During the January Monthly Meeting this past Wednesday, we took questions directly from Investing Club members. Here are Jim Cramer’s and Director of Portfolio Analysis Jeff Marks’ responses. Their answers have been edited for clarity. 1. What is a good entry point for Eaton ? It doesn’t seem to want to go down! (Brian) Jim Cramer: I knew we had a hot stock with Eaton because of how much of the company is devoted to climate controls and data centers. But I had no idea it would be this hot. I have always told you that our unusual discipline can hurt us. I fear it is doing just that with Eaton. Remember, we also have Abbott Laboratories in the Bullpen . I like the name but you can’t buy ahead of the quarter because they don’t know how to tell a good story. But they are fabulous manufacturers. Jeff Marks: We’re waiting for Eaton’s earnings report on Feb. 1. The CFO stepped down a week ago and that was a bit of a surprise. There’s also a CEO transition which will be announced soon. But the company is still well positioned to benefit from the ongoing buildout of data centers and more broadly, demand for electricity. About 15% of its revenues are from its data center/IT channel. Artificial intelligence data centers are an additional tailwind because they require high power and high power density, resulting in higher electrical content. 2. Jim, you seem to be souring on Morgan Stanley and gravitating towards Goldman Sachs . Might this simply be a case of UPOD (under-promise, over-deliver)? And what are your thoughts on new Morgan Stanley CEO Ted Pick. Is he the guy? (Luca) Jim Cramer: I am getting over the pain of Morgan Stanley but not the simmering anger. They are not executing well enough on Wealth Management and they seem to be waiting around for IPOs and M & A activity whereas, say, Goldman Sachs, is pulling out all the stops to get the job done. I await to see what the new CEO, Ted Pick will do but, just like I said with Disney , I am not in a tolerant mood in 2024. The stock should be doing well when the Fed cuts rates. Jeff Marks: We’re starting to see the stock come back a bit as the market embraces the reset of Wealth Management margin expectations. There’s also a nice dividend that pays you as you wait for the Fed to start cutting and for the IPO boom and M & A to pick up again. 3. With Palo Alto Networks , Eli Lilly , Microsoft , and Nvidia running so much, how do you determine what level to add shares that will obviously violate your cost basis? Do you just pull the trigger on any down days you may get? (Jenny) Jim Cramer: Eli Lilly is a company that almost trades like a Nasdaq stock. I think that it’s going to be a trillion company. Even though it’s a big company they still don’t have enough Mounjaro – the supply doesn’t meet demand. I’m not going to let go of a company that can’t meet demand of the biggest city in the country, New York City. Jeff Marks: A general rule of thumb is look for a pullback of about 3% to 5% to put some on. It may feel like these stocks never go down, but they all go through soft stretches at times. Usually, it’s around earnings when the expectations get too hot or the market focuses on one weaker line and misses the bigger picture. We’ve seen that repeatedly with Microsoft. It pulled back on earnings and we’ve used those pullbacks as buying opportunities. We’ve also seen Palo Alto pull back on earnings recently and that proved to be a good buying opportunity too. 4. How many individual stocks should someone own if you are also balancing an S & P 500 fund? Thank you for your time and the efforts you and your staff put into the investing club. (Dan) Jim Cramer: This is tough. I’ve always said you could do 10 because we’re in a world where you can look things up and we provide you with a lot of information. But with the Club, you get all the research and could add more. Jeff Marks: You should do what you are comfortable with but a general rule of thumb is five to ten. If you have enough time to research and stay up to date with more, do it. But I think five to ten at any time is plenty and you won’t run into trouble monitoring so many of them, especially in this volatile environment when things can change quickly. 5. I’ve been buying Coterra Energy below $25.50. What needs to happen for the stock to get back to $30 a share in 2024? (Max) Jim Cramer: If I’m right about my China trade suggestions ( Baidu , Alibaba , Pinduoduo , and JD.com ), that means China is going to be re-stimulating, which means they will be buying more oil. And our oil and gas expert Carly Garner said oil can go to $100 per barrel. Coterra has the ability to switch from oil to natural gas and vice versa, so I really like it. Jeff Marks: We would need to see a big and sustained move high in the price of oil and natural gas. The last time CTRA traded near $30 was in mid-October – you had geopolitical tensions in the Middle East at a high and oil was at $90. You probably will need to see oil at least above $85 for that to happen again. We’re only down to one oil stock because it’s still a “hedge” against something happening geopolitically. If the Pioneer takeout didn’t allow us to exit that one at a high into strength, we’d probably only be holding that one right now. 6. I am concerned that Ford is going to go the way of Estee Lauder . Yes, it pays a decent dividend, but at what point do we cut bait? (Kimberly) Jim Cramer: I am concerned every minute about Ford. The company’s balance sheet is good and I know the sales are going to be good for the Bronco and SUVs. I know the F-150 is selling like hot cakes. But I do feel your pain. I think the dividend is going to keep it going. If the Fed starts cutting, Ford shares will soar. Estee Lauder, however, is hostage to another country, China, and I think the CEO and CFO didn’t recognize that. Jeff Marks: What really plagued Estee Lauder was an inventory challenge. The one good thing Ford is doing is avoiding this issue by scaling back electric vehicle production to match demand. This is a positive. We want them to maximize profits and cash flow – to do this, they need to focus on ICE (internal combustion engine) vehicles and hybrid. It was the company’s quality issues – warranties and recalls – that disappointed the most last quarter. 