We're trimming a stock at record highs and redirecting the profits into a lagging name
We are selling 10 shares of Goldman Sachs at roughly $761.48. In addition, we are buying 40 shares of Texas Roadhouse at roughly $166.57. Following the trades, Jim Cramer’s Charitable Trust will own 210 shares of GS, decreasing its weighting in the portfolio to 4.33% from 4.50%. It will also own 530 shares of TXRH, increasing its weighting to 2.40% from 2.20%. Shares of Goldman Sachs are hitting a fresh record high on Tuesday, and we’re making a small sale into this strength. This trim does not reflect any change in our long-term positive thesis. There’s been a huge pickup in mergers-and-acquisitions activity lately, and this is a huge week for the initial public offering market. As Bill Smith, the CEO of Renaissance Capital, put it in his weekly newsletter: “The IPO drought is over, and the IPO wave is here.” Goldman shares are up about 32% year to date, making it the fourth-best performing financial in the S & P 500. Only Interactive Brokers , Citigroup and Bank of New York Mellon are having a better year. Given Goldman’s outperformance, our position size continues to swell and we are making a small trim to lock in these big gains. From this trim, we will realize a gain of about 32% on Goldman shares purchased in December 2024. We will use the cash proceeds from this sale to nibble on shares of Texas Roadhouse. Shares of the steakhouse chain have declined about 10% since it reported its second-quarter results. Although the company posted strong same-store sales growth of 5.8% and stated that these positive trends continued into the third quarter, the numbers were met with a negative reaction because margins were pressured due to higher beef prices, resulting in an earnings per share miss. With no break in beef prices in sight, management also raised its commodity cost inflation outlook to 5% from 4%, and this hit on margins forced analysts to revise lower their earnings per share estimates for the year. We’ve talked before about how beef inflation is a problem, but the commodity can’t keep going up forever because the cure for higher prices is higher prices. Suppliers are incentivized to increase cattle herd sizes to capitalize on these higher prices, and at some level, consumers will seek cheaper alternatives and suppliers. Since Texas Roadhouse’s quarter, live cattle futures continued to climb higher, but as of now, they may have peaked in late August. If this marks the start of a downturn in cattle markets, the pressure on Texas Roadhouse should ease, provided there’s no major shift in the U.S. economy. With this purchase, we will be buying back the other half of the 80 shares we sold at around $190 in May. We previously bought 40 shares on August 8that around $174 per share. (Jim Cramer’s Charitable Trust is long GS and TXRH. 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.
