Robotics at Honeywell Intelligrated.
We’re selling 75 shares of Honeywell (HON) at roughly $204.90, 150 shares of Marvell Technology (MRVL) at roughly $41, and 50 shares of Nvidia (NVDA) at roughly $147.49.
Following Monday’s trades, Jim’s Charitable Trust will own 575 shares of Honeywell, decreasing its weighting in the portfolio to 4.2% from 4.72%; 900 shares of Marvell Technology, decreasing its weighting in the portfolio to 1.3% from 1.53%; and 300 shares of Nvidia, decreasing its weighting in the portfolio to 1.47% from 1.72%.
We are making a handful of trims to start the week and raising cash given how overbought the market is, according to the S&P Oscillator. Following Friday’s rally, which extended the S&P 500’s gains to nearly 9% in October, the Oscillator jumped to 8.48% from 5.30%. As a reminder, any value above a positive 4% signals the market is overbought and potentially due for a pullback.
Of course, the Oscillator could become more overbought from here. And stocks can always move higher on earnings or as part of the market rotation into profitable companies that make stuff and do things — our mantra for the Club since the beginning of the year. But at a minimum, we think an overbought Oscillator serves as a reminder that the broader market has had a great run in a very short period and could be due for a pause.
This is the same discipline we stick by when the market is oversold, like it was in late September.
We are downgrading our rating to 2 from 1 following the stock’s big run over the past few weeks that pushed shares back to nearly flat year to date. Not only has Honeywell solidly outperformed the broader market, shares of this industrial are up about 5% since we upgraded our rating to 1 and bought 50 shares at about $188 on Sept. 13 and about 20% since we added 25 shares at about $170 on Sept 26, compared to a roughly 1% decline and 6% gain in the S&P 500 over the same period. Given this recent stretch of outperformance, the size of our overweight position, and the overbought nature of the market, we believe it is prudent to lock in some gains in the short term. Longer term, we continue to like Honeywell for the quality nature of its business and strength in aerospace, non-residential construction, and oil and gas end markets, all of which were on display when it reported third-quarter earnings last week.
This sale will lock in a great gain of about 34% on stock purchased in August 2020.
We are also peeling back our positions in Marvell and Nvidia, consistent with our strategy of reducing our exposure to semiconductors into strength. The two stocks were looking to open lower Monday but posted significant gains last week. As we have written previously, our primary concern is that the United States export restrictions on semiconductors to China have severely hurt the industry and earnings estimates for next year may need to come down even further. At the same time, the dilemma we face right now is how much bad news is already priced in. This explains why we are slowly reducing our exposure to this challenging group and not cutting and running all at once.
This Marvell trim will lock in a gain of about 80% on stock purchased in October 2019 and March 2020. This Nvidia trim will lock in a gain of about 290% on stock purchased in June 2019.
(Jim Cramer’s Charitable Trust is long HON, MRVL, NVDA. 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.