Wall Street navigated a choppy trading session Friday, with the S&P 500 paring earlier losses to close higher after initially reacting to its worst single-day performance since mid-October. The initial downturn reflected ongoing anxieties surrounding elevated spending and stretched valuations within the Big Tech sector.
Jim Cramer, in the CNBC Investing Club’s “Morning Meeting,” cautioned investors against chasing speculative growth stories, reiterating the importance of focusing on demonstrably profitable entities. He cited Club holdings Nvidia and Microsoft, alongside Alphabet, as examples of companies with solid financial foundations, contrasting them with ventures fueled by unproven promises.
While the S&P Short Range Oscillator hadn’t yet reached oversold territory, the Club is actively identifying select buying opportunities in stocks that have experienced recent pullbacks. Portfolio rebalancing is also underway, with plans to increase cash reserves as the Club considers exiting its position in Disney. Cramer expressed concern that Disney’s linear television networks are continuing to adversely impact overall profitability, and characterized the company’s management as being “in denial” regarding these challenges.
Bristol Myers Squibb (BMY) shares experienced a downturn, falling over 3.5% after a Phase 3 trial for an experimental drug was paused due to a patient health issue. Importantly, the drug in question was unrelated to Cobenfy, the company’s schizophrenia treatment which the Club views favorably for its potential application in treating Alzheimer’s disease. A crucial data readout for Cobenfy is anticipated later this year, presenting a pivotal moment for the Club’s investment thesis, particularly given management’s history of execution-related difficulties.
“It’s hard to have faith in management after a series of miscues,” noted portfolio director Jeff Marks. Reflecting this diminished confidence, the Club has been actively selling shares of BMY. As previously indicated, the Club would look to further trim the position should the stock price resume its upward trajectory.
Looking ahead to the week, the Club is closely monitoring upcoming earnings reports from several portfolio companies. Home Depot (HD) kicks off the week on Tuesday before the opening bell. The current high mortgage rate environment creates a near-term headwind, posing a challenge to maintaining a bullish stance. However, the significant pent-up demand within the housing market is expected to provide a counterbalancing tailwind for the home improvement retailer. Investors will be focusing on Home Depot’s ability to convert suppressed demand into tangible sales growth amidst affordability concerns.
On Wednesday before the market opens, TJX (TJX), the off-price retail giant, will release its earnings. The Club views TJX as a company that consistently under-promises and over-delivers, typically exceeding the high end of its guidance. Analysts will be scrutinizing TJX’s inventory management and ability to maintain margins in an increasingly competitive retail landscape.
Nvidia (NVDA) also reports on Wednesday after the closing bell. Despite a considerable number of bearish perspectives on the stock, Jim Cramer remains steadfast in his “own it, don’t trade it” conviction. The focus will be intensely on Nvidia’s data center revenue and its projections for future growth in AI-related technologies, which are crucial for validating its premium valuation.
Finally, cybersecurity firm Palo Alto Networks (PANW) is slated to report earnings on Wednesday after the market closes. The Club is particularly interested in gaining insights into management’s strategies for strengthening its agent-based security solutions. The evolution of their security platform and the degree to which they integrate emerging technologies like AI into their threat detection and prevention capabilities will be key areas of interest.
Other stocks discussed in Friday’s rapid fire segment included Applied Materials, Walmart, Gap, and Nucor.
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