In the course of the October Monthly Meeting , we took questions directly from Investing Club members. Listed here are Jim Cramer’s and portfolio director Jeff Marks’ responses. Their answers have been edited for clarity. 1. Why do rising rates of interest have such a negative effect on technology stocks? (Rod) Jim Cramer: When the Federal Reserve began raising rates, we made sure to reiterate that we prefer firms which can be profitable, generate money flow, and return money to shareholders because these characteristics help mitigate the chance of upper funding costs related to higher rates. Mega-cap tech names have been holding up because they earn numerous money. For example, in the course of the period when rates began to soar, Nvidia (NVDA) initially got hurt but the corporate proved resilient because it kept getting more orders from customers. Jeff Marks: It’s steadily viewed that the current value of an organization is predicated on the sum of future money flows discounted back at a certain rate – the speed often used to discount back is predicated on Treasury yields. The upper the rate of interest, the lower the current value of every money flow and thus, a low stock price. Funding costs also matter for growth firms, which are sometimes in tech. If rates are higher, it becomes dearer to borrow to fund growth and expansion plans if the corporate doesn’t have the money. That is why we made the change last 12 months and said you might have to own profitable firms that generate money flow when the Fed starts mountain climbing rates. 2. Why have not the stocks of oil firms risen at the identical rate as the value of oil? Is that this only a lag effect or are fears a few slowdown offsetting the upper oil prices? (Todd) Jim Cramer: I feel that the rally in oil was a brief squeeze that’s now over. I do not think it deserved to be within the $90’s since it did not have the economic growth. President Joe Biden mistakenly didn’t refill the strategic petroleum reserve so he was not in a position to offload oil. I do think Russia ordered oil and sent it to China which kept it off the market. Our own producers surprisingly didn’t break ranks. What has happened is the factitious nature of the short squeeze engineered by traders and whole countries got here apart after we realized that there have been no bids and there was not enough oil out there. We own Coterra (CTRA), our play on natural gas, which keeps edging higher. CEO Tom Jorden was right when he said that he was putting his bet on natural gas and he’s crushing it. Should you don’t own Coterra, I feel you make a mistake. Jeff Marks: I feel the market sniffed out that oil was closer to creating a near-term top and that is why the stocks weren’t being priced like oil was making a run to $100. But when the value of oil stocks stays disconnected from the value of the commodity for long, then what tends to occur is you get some M & A chatter around one in all the larger fishes looking to amass an independent. That is exactly what played out last week when the story about Exxon’s interest in Pioneer (PXD) was renewed. And, that deal was announced Wednesday. We plan to sell our PXD stake as soon as our trading rules allow. 3. I’m concerned with Apple’s decline. Is it time to start trimming or still “own it, don’t trade it?” (Donald) Jim Cramer: A few years ago when Apple (AAPL) traded within the $20s and $30, Shark Tank investor Daymond John got here on “Mad Money” and advisable the stock, saying “stick to it, it is a winner.” John appeared on “Mad Money” on Tuesday and said he believes the upcoming Vision Pro from Apple goes to be a winner too. There’s a chance for Apple to create a partnership with ESPN and pull content onto the miraculous Vision Pro mixed reality headset. Jeff Marks: Still within the “own it, don’t trade it” camp. It’s served us well for a few years – through rate mountain climbing cycles, pandemics, and trade wars – and it has been higher to carry it through all those events as a substitute of attempting to time the sell-point but additionally the re-entry level. Our Club analyst Zev Fima recently showed us the maths behind it . 4. I’ve had Salesforce for quite some time in your suggestion and have a solid gain. But It’s fallen roughly 10% previously month – roughly in keeping with the Nasdaq. Do you continue to think it is a long-term hold? (Peter) Jim Cramer: Marc Benioff, co-founder and CEO of Salesforce (CRM), is decided that artificial intelligence goes to supply more profits for firms which is able to then produce extra money to rent people. The stock jumped after it announced a better-than-expected quarter . There are individuals who say their business is weak but this business is on fire. Jeff Marks: Yes, I do, the corporate has made great strides expanding margins and increasing free money flow, while keeping its regular cadence of around 10% revenue growth despite the uncertain macro. Salesforce has gotten higher at managing dilution with its buybacks. The corporate continues to be the leader in customer relationship management and its generative AI tools could add a layer of incremental growth. 5. In light of the federal government’s anti-trust challenge, is Amazon “dead” money? (John) Jim Cramer: FTC chair Lina Khan doesn’t have a powerful antitrust case against Amazon (AMZN) – her arguments don’t make sense. Khan has had it out for Amazon since she was in law school and the case is garbage and it’s going to be thrown out slightly quickly. Jeff Marks: I do not think so because I do not think anything goes to return of it. And if anything, we’re within the camp that a breakup of Amazon into different parts could unlock value for shareholders. And by the best way, I do know Amazon recently has made great strides on the associated fee side and improving profitability, but when Amazon’s different businesses – the AWS cloud unit and retail – were independent, there could be increased scrutiny on each to expand margins and grow profits. 