Monthly Portfolio Update: 33 Stocks, 4 Buys Now

The CNBC Investing Club recently convened its May Monthly Meeting, a crucial gathering where Jim Cramer and Director of Portfolio Analysis, Jeff Marks, meticulously reviewed all 33 holdings within the Club’s portfolio. Cramer did not hold back, offering his candid assessments of each stock and highlighting four particular names he believes new Club members should prioritize. Marks, meanwhile, provided a deep dive into the two most recent additions to the portfolio, dissecting the strategic rationale behind their initiation. A recurring theme from Cramer was the indispensable nature of diversification, even in market environments dominated by a singular, powerful narrative. Currently, artificial intelligence is undoubtedly the driving force, and the Club has strategically positioned itself to capitalize on numerous AI-related opportunities. However, as committed long-term investors, maintaining a disciplined approach necessitates the inclusion of a broader spectrum of equities. Let’s delve into the key insights shared by Cramer and Marks.

For new Club members looking to initiate positions, Cramer’s top four stock recommendations include:

Big Tech Leaders Taking Center Stage

• Alphabet: Reflecting on past decisions, Cramer admitted a misstep in selling Alphabet last spring, deeming the subsequent repurchase a judicious move. The compelling synergy of Google Search, the advanced capabilities of Gemini, the robust growth of Google Cloud, the ubiquitous reach of YouTube, and the pioneering efforts in autonomous driving with Waymo underpins this conviction. For new entrants, Alphabet stands out as Cramer’s premier buy recommendation.
• Amazon: This e-commerce and cloud computing titan boasts an exceptionally diverse and valuable collection of business units. From the powerhouse of Amazon Web Services (AWS) and its increasingly important custom silicon initiatives to the enduring loyalty of the Prime membership program and the burgeoning advertising segment, the intrinsic value of these components demonstrably outpaces the current stock price. While some investors express apprehension regarding Amazon’s substantial AI investments, the anticipation is that profitability from these endeavors will begin to materialize as early as next year.
• Apple: The stock has recently experienced a significant upward surge, fueled by burgeoning optimism surrounding its artificial intelligence initiatives. Despite initial investor concerns about a potentially delayed AI rollout, the company’s unwavering commitment to product excellence, prioritizing quality over speed, has been validated. The market keenly awaits the potential unveiling of an AI-enhanced Siri at the upcoming annual developer conference on June 8, a development that could further invigorate its ecosystem.
• Nvidia: The undisputed leader in AI chip manufacturing finds itself at a pivotal juncture, reminiscent of Apple’s trajectory over a decade ago. Cramer suggests that Nvidia could emulate Apple’s strategy by implementing a substantial share buyback program, complemented by consistent and significant dividend increases. In Cramer’s view, Nvidia’s most compelling investment right now is its own stock.

Navigating the Big Tech Laggards

• Meta Platforms: CEO Mark Zuckerberg is renowned for his intolerance of underperformance, yet Meta Platforms has, of late, been a notable exception. The Club remains invested, driven by a cautious apprehension of selling only for Meta to subsequently unveil a groundbreaking AI development. This “wait and see” approach underscores the volatile yet potentially rewarding nature of the AI landscape.
• Microsoft: A similar strategic debate surrounds Microsoft. While acknowledging the undeniable operational challenges, it is difficult to conceive that leadership, including CEO Satya Nadella and CFO Amy Hood, are unaware of these issues. The Club has granted the company an additional quarter to demonstrate tangible improvements in its AI-centric prospects. Having held this position for nearly a decade, the objective is to preserve existing gains rather than risk further erosion.

