Cramer's Investing Club: 3 portfolio stocks — in retail, tech and oil — get new ratings

Published Tue, Jan 25 202212:13 PM ESTUpdated Tue, Jan 25 202212:21 PM EST

We are changing the ratings on three stocks in the charitable trust portfolio to better reflect our thinking about each position at the current price following the recent swings in the stock market. Before we talk about the stocks, we want to provide another brief reminder about how to interpret our portfolio rating systems. As a reminder, we rank every stock in the portfolio with a 1 through 3 rating. A stock rated "1" means we would buy it right here. A stock rated "2″ means we would wait for a pullback before buying it. We generally classify a pullback as a decline of about 5% from a recent high, but volatile times call for wider levels. Finally, a "3" rated stock is a position we would sell into strength. Currently, there are no "3″ rated positions in the portfolio. You can view the entire portfolio and our ratings here . We think Costco 's (COST) roughly 15% pullback from its high has made the stock attractive again, and we are upgrading our rating on COST to a 1 from a 2 . In addition to being the best run retailer in the entire world, we believe there are two potential catalysts this year that could help send shares higher. Our first potential catalyst is the board approving a special cash dividend. Costco has paid out a special dividend four times in the past eight years because the company did so well that its balance sheet swelled with cash. We think the timeline of the next special cash dividend is approaching, and shares have a history of outperforming the market around the announcement. The second potential catalyst is the company hiking the price of its membership fee. Historically, Costco increases the cost of a membership every five years, and it will be five years this summer. With Costco's loyalty rates as strong as they are, Costco can probably increase its membership fee with little resistance from customers. And remember, fee income is pure profit. We're also upgrading our Cisco Systems (CSCO) rating to a 1 from a 2 . You may recall that we booked gains in our Cisco position near $59 per share back in December . We trimmed the position out of prudence and our discipline proved correct because Cisco shares have fallen about 5% below our sale price due to the recent weakness in the market. We think CSCO has reached an interesting level where we are exploring the possibility of buying back what we sold higher. Plus, we think CSCO is the type of value technology name that can work when the Federal Reserve raises interest rates, which it is expected to do four times this year starting in March. Cisco shares trade at an undemanding 16x forward price-to-earnings multiple, it pays a solid 2.64% dividend yield, and share repurchases are typically in the mix as well. Furthermore, we like Cisco for its business model transformation to software from hardware and exposure to trends in enterprise IT spending. Lastly, we are downgrading Chevron (CVX) to a 2 rated stock from a 1, meaning that we would be buyers on a pullback. The markets have been volatile over the past few weeks, but CVX has powered through the tumult with shares up about 8% year to date compared to the nearly 9% decline in the S & P 500 . After this level of outperformance, we think it is prudent to be patient and more selective before blessing new buys in CVX. Plus, our preference in oil right now is to build up our position Devon Energy (DVN) —which we initiated a position in Monday during the teeth of the market decline — into weakness. Even though we aren't buying CVX at these levels, we don't have a reason to sell any shares just because of the 4.25% dividend yield, the big buyback, and the possibility that energy prices push higher this year. (Jim Cramer's Charitable Trust is long COST, CSCO, CVX and DVN. 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.

Jim Cramer on CNBC's Halftime Report.

Scott Mlyn | CNBC

We are changing the ratings on three stocks in the charitable trust portfolio to better reflect our thinking about each position at the current price following the recent swings in the stock market.