6. Over/Under in the subsequent 12 months that Costco distributes a special money dividend. (David) Jim Cramer: I spoke with Costco CFO Wealthy Galanti and he said it’s only a matter of “when, not if” the corporate distributes a special dividend. We love Costco (COST) because, unlike its retail peers, it doesn’t have theft problems. Costco is one in all my absolute favorites within the portfolio. Costco is crushing it. Jeff Marks: I will take “the over” on the special money dividend because I feel Costco likes collecting the 5% interest on its money. But I will “take the under” on a membership fee hike. 7. Are you able to review the concept of trading around a core position and provides an example of how and when to accomplish that? (Peter) Jeff Marks: What we did with Eli Lilly (LLY) recently is an amazing example. It has been a core name since we bought it because we have been believers that Lilly had the very best growth profile of any large-cap pharma name on account of the worth of its pipeline. But periodically, when everyone gets bulled up around one idea, the stock becomes a “crowded trade” and gets prolonged within the short term, which is why we recently trimmed some a number of dollars below $600. Sure enough, the stock pulled back to the low $500s over the subsequent few weeks. We didn’t pull the trigger and repurchase what we sold higher at those lower levels, but that money became of fine use when the entire market was getting clobbered last month. And, now with all of the positive attention GLP-1s — those diabetes/weight reduction drugs like Mounjaro — have gotten recently, the stock looks able to break above that $600 price. Diabetes drug Mounjaro is anticipated to get approval to treat obesity soon. Jim Cramer: When you might have a core position in an organization where you might have a long-term thesis, when the stock makes an enormous move, you are taking a bit of little bit of and redeploy it some other place within the portfolio. We did this in Humana (HUM) after we sold some HUM shares to secure a 12% gain. With the additional money available, we felt that we had the case to purchase, and traded around Procter & Gamble (PG). 8. Why do you want Stanley Black & Decker while you currently state put money into stocks which can be earning profits and never losing money? (Norman) Jim Cramer: We wish to have something related to the housing cycle that might earn money. The decline within the stock is sort of ridiculous because that is the premier tool company on this planet valued at $12 billion, has a powerful 4% annual dividend yield, a management team that is focused, and has gotten its costs down. Jeff Marks: Yes, Stanley Black & Decker (SWK) has had a number of unprofitable quarters this 12 months, but it is a special situation. Over the past 12 months, the corporate was tormented by an excessive amount of inventory, a foul cost structure, and a fancy supply chain. But, the corporate is within the means of fixing all three. After losing money for 3 straight quarters, the corporate is anticipated to return to profitability within the upcoming reported quarter and the earnings recovery is anticipated to select up into 2024 with expectations that it earns more that 12 months than it did in 2022. 9. Once you speak of shopping for on the best way down and waiting for the subsequent level, how do you identify what the subsequent level down is? (James) Jim Cramer: That is more of an art, not a science. I learned a method from Michael Steinhardt, who’s an unbelievable hedge fund manager, called a pyramid sort of buying. It’s where you begin small and construct up, but provided that it means it lowers your cost basis. Jeff Marks: You may do that a number of ways. Sometimes we use a percentage basis – so on every 3% to five% pullback. You possibly can also use dividend yields – so when you bought a stock at a 3.75% yield, the subsequent level may very well be at 4%. But conviction levels matter and what’s happening out there is essential as well. 10. I had a sizeable position in Honeywell for years and the stock is well off its 2021 highs. Should I proceed to carry it? (Rhonda) Jim Cramer: We were expecting business changes at Honeywell (HON) and management followed through Tuesday when it announced a reorganization of the corporate. CEO Vimal Kapur, who replaced Darius Adamczyk earlier this 12 months is reorganizing the business into different divisions starting in the primary fiscal quarter next 12 months. We wish to see what he does with these changes but need to provide the brand new leader a while to indicate us how he can bring out value for shareholders. Jeff Marks: I do know CEO Vimal Kapur is early in his tenure, but I feel the clock is ticking on Honeywell to bring out value and that is value owning it for. Yesterday (Tuesday) he announced the strategic reorganization of the corporate – that is a positive first step. Next, I’d wish to see acquisitions that speed up growth and dispositions of non-core assets. Otherwise, I would not be surprised to see chatter around an activist wanting to interrupt the corporate up, based on the success of the General Electric (GE) and Raytheon Technologies splits. (Jim Cramer’s Charitable Trust is long NVDA, CTRA, AAPL, CRM, AMZN, COST, LLY, HUM, PG, SWK, HON. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club 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 has talked a few 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.
In the course of the October Monthly Meeting, we took questions directly from Investing Club members. Listed here are Jim Cramer’s and portfolio director Jeff Marks’ responses. Their answers have been edited for clarity.