Strategic AI Plays Beyond the Core

• Arm Holdings: Having joined the portfolio recently, Arm Holdings has experienced a meteoric rise since its acquisition last month. While concerns about securing adequate manufacturing capacity from TSMC persist, the prevailing market enthusiasm for anything data center-related has temporarily overshadowed these anxieties. The Club has realized some profits from this position.
• Broadcom: This stock has recently experienced a plateau, potentially attributable to perceptions of Marvell as a formidable competitor in the custom AI chip market and a lack of new customer announcements. However, the enduring strength of Broadcom’s networking portfolio and the steady leadership of CEO Hock Tan remain significant positives. The Club is patient, recognizing Broadcom’s foundational role in the data center infrastructure.
• Eaton: Eaton exemplifies a company proactively addressing the power infrastructure demands spurred by the exponential growth of data centers. Its critical role in providing cooling and electrical equipment ensures the smooth and uninterrupted operation of these vital facilities.
• GE Vernova: This entity stands as a significant beneficiary of AI’s insatiable demand for energy. GE Vernova’s primary contribution as a builder of natural gas turbines provides essential power for data center operations, positioning it as a key player in the AI energy ecosystem.
• Corning: As data center operators increasingly transition from slower copper connections to advanced fiber optics, Corning has emerged as the Club’s most significant winner. This esteemed American company is consistently being re-evaluated and appreciated by the analyst community, solidifying its position as a treasured holding.
• Qnity: Spun off from DuPont last fall, Qnity has been a standout performer, directly benefiting from the AI chip boom. While some profits have been taken, the stock continues to garner favor, particularly given its relative obscurity on Wall Street. A shift in analyst coverage from specialists in chemicals to those focusing on technology could unlock further upside potential.

Technological Advancements Beyond the Data Center

• CrowdStrike: It required considerable conviction to maintain positions in cybersecurity stocks during the recent “AI is eating software” sell-off. The Club’s decision to disregard the prevailing negative sentiment has been vindicated, with shares rapidly approaching all-time highs. A minor pullback following a disappointing outlook from peer Zscaler is not considered a cause for alarm.
• Palo Alto Networks: The long-term imperative for robust cybersecurity solutions remains unassailable. Consequently, the Club is comfortable holding a second cybersecurity position in Palo Alto Networks. Both CrowdStrike and Palo Alto Networks are scheduled to report earnings next week, offering further insights into their performance.
• Salesforce: The Club’s most challenging technology holding is set to report earnings after Wednesday’s close. The central debate revolves around whether to divest the stock if the realization of AI’s implications is expected to be a protracted process, with the option to repurchase it later. The upcoming quarterly results will be pivotal in informing this strategic decision.

Diversifiers for Long-Term Resilience

The overarching objective of the Investing Club is to cultivate a diversified portfolio that is resilient and performs consistently over the long term. This necessitates a strategic allocation beyond just data center and AI-centric plays, acknowledging that not all market segments advance in lockstep.

