An Exit, a Purchase, and an Upgrade Monday Morning

Shortly after the opening bell, we will be exiting our position in Shopify (SHOP) , selling 45 shares at a bid/ask of $388.31/388.94. In addition, we will be buying 200 shares of Viacom (VIAB) at a bid/ask of $24.75/25.20. Following the trades, VIAB (3,400 shares) will represent 3.22% of the portfolio.

As alluded to last Friday in our Daily Rundown video here, we will be selling the last bit of our Shopify position at a huge average gain of about 52% on our remaining shares .

Our exit doesn't reflect a change in our view of the company's powerful secular theme and how the Shopify platform is helping small to medium-sized businesses from all over the globe capitalize on the growing e-commerce world. Instead it's about valuation. Even though management printed great numbers earlier in the month that you can read about here and we think the initiatives in place are additive to the flywheel effect and make the platform "sticky," we have struggled to justify an appropriate price target that is greater than the current stock price. The stock has been an absolute horse since we first bought it in the mid-$250s back in May (see our Alert here), and it currently trades at about 28x estimated 2019 sales and 21x estimated 2020 sales, which is simply getting too rich for our taste.

Can this stock continue to go higher? Of course. But when we have a stock this expensive and trading this far above our price target, discipline calls for us to take our money and run.

All in, we view Shopify as a tremendous win with the only issue being that we didn't get more on.

We'll use a portion of our Shopify sale to finance a purchase in Viacom, a stock that is still too cheap to ignore given the merger with CBS (CBS) . So what you are seeing us accomplish from these two trades is sell out of one of the most expensive stocks in the portfolio (let alone the market) with no yield and redeploy that capital into one of the cheapest, low multiple stocks in the portfolio with a solid yield. Our VIAB purchase here follows the commentary from our Alert last Thursday here.

Lastly, this morning Bristol-Myers Squibb (BMY) /Celgene (CELG) announced it will divest the global rights to Otezla, a $2 billion in annual sales psoriasis drug, for $13.4 billion in cash. We discussed the possibility of this deal last Thursday in our Alert here, and cited Jefferies view of how Amgen was a logical partner. While this prediction was spot on, what's different is price, with Jefferies estimating that an acquisition would look to be about $8 billion or 4x sales.

Did Amgen overpay for it? We think so and this transfer of value from Amgen to BMY/CELG is being reflected at the open this morning.

But more importantly, what Amgen gets from this deal is a big, money-making drug whose patent is not due to expire from almost another ten years. Combining Otezla with the reinforced Enbrel, the potential blockbuster drug Aimovig, and others in the Amgen lineup, and all of sudden the once growth-lacking Amgen has suddenly turned into a company with some very good growth prospects. It would be remiss of us to not mention the cancer drug (AMG 510) in the pipeline with huge potential, and the next key read out on it will be in early September. Let's also not forget how Amgen has the wherewithal to make this type of deal. Before the announcement, Amgen had $21 billion of cash on the balance sheet and the cash flow is robust.

All in all, we think acquiring this asset is a better use of cash than just buying back stock and sitting on it. The company's long-term growth outlook improved this morning, but the stock is expected to open around the $195, which is $10 off its recent high.

We will upgrade AMGN to a ONE on this morning's expected small, but early decline. We've been looking for a level to upgrade this post-Enbrel win, and we think this is the opportunity right here.

Action Alerts PLUS, which Cramer manages as a charitable trust, is long SHOP and VIAB.