We're trimming a rebounding tech stock and buying more of a catalyst-rich name
We are selling 205 shares of Palo Alto Networks at roughly $183.32 and buying 30 shares of Honeywell at roughly $210.68. Following the trades, Jim Cramer’s Charitable Trust will own 245 shares of PANW, decreasing its weight in the portfolio to 1.2% from about 2.20%. It will also own 420 shares of HON, increasing its weight in the portfolio to 2.35% from 2.20% The best-of-breed cybersecurity stocks — CrowdStrike and Palo Alto Networks — are continuing the rebound from their sell-offs earlier this year. The market is finally coming to our view that artificial intelligence will be an accelerant to their businesses, not a disruptor. For Palo Alto Networks, the stock has is now roughly flat on the year after being down 23% as of the Feb. 24 close. With the stock back in the $180s, we’re following through with our previously stated intention to trim into strength and consolidate our cybersecurity exposure around CrowdStrike. This isn’t a knock against Palo Alto. It’s still a top name in the industry, led by a bankable CEO in Nikesh Arora, who successfully positioned the business for the AI era. Instead, it reflects portfolio management discipline. We hold two cybersecurity names in a 32-stock portfolio. Right or wrong, the group tends to sell off when the market gets concerned about software. This trim will make us less exposure to those downdrafts. From this sale, we will realize an average gain of about 30% on stock purchased in 2023 and 2024. We’re using some of that cash to buy shares in Honeywell, taking advantage of its recent decline. The stock fell about 9% from $233.55 to $213.17 last week, and we’re picking up shares into this weakness. Honeywell’s quarter was a bit soft due to the Middle East conflict, which drove shipment delays and a supply-chain snag impacting aerospace sales. Honeywell wasn’t the only aerospace-focused name to fall after earnings. GE Aerospace and RTX Corp also pulled back on concerns that the Iran war-related spike in oil prices and jet fuel shortage will hurt commercial aerospace aftermarket demand. We view all those short term concerns as an opportunity to add to our position and buy back stock we sold at a higher price earlier this year. The main part of our thesis is based on the value creation from the separation of Honeywell Aerospace, resulting in two publicly traded firms. The “spin purgatory” has made this a frustrating stock to hold, but Honeywell is almost through to the other side. Attention around the breakup should pick up momentum in June when the company has investor days for Honeywell Aerospace and Honeywell Automation. It culminates in the Aerospace spin-off on June 29. (Jim Cramer’s Charitable Trust is long PANW, HON and CRWD. 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.
