We’re exiting an oil stock — continuing to reduce energy exposure and locking in a big profit
We’re exiting our position in Chevron (CVX), selling our last remaining 100 shares at roughly $155 each. Following Wednesday’s trade, Jim’s Charitable Trust will no longer own a position in Chevron. This sale will lock in a fantastic gain of about 36% on stock purchased in December 2021. We’re taking another step Wednesday to pare back our overweight exposure to energy, a strategy that we have been consistent about since early August. It’s also a plan that has worked in our favor as we have mostly sold our energy stocks during pockets of relative strength and outperformance. As we noted Wednesday , our energy stocks have been the most resilient to the declines in the broader market between Aug. 16 through Sept. 2. There are, of course, several reasons to be bullish about energy heading into the end of the year, such as the potential for a cold winter, the eventual refill of the Strategic Petroleum Reserve, a China reopening, and the constant threat of geopolitical tensions. However, our concern Wednesday is a further breakdown in the commodity, with West Texas Intermediate crude sinking roughly 5% to under $83 per barrel. We aren’t technicians, but we always respect the charts and one thing analyst Carley Garner pointed out back on Aug. 11 is that the charts suggested a short-term bounce was due but would be followed by a significant decline. It’s played out this way so far. We don’t want to completely exit the sector because our oil holdings still in the portfolio — Coterra Energy (CTRA), Devon Energy (DVN), Halliburton (HAL) and Pioneer Natural Resources (PXD) —are still generating significant amounts of free cash flow at these commodity prices, and the companies are returning a large percentage of that cash to shareholders via dividends and buybacks. But if the charts are in control and oil does head lower, then we do not want to regret selling more. By the way, we continue to view a decline in oil as a positive for the rest of the market. Energy prices are a major input of inflation in many different places. If oil does plummet from here, our recent approach of selling energy stocks higher to buy high-quality but beaten-down tech and consumer discretionary stocks. as mentioned in our commentary Tuesday , should play to our favor. From a portfolio management perspective, this exit is less about Chevron the company and more about protecting our great return. Additionally, due to recent initiations of Starbucks (SBUX) and TJX Companies (TJX), the Charitable Trust’s total stock count went to 34. That’s on the higher side of what we typically like to carry. We try to trend somewhere closer to 30, because we are big believers in that the more stocks you own, the harder it is to stay current on homework and analysis . By exiting CVX, the second smallest position in the portfolio, we can free up some space to pursue new opportunities. All in all, Chevron served us well through this turbulent year due to the imbalance of energy supply and demand and also as a great hedge against geopolitical tensions and inflation. We’ve also collected several healthy dividend payments along the way. But we are moving on from the stock Wednesday afternoon to reduce our exposure to the sector and lock in a big win. (Jim Cramer’s Charitable Trust is long CVX, CTRA, DVN, HAL, PXD, SBUX and TJX. 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.
