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Despite an unexpected banking crisis that rippled through markets and the broader global economy, equities ended the first quarter of the year on a high note last Friday. But the first week of trading in the second quarter got off to a rocky start, forcing us to recalibrate our approach to the market. For starters, the S&P 500 short-range oscillator moved into overbought territory for the start of the quarter, giving us an opportunity to reduce some of our positions and raise funds. But as the week wore on, stocks came under pressure amid signs the labor market is weakening, fueling renewed fears among investors of a recession. This prompted many investors to shed technology stocks in favor of defensive sectors like healthcare and consumer staples. In keeping with our discipline, we followed what Jim Cramer outlined on Sunday and used this week’s volatility to sell opportunistically, along with some buying. This week of trading follows a wave of buying in the second half of March, when the market was oversold and financial sector uncertainty dominated. Here is a recap that explains how our broader view of the market influenced our trading decisions this week: Monday Guided by the oscillator, we decided to reduce shares in our network portfolio at the start of the week. We sold 160 shares of Cisco Systems (CSCO) in force on Monday, as the stock is up about 10% since the company’s second-quarter fiscal report in February. During this quarter, Cisco beat its revenue and earnings, while raising its forecast. However, investors like us are still wondering if Cisco’s orders can continue to grow at the same pace as in 2022. Earlier this year, we began to worry about Cisco’s order growth prospects amid a slowing IT expenses. As a result, we remain cautious on Cisco until we have a better idea of growth expectations for next year. Tuesday Tuesday was our busiest day with jobs. We had a mix of opportunistic selling and buying in our holdings in energy, consumer staples, infrastructure and healthcare. We decided to exit our position in Devon Energy (DVN), selling 500 shares of the energy company after an unexpected OPEC+ production cut boosted oil inventories. We had planned to part ways with Devon since he delivered a disappointing fourth quarter, leading to a lower more variable fixed dividend. This transaction also allowed us to reduce our weighting in the oil and gas sector. But we continue to own Coterra Energy (CTRA), which has exposure to natural gas. We have a stake in Halliburton (HAL) for its strong pricing power and expect it to benefit from years of underinvestment in the industry. Pioneer Natural Resources (PXD) is another of our energy stocks that we hold for its strong capital efficiency and 10.5% dividend yield. We plan to stick with these three oil stocks, given that energy prices are likely to rise even further amid ongoing geopolitical unrest. We reduced our position in Procter & Gamble (PG), selling 100 shares of the consumer goods giant while lowering our rating for the stock to 2. P&G shares had a difficult start to the year as Investors have crowded into the tech, but the stock recently rose after some Wall Street analysts upgraded the company to a buy rating. The increase in equities allowed us to reduce our position and raise cash. We’re still big fans of P&G for its ability to maintain its pricing power. We also expect a favorable setup for the stock for the remainder of the year as some raw material costs decline. We bought 20 shares of manufacturing giant Caterpillar (CAT) as signs of a weakening economy caused the market to rotate into defensive stocks. We therefore strategically bought shares of CAT on weakness, as we favor the company over the long term for its strong order book and strong dividend. With the market moving into health care stocks this week, we sold 20 shares of biopharmaceutical giant Eli Lilly (LLY) strongly after the stock rose over the past month. We are still long-term owners of the company, and our investment case has not changed. We continue to believe that Eli Lilly’s obesity and diabetes treatment, Mounjaro, could be one of the best-selling drugs of all time. Thursday We ended the trading week by buying this automation-focused industrial giant on weakness. We added 50 shares to Emerson Electric (EMR) on Thursday, as the stock is down around 4.5% this week. Our purchase comes ahead of a likely move on Emerson’s bid to acquire measurement equipment maker National Instruments (NATI) for $53 per share. If Emerson were to secure the winning bid in the mid-$50 per share range, its stock should trade higher as the deal would be accretive to earnings per share. And if Emerson backs out of the deal, the stock could also trade higher, mainly because the uncertainty surrounding the takeover, which crushed the stock in January, would be eliminated. We expect management to exit the deal if the price moves too high, freeing up cash for other acquisition opportunities or, more likely, a stock buyback. (See here for a full list of Jim Cramer’s Charitable Trust stocks.) As a CNBC Investing Club subscriber with Jim Cramer, you’ll 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 talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AS WELL AS OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
Traders work on the floor of the New York Stock Exchange during morning trading on January 17, 2023 in New York City.
Michael M. Santiago | Getty Images
Despite an unexpected banking crisis that rippled through markets and the broader global economy, equities ended the first quarter of the year on a high note last Friday. But the first week of trading in the second quarter got off to a rocky start, forcing us to recalibrate our approach to the market.