Thinking Through Monday's Decline With the Majority of Our Positions
In keeping with of our view on today's market-wide selloff, we recognize the possibility of more downside because there is still much to be known about the implications to global supply chains and economic activity, let alone the coronavirus itself. However, we believe we are ready to play a little "offense" into the selloff because that's why we raised all this cash in the first place. Furthermore, we believe our additional trims this morning were both measured and correct given the underlying circumstances facing each company.
Before we talk about our stocks, we want to hit home the point that when we do start to make more gradual purchases (we did one into General Electric (GE) this morning), we are executing trades under a full understanding that we probably won't catch the exact bottom...but that is perfectly OK.
As an investor, we must always be humble and recognize how difficult it is to time the exact top and bottom on stocks. Sometimes you will get it, most times you won't. But if there is one thing we can do as investors that at least gives us a chance to capitalize on the precise moments of strength and weakness it is to stay true to our disciplines.
Our disciplines always tell us to scale down positions when they rally (bulls make money, bears make money, hogs get slaughtered), and reposition into hig-quality "merchandise" when the market puts them on discount. We made a lot of tough sales over the past few weeks that did not look great at first because the market continued to rally, but now those stocks have come in and we find ourselves with a flushed cash position we can get opportunistic with.
Respective to our position sizes and average cost bases, there's not much sticking out to buy at the moment. But it is still very early in the trading day, so our prices are very much subject to change. With that being said, below is our latest thinking on a slew of positions in the portfolio, in no particular order.
Apple (AAPL) -- We said last week in our Alert here that we would upgrade around $302 to $311. Given the recent coronavirus news and uncertainty over guidance, we want to be a little more patient before our upgrade.
Abbott Laboratories (ABT) -- We are still trying to figure out how Abbott's China nutrition business comes into play here. On one hand, we think any product in the nutrition category should see an uptick in demand as people look for ways to supplement their health. But on the other, we don't know what the supply chain implications are. Therefore, we would wait on this one.
Activision Blizzard (ATVI) -- This one is barely down, and perhaps rightfully so because video games are part of the stay-at-home-economy, which fits when people are forced to stay at home. However, we prefer to see a little more weakness closer to our cost basis before adding.
Amazon (AMZN) -- We don't want to sell Amazon down here and think a price closer to $1,900 is interesting for investors with long-term views.
Bristol-Myers (BMY) and Abbvie (ABBV) -- Two names we like on pullbacks. We are hesitant to violate our own cost bases, but for new members who never got in this might be a good time to start a very small position.
BP (BP) - The yield is tempting but we reiterate our stance to move away from the oils because of ESG-related concerns.
CVS Health (CVS) -- We'll get tempted to buy at about $65, which would give us a yield slightly above 3% on a forward multiple just above 9x. We want to be mindful of Senator Bernie Sanders' rise in the polls.
Clorox (CLX) -- Tough to buy any stock up right now, but we would pounce on weakness.
Costco (COST) -- Interested in adding because health scares cause people to rush into grocery stores.
Salesforce.com (CRM) -- We want to keep our Two here and we'll have a firmer idea on when to upgrade after the company reports earnings tomorrow.
Banks -- We made our one trim this morning through Citigroup (C) , but we reiterate our view that all are vulnerable and cannot be bought yet.
Disney (DIS) -- We are conscious of the impact related to park closures, but we continue to believe the outlook is bright here because of the Disney+. Too low to trim, but not the right price yet to upgrade.
Honeywell (HON) -- We don't know if the status of the company's facilities has changed since last week's Barclays conference (see our Weekly Roundup here), but we view this stock as a hold and wait for a better price.
Microsoft (MSFT) -- We want to be a little more patient but are tempted to upgrade with the stock down about 8% from its all-time high.
Alphabet GOOGL -- Similar sentiment as Microsoft. We are thinking more about what price to upgrade to a One rather than when to sell.
Novartis (NVS) -- We want to continue to own this one and see nothing to do right here.
Marvell Technology Group (MRVL) -- Due to our concerns about semis, we'll keep our Two rating on this one until it gets closer to $20.
PepsiCo (PEP) -- Consumers are not going to stop drinking Pepsi or eating snacks, but we wouldn't buy it if it is up today.
Starbucks (SBUX) -- We made a good trim higher last week in our Alert here, but can't touch this one yet due to its exposure to China. Let's wait until the stock falls below our average cost basis.
Tyson Foods (TSN) -- We think it's dirt cheap down here and would be interested in picking at it on a couple more dollar decline.
ViacomCBS (VIAC) -- We are not going to touch this. If we are to buy, we'd rather go for higher quality.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long GE, AAPL, ABT, ATVI, AMZN, BMY, ABBV, BP, CVS, CLX, COST, CRM, C, DIS, HON, MSFT, GOOGL, NVS, MRVL, PEP, SBUX, TSN and VIAC.