We’re taking solid profits in one big tech stock and buying more of another
We’re making two trades Tuesday. We’re selling 100 shares of Cisco Systems at roughly $87 each, decreasing its weighting in Jim Cramer’s Charitable Trust to about 2% from about 2.18%, and decreasing our portfolio share count of CSCO to 900. We’re also buying 30 shares of Alphabet at roughly $318 each, increasing its weighting in the Trust to 1.2% from about 0.95% and increasing our share count of GOOGL to 150. Shares of networking equipment company Cisco have rallied about 18% since reporting its latest quarter in mid-November, greatly exceeding the S & P 500 gain of about 2% over the same time period. The recent gains have pushed its forward price-to-earnings multiple to about 20 times. CSCO .SPX mountain 2025-11-12 Cisco Systems vs. S & P 500 since Nov. 12, 2025 We’ve been calling for a re-rating in Cisco since we started buying the stock last July. It’s earned this re-evaluation through its accelerating orders from hyperscale customers and campus refreshes from enterprise customers. But with earnings approaching Wednesday evening and the stock sitting at record highs and at a premium to its historical mid-teens valuation, we are taking profits because we think there is little room for error here. We think Cisco’s AI thesis is sound, but we’re taking some precautions around earnings just in case rising memory prices eat into the company’s gross margins. Also, Cisco’s Security business has underwhelmed in the past few quarters, and we’re not anticipating a quick rebound. Management was able to raise its full-year outlook last quarter despite the security unit’s weakness, but the stock may face greater scrutiny this time around since it’s trading at all-time highs. From this sale, we will realize a solid gain of about 28% on Cisco shares purchased in July 2025. GOOGL mountain 2026-02-04 Alphabet since Feb. 4, 2026 We’re taking the proceeds from the Cisco sale to buy small in Alphabet into its recent weakness. Shares of this tech giant have pulled back about 4% since reporting earnings last Wednesday evening despite excellent results. Google Search revenue showed no signs of cannibalization from AI queries based on its 16.7% year over year growth. Google Cloud revenue surged approximately 48% year over year, and its backlog increased 55% to $240 billion. With more than 750 million monthly active users, the Gemini App has almost fully caught up to OpenAI’s ChatGPT. So what’s causing the market’s hesitation? Alphabet said capital expenditures this year will be about $175 billion to $185 billion, which is well above the $120 billion analysts had forecasted. Due to the increased investment spend, free cash flow is expected to take a big hit after generating about $73 billion in 2025. The company is also taking on debt to fund these investments — a new 100-year bond is getting some attention. The market has become a little anxious about whether these big bets will pay off, but we look to things like a rapidly expanding backlog, increased product engagement, and stronger search advertising revenue growth as signs that Alphabet has become the best of the Magnificent Seven megacap tech names at monetizing its investments. (Jim Cramer’s Charitable Trust is long CSCO, GOOGL. 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. 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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