We hold two cybersecurity names in a 32-stock portfolio. Right or wrong, the team tends to sell when the market worries about the software. This feature will make us less exposed to drafts. From this sale, we will see an average return of about 70% on the stock purchased in 2023 and 2024. We are using some of that money to buy shares of Honeywell, taking advantage of its recent decline. The stock fell nearly 9% from $233.55 to $213.17 last week, and is rallying shares on this weakness. Honeywell’s quarter was soft because of the Middle East conflict, which led to shipping delays and a sports-chain snag affecting aerospace sales. Honeywell wasn’t the only aerospace-focused name to fall behind in earnings. GE Aerospace and RTX Corp also shrugged off concerns that rising oil prices related to the Iran war and jet fuel shortages will hurt demand in the commercial aerospace market. We view all of that short-term concern as an opportunity to add to our position and buy the stock we sold at a high price earlier this year. The main part of our thesis is based on value creation from the separation of Honeywell Aerospace, resulting in two publicly traded firms. “Spin purgatory” has made this a frustrating stock, but Honeywell has almost gone the other way. Attention about the breakup should pick up steam in June when the company has investment days for Honeywell Aerospace and Honeywell Automation. It culminates in an Aerospace spin-off on June 29. (Jim Cramer’s Charitable Trust is long PANW, HON and CRWD. See here for a full list of 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 stock in his charity portfolio. When Jim talks about a stock on CNBC TV, he waits 72 hours after issuing a trade warning before making a trade. THE PRIVATE INFORMATION OF THE BURNING CLUB IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AND OUR PRIVACY POLICY. NO LEGAL LIABILITY OR OBLIGATION EXISTS, OR IS CREATED, BY YOUR ACCEPTANCE OF ANY INFORMATION PROVIDED BY CONTACTING THE INVESTMENT CLUB. NO PARTICULAR RESULT OR INTEREST IS GUARANTEED.
