Our discipline demands a trim after this industrial stock hit an all-time high. But we still love it
We’re selling 25 shares of Caterpillar (CAT) at roughly $293. Following Wednesday’s trade, Jim Cramer’s Charitable Trust will own 290 shares of CAT, decreasing its weighting 2.82% from 3.05%. We’re trimming some Caterpillar shares with the stock trading at a new all-time high. However, late in Wednesday’s session CAT pulled back along with the broader market. Caterpillar may have had a strong year with the stock up about 23% year to date, but the gains haven’t always been so easy. After a strong start to the year, Caterpillar shares got hammered in the spring on concerns about the economy and a possible credit crunch in the wake of the regional banking crisis. The stock made a strong move over the summer as those fears proved overblown and the company posted blowout earnings . But then shares fell again in the fall on concerns about surging interest rates. Bears also tried to pick apart Caterpillar’s third-quarter earnings report on worries about peaking pricing power, margins, and backlog, sending the stock briefly below $230 per share. We thought these concerns were way too overblown, which is why we said to buy the pullback as we reiterated our $300 price target. CAT YTD mountain Caterpillar YTD Caterpillar has been a battle at times this year, but here we are with the stock on the doorstep of $300. While we think the stock can have another strong year next year due to an influx of infrastructure spending and improving economic conditions thanks to a more dovish Federal Reserve, we would feel greedy if we didn’t take off any stock up here at these lofty levels. That’s why we are making a small sale Wednesday and downgrading our rating to 2 , realizing a great gain of about 20% on stock purchased in January 2023 in the process. In addition, we’ve mostly been letting stocks run into this end-of-year melt-up, but after another strong day Tuesday, we’ve grown incrementally more cautious. We’re keeping our guard up because the S & P Short Range Oscillator has pushed above 7%, indicating the market has become deeply overbought. An overbought reading has done nothing to slow this stampede of a rally over the last handful of weeks, making it feel painful to let some stock go. However, raising a little extra cash when the market is this overbought is a discipline we are unwilling to break. It’s helped us many times before, including on the other side when the market became oversold as it fell apart in September and October. (Jim Cramer’s Charitable Trust is long CAT. 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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