Cramer's Investing Club: We're trimming our Walmart holding to boost cash in volatile market

Published Thu, Jan 27 202212:34 PM ESTUpdated Thu, Jan 27 20227:01 PM EST

We are selling 300 shares of Walmart (WMT) at roughly $137.34. Following the trade, the Charitable Trust will own 375 shares of Walmart. This sale will decrease WMT weight in the portfolio from about 2.4% to 1.35%. We put a lot of cash into the market earlier this week at much lower prices in stocks like Devon Energy (DNV) and Morgan Stanley (MS), and at slightly higher prices in stocks like Eli Lilly (LLY) and Marvell Technology . With Thursday's market stronger earlier in the session, we thought it appropriate to raise some cash to increase our flexibility. Although we are making a sale in the afternoon, we want to be careful about how much cash we raise because the market is heavily oversold right now, as explained in our latest morning note . But at the same time, we must recognize that volatility is here to stay due to the Federal Reserve 's projected plan of multiple interest rate hikes this year, and we need to protect cash in case the market gets hit again and retests Monday's lows. So how are we managing our portfolio through this stretch of volatility? Our plan is to take advantage of market rallies and oversold bounces by selling stocks we favor the least in the portfolio into that strength. That way, we'll have more cash (and more flexibility) to reposition the portfolio into the stocks we favor most in the current environment; mostly companies with undemanding price-to-earnings multiples, great cash flow, dividends, and buybacks. And on occasion, but only on wide scale, we will buy those high price-to-earnings companies (it must make money) into weakness because many great companies have been thrown away by market volatility. Why Walmart? It may be defensive if the economy slows down, but the stock has been unable to sustain a rally due to inflationary costs. Heavy investment spending to support the e-commerce business has also limited Walmart's earnings power. Plus the dividend has gotten less attractive now that it's roughly in parity with the rising 10-year Treasury yield. We will book a small but still disappointing loss of about 6% from this trade. (Jim Cramer's Charitable Trust is long WMT, DNV, MS, LLY and MRVL. 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.

A man wearing a face mask pushes a cart in front of a Walmart store in Edmonton. On Tuesday, January 12, 2021, in Edmonton, Alberta, Canada.

Artur Widak | NurPhoto | Getty Images