7. Do you think the market baked in too many interest rate cuts, leading to a downward trend at the start of the year? (Mike) Jim Cramer: I see no evidence why anything has to be cut despite what the all-knowing yield curve and its accouterments like fed fund futures are telling us. If you recall I was early on in saying that rates were going higher and early on in saying that unemployment was going lower which gave us the soft landing we are currently embarking on. I am actually bullish about where things are with the economy because I think the Fed truly has a chance to crush inflation by staying tighter and inflation is the most ruinous force for us. We don’t want cuts because the economy is weak. It isn’t. We don’t want cuts because the stock market needs it. Cuts with inflation won’t help the stock market. Jeff Marks: I think that’s played a role in the decline in the small-cap/broadening out trade that dominated the end of 2023. The market got a little ahead of itself. The probability of a rate cut in March has fallen.One week ago, it was around 66%, and one month ago it was around 88%, according to the CME Fed Watch tool. We’ll see how the data plays out over the next month but it’s definitely a reason why. 8. What is the exit strategy for Caterpillar ? I know we’re waiting on infrastructure spending, but I wonder when we can consider that potential as “baked in” to the stock price. (Austin) Jim Cramer: We made a nice sale in CAT, sold half of the position. If it gets to $300, we might sell some more. Maybe we sell some more even before it gets there. And the reason I want to do that is because it’s a win. And I know Caterpillar. In 1982, I got long Caterpillar. In 1983 I shorted Caterpillar. In 1985, I had a complete homerun from August to September because they had a really bad strike and they broke the union. So I know Caterpillar as well as CEO Jim Umpleby does but I will tell you this, I know when I’m up and I don’t want to give it back. (One day after Wednesday’s Monthly Meeting, we exited Caterpillar at around record highs.) Jeff Marks: One could argue it’s not fully baked in because of how many bears there are on the stock, worried about peak pricing, peak backlog, peak margins, and peak earnings. Consensus forecasts for 2024 expect CAT’s earnings to be flat to slightly down from $20.68 per share in 2023 to $20.54. But if infrastructure investment supports demand and the economy proves to be better than expected like it was last year, those estimates will look too low this time next year. However, it has not been a great earnings season so far for the industrial economy. Many first-quarter guides have been light. That’s why we sold half our position last Wednesday because when management gives their qualitative view of the year, it will probably be conservative. 9. With China starting to look worse and worse, when will it be time to sell stocks such as Wynn Resorts and move into more domestic gaming growers such as DraftKings ? (Bill) Jim Cramer: I talked to DraftKings CEO Jason Robins since 2015. I think Jason is an amazing operator. I worked with DraftKings a couple of years ago. It’s a fantastic company. If they get more states, they will just blow away the number. They’re still not in California or Texas. This is a great stock. Jeff Marks: Sentiment around China is horrible but their results in Macao have been strong. China is looking worse but it hasn’t really shown up in the Macao gaming numbers, which have been more resilient. DraftKings has been very surprising though. They are still losing money on an earnings basis but have made the pivot to profitability. The health of the industry has gotten better because it’s not hyper-promotional like it was at launch. 10. When you take some profits on your positions, what are the factors you consider in deciding how much of the position to sell? (Sandy) Jim Cramer: Let’s take CAT for example. The goal was to figure out how to not have a DuPont and also ring the register. I came in this morning (Wednesday) and said, we either sell half or sell it all, and we hashed it out and we said, sell half. I kind of wanted to blow it out because it’s such a big gain (of course, the Club did the next day). I thought there might be even more gain. But the answer is: this stock went up dramatically on the pivot by the Fed, not on the numbers by CAT. Jim Umpleby, liked DuPont, got hit last quarter, so I think you’re going to see more sales from Caterpillar. Jeff Marks: How much cash we want to raise goes into it. If you are right-sizing a winner , how large it is in the portfolio is a factor. For example, if a stock that was 4% of the portfolio, rallies hard and becomes around 4.3% of the portfolio, we may look to take it back down to 4% and pocket the cash. If it’s a stock we have less conviction in, we may sell some to limit our downside. That could be taking a position down to 1% to 2% of the total portfolio. (Jim Cramer’s Charitable Trust is long ETN, MS, DIS, EL, CTRA, LLY, PANW, MSFT, NVDA, WYNN. 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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