Cramer's Investing Club: We're putting more cash to work, adding to Disney and Honeywell

Published Fri, Jan 28 20222:04 PM EST

We will be buying 75 shares of Disney (DIS) at roughly $136.46. Additionally, we will look to pick up 25 shares of Honeywell (HON) at roughly $199.59. Following the trade, the Charitable Trust will own 725 shares of Disney and 575 shares of Honeywell. This buy will increase DIS' weight in the portfolio from about 2.3% to about 2.55% and increase HON's weight in the portfolio from about 2.84% to 2.96%. On Thursday, we raised about $40,000 in cash with our sale of some Walmart (WMT) shares. Earlier Friday, we put about half of that back to work with our buys of Bausch Health (BHC) and Cisco Systems (CSCO). Given the selling dynamics we called out in our last trade alert, the advance/decline dynamic and the incredibly negative levels on the S & P Short Range Oscillator, we want to get the rest of that WMT-sale cash to work. Disney came under pressure following Netflix 's most recent earnings release as investors read through Netflix's downbeat subscriber additions guidance and thought the same could be happening at Disney+, a move that was likely further exacerbated by the broader market selloff we have witnessed in recent weeks. We understand that first level thinking — the notion that Disney traded on subscriber numbers throughout 2020 and during a good portion of 2021, so if those numbers are not growing as expected it must be sold. However, we think that narrative fails to account for key differences between Netflix and Disney. For starters, Disney is so much more than a streaming platform and the businesses outside of streaming are exactly the type of businesses you want to own as the economy comes back online – businesses such as cruises and theme parks, experiential entertainment offerings that cooped-up-for-too-long people will flock to when Covid eventually eases. In addition to having those business that benefit from people leaving the home, the combination of Disney media content and these experiential offerings provides Disney with an incredibly powerful flywheel that few others in the space can leverage for increased engagement and user monetization. That said, we still see a lot of growth ahead for the streaming platform this year, as Disney+ expands internationally, with launches expected this year in 50+ additional countries in regions such as Central Eastern Europe, the Middle East and South Africa. Given these near-term catalysts (demand for experiential entertainment and international expansion for Disney+), as well as the flywheel and the fact that shares have likely already taken the bulk of any hit on any possible near-term subscriber hiccups in the upcoming quarter, we are taking the opportunity to increase our exposure and reduce our overall cost basis as shares are trading ~18% below our overall cost basis. As for Honeywell, while the stock has been largely stagnant over the past year or so, the underlying business remains one of the strongest in the industrial space as management has worked diligently to transition the company from an old-school industrial to a software-industrial with exposure to several highly attractive end markets. In addition to industrial-orientated Software as a Service (SaaS) offerings such as Honeywell Forge, which helps customers digitize their operations, reduce downtime and increase efficiencies, Honeywell generates roughly a third of sales from the aerospace market, providing us with a cyclical catalyst as the economy reopens, air travel picks up and airlines start to increase investments again. The company also expects to benefit from higher oil prices in 2022 as it supports increase capital and operating expenditures by their customer base. Of course, the move away from fossil fuels won't hurt Honeywell because the company also offers solutions to meet the growing demand from customers with initiatives to enhance sustainability. On top of strong, growing end markets, Honeywell maintains a very healthy balance sheet with plenty of capacity for capital returns to shareholders, acquisitions, and organic growth investments. Given the stock has only become cheaper over the past year due to the combination of a flat stock price and growing earnings, we want to step in as shares have seen strong support around the $200 level and we believe 2022 is shaping up to be a year of strong demand that will be met with supply chain headwinds easing (Jim Cramer's Charitable Trust is long DIS, HON and WMT. 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.

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We will be buying 75 shares of Disney (DIS) at roughly $136.46. Additionally, we will look to pick up 25 shares of Honeywell (HON) at roughly $199.59.