(This article was sent first to members of the CNBC Investing Club with Jim Cramer. To get the real-time updates in your inbox, subscribe here.)
After you receive this email, we will be selling 350 shares Cisco Systems (CSCO) at roughly $58.99. Following the trade, the Charitable Trust will own 1,650 shares of CSCO. Our trim in CSCO will decrease its weighting in the portfolio from about 2.86% to about 2.37%.
Shares of Cisco Systems are trading flat to slightly lower Monday after JPMorgan removed the stock from its Analyst Focus List. JPMorgan kept its overweight, as they see a "favorable outlook" driven by the near-term rebound in Enterprise IT spending and long-term benefits of the software and subscription business model transformation. However, the analysts took the company off their AFL due to Cisco's "greater susceptibility to near-term supply headwinds, with its broad portfolio of products, limiting near-term catalysts for the shares."
Get Chicago local news, weather forecasts, sports and entertainment stories to your inbox. Sign up for NBC Chicago newsletters.
We are pretty torn on CSCO because it is the type of stock that can work in this market. Cisco is the opposite of a high-flying, unprofitable "conceptual" company that could get slammed as the Federal Reserve tapers and tightens. It is high quality, cash flow generating and profitable. The stock also trades at an inexpensive price-to-earnings multiple. The 2.50% dividend yield provides a layer of support to the equity price and compensates investors for their patience. And the long-term fundamentals are positive due to Cisco's exposure to growing trends in software and enterprise IT spending.
But as much as we like the characteristics of the company and stock, we believe it is still prudent to trim our position and lock in gains into today's relative strength. We think JPMorgan is right in their assessment of the lack of near-term catalysts, and how long the supply chain headwinds persist remains up for debate.
We didn't think CSCO was a sell when it fell hard to the low $50s after earnings last month, but we are ready to let some shares go now that the stock price has recovered its post-earnings losses and rebounded back near its 52-week highs. The gain from this trim will be about 11% on shares bought in June 2021.
No One Ever Got Hurt Taking a Profit
Stock and company-specific reasons aside, we think it can't hurt to raise a little extra cash following the recent strength of the major indices, though most of the gains are only coming from a handful of stocks. Oversold conditions and the possibility of a Santa rally are still fresh on our minds, but traders and investors should prepare themselves for what could be a more hawkish and harsh statement at the FOMC press conference Wednesday. This sale will take the portfolio cash's position up to about 7.25% from 6.75%.
The CNBC Investing Club is now the official home to my Charitable Trust. It's the place where you can see every move we make for the portfolio and get my market insight before anyone else. The Charitable Trust and my writings are no longer affiliated with Action Alerts Plus in any way.
As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Typically, Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If the trade alert is sent pre-market, Jim waits 5 minutes after the market opens before executing the trade. If the trade alert is issued with less than 45 minutes in the trading day, Jim executes the trade 5 minutes before the market closes. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. See here for the investing disclaimer.
(Jim Cramer's Charitable Trust is long CSCO.)