• Goldman Sachs: While typically associated with sales and trading, Goldman Sachs excels in the more lucrative IPO and M&A markets. Given the anticipated surge in public offerings and mergers, a significant upward movement of 25% from its current trading level by the fall is a distinct possibility. This stock is also among Cramer’s recommendations for new members.
• Wells Fargo: A sustained period of subpar financial performance could necessitate an exit from this position. The bank’s most recent earnings report proved particularly disappointing, leading to a downgrade. This is perplexing given the substantial progress CEO Charlie Scharf has made in transforming the institution.
• Capital One: Following consecutive disappointing top and bottom-line results, the Club expresses a degree of dissatisfaction with Capital One. While CEO Richard Fairbank is recognized as an exceptional leader, the successful integration and rationalization of the recently acquired Discover business have not yet met expectations. Despite its current valuation, the Club is willing to exercise greater patience with Capital One compared to Wells Fargo.
• Eli Lilly: A long-standing holding, Eli Lilly has delivered strong returns for the Club. The company’s next-generation injectable drug, retatrutide, is poised to be a significant disruptor, potentially establishing a definitive lead over its primary competitor, Novo Nordisk.
• Cardinal Health: The recent market rotation away from medical device and ancillary healthcare names has been particularly severe. The Club believes the reaction to Cardinal Health’s last earnings report was disproportionate given the company’s inherent quality. This stock represents a worthwhile battle.
• Johnson & Johnson: Another casualty of the market’s current disfavor towards the healthcare sector, Johnson & Johnson possesses a promising portfolio and pipeline of innovative drugs and medical technologies expected to drive future growth. Furthermore, the company has implemented a more robust legal strategy to mitigate talc-related lawsuits, allowing investors to refocus on fundamental business performance. Johnson & Johnson has indicated that its new once-daily psoriasis pill could become one of its most significant pharmaceutical products to date.
• Home Depot: This position represents the Club’s primary bet on a resurgence in mortgage rates and a substantial increase in housing market activity. Unfortunately, this catalyst has yet to materialize despite recent Federal Reserve rate adjustments. However, the Club remains invested, recognizing the unpredictable nature of such economic shifts.
• Costco: In the retail sector, Costco is considered a superior performer to Home Depot. The company is slated to report earnings on Thursday evening, with expectations for a solid quarter driven by its strategy of offering competitively priced gasoline to attract new cardholders.
• TJX Companies: Another strong performer in the retail landscape, TJX Companies was acquired ahead of its earnings report last week, a decision that proved prescient. The parent company of T.J. Maxx and Marshalls remains attractively valued, making it a compelling option for new Club members.
• Starbucks: The Club is maintaining its position in Starbucks, pleased to have held on during periods when Wall Street sentiment soured, with the stock trading in the $80-$90 range. Recent performance indicates that CEO Brian Niccol’s turnaround strategy is gaining traction, with further upside potential as he addresses the company’s remaining challenges.
• Procter & Gamble: Similar to Home Depot, Procter & Gamble serves as a hedge against a potential severe economic slowdown. While not anticipating an imminent downturn, the Club acknowledges the unpredictable nature of global events, referencing the unexpected conflict in the Middle East as an example of unforeseen catalysts.
• Nike: The stock’s performance has been a notable disappointment. Should the apparel giant deliver another lackluster quarterly report, forcing Wall Street to revise its estimates downward, a divestment may become necessary. CEO John Donahoe faces significant headwinds, and the current market conditions present a formidable challenge.

Industrial Sector Insights

• Boeing: Cramer has identified Boeing as another stock suitable for consideration by new Club members. As monthly aircraft deliveries increase, the stock is expected to trend higher, potentially reaching the $300 mark. The stock saw a nearly 2% increase on Wednesday afternoon following CEO Dave Calhoun’s remarks at a conference, indicating that the company has met regulatory requirements to ramp up 737 Max production.
• Honeywell: The Club trimmed its position in Honeywell on Tuesday, primarily due to a speculative surge driven by the company’s stake in a publicly listed quantum computing firm. This excitement appears to have overshadowed the more fundamental value of Honeywell’s industrial conglomerate operations. The true catalyst for Honeywell is its impending corporate split, which is anticipated to unlock greater shareholder value.
• DuPont: This diversified company, with holdings spanning chemicals, plastics, filtration, and safety materials, presents a complex investment thesis that has resulted in a somewhat directionless stock performance. Significant underlying value exists within DuPont, but CEO Ed Breen needs to expedite the realization of this value to warrant continued investment. The former electronics business, now operating as Qnity, has been the standout performer within the conglomerate.
• Dover: While Dover is a robust conglomerate with exposure to various sectors of a growing economy, its stock performance has been perplexing, seemingly fluctuating without clear drivers, unlike many soaring peers. The Club is closely monitoring Dover to determine its continued strategic fit within the portfolio.
• Linde: The inherent strength of this industrial gas company lies in its broad exposure across diverse industries, including healthcare, semiconductors, wine, and beverages. Linde demonstrates resilience in a stable economic environment and thrives during periods of economic expansion.
• FedEx: FedEx was recently upgraded from the Club’s “Bullpen” watchlist. CEO Raj Subramaniam has implemented significant operational improvements, and the impending spin-off of its freight shipping business is expected to serve as another catalyst for investor returns. The Club favors spin-offs as they typically enhance corporate focus and unlock value.

As a subscriber to the CNBC Investing Club with Jim Cramer, members receive trade alerts prior to Jim executing any transactions within the charitable trust’s portfolio. Jim adheres to a 45-minute waiting period after issuing a trade alert before buying or selling a stock. If a stock has been discussed on CNBC television, he extends this waiting period to 72 hours after issuing the trade alert before executing the trade.