Shortly after the opening bell, we will be selling 195 shares of Estee Lauder at roughly $99.05. Following the trade, Jim Cramer’s Charitable Trust will own 330 shares of EL, decreasing its weighting to about 1% from roughly 1.6%. We’ve locked in big gains this month in a bunch of winners in Meta Platforms , Palo Alto Networks , TJX Companies and Wells Fargo . And now with our trusted S & P Short Range Oscillator still overbought at 4.88%, we believe it is only right to trim a loser in Estee Lauder . A cardinal sin in managing a portfolio is to only trim winners. While it’s never easy to take a loss of about 50% on any position like we are here with Estee Lauder, if you never sell the bad ones you’ll be stuck waiting for a bunch of underperforming stocks to improve and risk missing out on better opportunities. These reasons are why we took the pain and exited Bausch Health and Foot Locker over the past few months. “Never sell your winners to subsidize your losers,” Jim has said previously . “If you need to raise money for whatever reason, just take the darn loss and sell something that’s underperforming.” And that’s how we are thinking about Estee Lauder right now. We put a good chunk of money in the market last week buying Advanced Micro Devices as it fell on the market rotation and concerns about the potential of tighter export controls and tariffs. With the market indicated higher Monday to start this week but the Oscillator still overbought, we want to replenish some cash by selling stock in an underperformer. One can certainly make the argument that a lot of bad news is already priced into Estee Lauder down at these levels and the market knows another bad guide is coming. But we’ve thought that in the past and it’s been wrong, costing us money. The company continues to struggle with a weak consumer in China and a competitive environment in the U.S. Due to the lack of catalysts out there that could lead to a sustainable turn in the company, we want to downsize this small position even further to protect against more losses and free up capital for better opportunities. (Jim Cramer’s Charitable Trust is long EL. 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.
We’re trimming an embattled stock to avoid a cardinal sin in portfolio management
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