We’re upgrading Honeywell — plus 2 positions we’d like to build up
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Stocks are closing out the week on another sour note , as the S & P 500 heads for its fourth straight losing week. The market decline on Friday extended the S & P 500’s pullback from its closing high on Jan. 27 to roughly 6%. For the year, the index is down more than 4%. Oil remains an important story, with WTI and Brent crude both higher by about 1%. But the move in bond yields may be the bigger focus on Friday, with the yield on the 10-Year Treasury surging roughly 10 basis points to 4.38%. That’s its highest level since last July, as the possibility of rate hikes — not cuts — before year’s end has entered the conversation amid concerns about an oil-driven spike in inflation. Energy was the top-performing sector , gaining about 4% and extending its run this year to 33%. Financials managed to squeeze out a small gain on easing concerns over private credit. New rules that relax capital requirements could be a long-term tailwind for banks, too. Goldman Sachs and Wells Fargo both rallied 4% in the tough week, while Capital One was about flat. Leading to the downside were the consumer staples. Costco and Procter & Gamble are the two staples in the portfolio, and both stocks dropped about 3% this week. You’d expect this defensive, economically resilient group to hold up better in a slowdown, but rising input costs in an inflationary environment will weigh on the sector, especially those that lack the pricing power to offset those pressures. Also, those dividends don’t look as meaty when the 10-Year is well north of 4%. It is our discipline to nibble on stocks when the market is down this much, and the S & P 500 Short Range Oscillator is this low, but our trading restrictions are holding us back from adding to some positions in the portfolio. As much as we like Goldman Sachs, Boeing , and Cardinal Health in their declines, we can’t keep buying them day after day. Two more opportunities we’re interested in are Alphabet and Honeywell . We’ve talked about our plan to build up Alphabet several times, and we recently purchased shares last Friday. As for Honeywell, we are upgrading our rating to a 1. The stock has been down for most of the week after CEO Vimal Kapur said at a conference that first-quarter revenue will be light. The issue was disruptions in the Middle East. The company can’t ship its products to some customers in the region because of the war. However, Kapur said these were timing issues that won’t impact the company’s full-year guidance, which he said was “shaping up quite well.” Another reason we like Honeywell in this market, which is struggling to find any footing, is that it has a catalyst: the upcoming separation of its aerospace division from its automation business. Honeywell is hosting an investor day for its aerospace division in early June, and we would expect the stock to trade higher as the spin date nears. We are looking to buy back some of the stock we sold in early February at a price more than $10 above the current price. Next week is quiet, aside from monitoring the war , with no companies in the portfolio scheduled to report. It’s a relatively calm period for corporate news, as companies wrap up their first quarter over the next two weeks. One earnings release of note will be Jefferies on March 25. It typically reports a few weeks ahead of major banks like JPMorgan and Goldman Sachs, offering an early look at how investment banking performed during the period. Economic data is also pretty light. Usually, we put more emphasis on what companies say than on the Federal Reserve, but a handful of officials are scheduled to speak, and what they say about their policy outlook could impact bonds. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) 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.
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