The sun has set on Wall Street’s summer rally, and stocks are back to the wobbly ways that dominated nearly all of the first six months of 2022, which for the S & P 500 was the worst start to a year since 1970. The S & P 500 reached its near-term peak Aug. 16, closing at 4,305 and representing a 17.4% advance from its 2022 closing low on June 16. Since then, as the Federal Reserve reiterated its hawkish posture, the S & P 500 has fallen nearly 9% based on Friday’s close. It was in the red again Tuesday. The market was closed Monday for Labor Day. Our strategy to navigating this resurgent turbulence is reflected in our four best performers and our four biggest losers. In recent weeks: Our two-pronged approach, while maintaining discipline, has been to trim into strength when the S & P Oscillator pointed to an overbought market. Then, once the Oscillator pointed to oversold conditions in late August, we started to look for opportunities in beaten-up areas to strategically deploy some of the cash we just raised. How our stocks have fared Here are our top four performers between Aug. 16 and Friday, Sept. 2 in Jim Cramer’s Charitable Trust, the 34 stock holdings we use as our Club portfolio. 1. Devon Energy (DVN): up 10.6% 2. Halliburton (HAL): up 6.4% 3. Pioneer Natural Resources (PXD): up 5.5% 4. Coterra Energy (CTRA): up 3.2% The common thread? They’re all oil and gas stocks that trade at “value” like multiples. The trio of Devon, Pioneer, and Coterra also all generate significant amounts of free cash flow and return the majority of that cash back to shareholders via dividends and buybacks. Here are our bottom four performers. 31. Marvell Technology (MRVL): down 15.8% 32. Salesforce (CRM): down 18.9% 33. Advanced Micro Devices (AMD): down 19.9% 34. Nvidia (NVDA): down 27.7% The common thread? They’re all high price-to-earnings multiple , growth-oriented tech stocks that tend to get hit the hardest when interest rates rise. Since Aug. 16, the S & P 500’s tech sector has underperformed the overall index while the 10-Year Treasury yield has climbed from about 2.8% to 3.34% on Tuesday. Moves we’ve made Compare those two lists above with our most recent sales: Sept. 6: Sold 100 shares of Devon Energy Aug. 31: Sold 25 shares of Pioneer Aug. 29: Sold 20 shares of Pioneer and 200 shares of Devon Energy Aug. 26: Sold 35 shares of Pioneer Aug. 22: Sold 300 shares of Coterra Energy Now, let’s look at what we’ve been buying, excluding a number of purchases of Starbucks (SBUX) and TJX Companies (TJX). Those companies are our two most-recent additions to the portfolio, on Aug. 22 and Aug. 24 , respectively, and since then we’ve scaled into them into weakness. Outside of TJX and SBUX, these are our recent buys: Sept. 6: Bought 50 shares of Salesforce and 50 shares of Meta Platforms (META) Aug. 31: Bought 35 shares of Danaher (DHR) and 25 shares of Nvidia Aug. 29: Bought 25 shares of Microsoft (MSFT), 50 shares of Johnson & Johnson (JNJ), 95 shares of Amazon (AMZN) and 50 shares of Qualcomm (QCOM) When presented this way, the second part of our two-pronged strategy becomes pretty clear. At the industry level, we’re selling energy stocks and buying lots of tech. More specifically, though, we are lightening up on our outperformers during the weakness because we don’t want to be greedy. At the same time, we’re looking to put cash to work in stocks that we believe have gotten attractive after sizable declines. We want to avoid the mistake we made in early June, when oil prices reached their near-term top and so did many of our energy stocks — but we didn’t lock in profits. This time around, with crude prices generally advancing on days when the S & P 500 was falling, we’re being disciplined and ensuring our inflation hedge doesn’t occupy a too large of a weighting the portfolio. Back in June, oil grew to be around 9% to 10% of our portfolio. Now, it’s at a more appropriate level around 7%. Discipline in action For example, on Aug. 29 when we trimmed 200 shares of Devon Energy, the stock was near its 52-week highs. We ended up booking a roughly 63% gain on stock we bought back in January. The other side of our strategy is exemplified by our Microsoft buy Aug. 29. We picked up 25 shares of the tech giant at roughly $264.86 each, a little over three weeks after we sold 50 shares at approximately $283 apiece, which at the time locked in a profit of 242%. The reason we sold MSFT in early August: Tech stocks had been a driving force of the summer rally, and we wanted to lighten up, so we had ample cash on hand to take advantage of a possible market pullback in the coming weeks. That is, of course, exactly what transpired, and we had the money to be net buyers in last week’s very busy Club trading activity. Similar thinking went into our Salesforce purchase earlier Tuesday. We bought 50 shares at a price roughly 20% below where we sold 30 shares of the company in early August and nearly 17% below where we sold 50 shares in late July. While Salesforce lowered its 2023 guidance recently, our long-term rationale for owning the company remains intact. This makes us strategic buyers after the pullback, not spooked shareholders looking for the exit. Same goes for Microsoft. Bottom line September is historically the worst month of the year for stocks, and while a number of our companies have potentially positive catalysts on the calendar , there is no predicting where Wall Street will go from here. Sentiment is quite bearish , and the market remains in oversold territory, according to the S & P Oscillator. A short-term bounce could be possible, but we may have more downside before we experience it. No matter which direction stocks go, we will keep watching energy. We definitely believe it should be in our portfolio in this environment. Our energy holdings return large chunks of their cash to shareholders via dividend and buybacks, and they help us, as long-only investors, hedge against inflation as rising energy prices usually lead to higher prices in energy stocks. However, in an oversold market, we still may trim more energy into future outperformance and redeploy those funds into companies we think continue to have strong business outlooks long term and are not beholden to the day-to-day swings in a volatile commodity. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust portfolio.) 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.
Luke Sharrett | Bloomberg | Getty Images
The sun has set on Wall Street’s summer rally, and stocks are back to the wobbly ways that dominated nearly all of the first six months of 2022, which for the S&P 500 was the worst start to a year since 1970.
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