Jim Cramer explained Tuesday morning why investment clubs are trying to strike a delicate balance with their moves as the stock market is affected by the Iran war. It was a surprisingly calm day for the stock market on Monday, amid heavy selling on Wall Street due to the Middle East conflict, and Jim stressed in the morning meeting that “those who flee in moments like this can never come back.” Oil prices soared on Tuesday on concerns about supply disruptions, sending ripples through the stock market. Regardless of how things go on Tuesday, if there are finally reports of “fewer drones” in the air, the market is likely to jump in response, Jim said. You don’t want to miss out on a relief rally like this. “Remember, we’re optimists,” Jim said. At the same time, Jim said he is not too keen on putting money into the Iran situation as it is fluid and the market is far from oversold as measured by the S&P Short Range Oscillator on Monday night. This has been Jim’s go-to momentum indicator for decades, and when oversold flashes, we become more eager buyers. We’re not there yet. Instead, our approach to the market is tactical, looking for buying opportunities when we see them and identifying where to trim. The goal is to keep the cash position relatively constant and offset purchases and sales. “We’re not putting in new money. That’s what will happen when it gets really oversold. We’re kind of on the fringe,” Jim said. Cardinal is in, BlackRock is out Our actions on Monday (initiating a position in Cardinal Health and subsequently cutting BlackRock stock in half) demonstrate how we have avoided eating into piles of cash. We basically hit the repeat button on Tuesday afternoon and bought more Cardinal Health with the money we used to completely exit BlackRock. CAH .SPX YTD Mountain Cardinal Health’s year-to-date stock performance compared to the S&P 500. Reasons to Scale In Also on Tuesday morning, we bought more shares of Google parent Alphabet, expanding on a position we started in late December when the stock was trading at about $313. At the time of the trade alert, Alphabet’s stock price was below $300, so it used the opportunity to lower its cost basis. This is the fourth acquisition of Alphabet this year. We’ve intentionally kept our purchases small for moments like Tuesday. This is our proven approach to position building, as the market is unpredictable in the short term. We can view the stock decline as opportunistic because our theory of Alphabet’s AI leadership is still intact. Jim said that in his hedge fund days, he would have been aggressive in buying large amounts of new stocks from the get-go, but later said, “Just kicking them out doesn’t work.” He stressed: “That’s not what we’re trying to do (with the club). What we’re trying to do is build a strong position at a high price and that’s worked out over and over and over again.” Upgrading Winners Another move we made over the past two sessions was to move Nvidia back to a 1 rating, which equates to a Buy. Despite mounting evidence that AI spending is increasing significantly and that should boost NVIDIA’s earnings, the stock has essentially been in solid mode since late summer. So far, the company has certainly reported strong quarters and even better forward guidance, as evidenced last week. It was also something Nvidia wanted to upgrade ahead of its annual GTC conference later this month. AI chipmakers are expected to announce a flurry of product advances and partnerships at the conference. (Jim Cramer’s Charitable Trusts are long on NVDA, CAH, and GOOGL. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
