Cramer's Investing Club: We're exiting this Club holding and considering better risk/reward stocks

Published Thu, Feb 3 202211:54 AM ESTUpdated Thu, Feb 3 20223:34 PM EST

We're exiting our position in Union Pacific (UNP), selling 300 shares at roughly $250.89. Following the trade, the Charitable Trust will no longer own any shares of UNP. Prior to the sale, the stock had a 1.87% weighting in the portfolio. With the market continuing to chop around, we are looking for opportunities to both put money to work in names that have gotten beaten down too much — while at the same time, scanning for opportunities to lock in gains and raise cash, where we believe the "easy money" has been made and the risk/reward is no longer in our favor. We're also watching a few companies that we're considering initiating positions in. But before possibly adding a new name, we must first free up a space in our 35-stock portfolio, which will happen with the UNP sale, otherwise we simply would not be able to adequately cover all of the holdings and appropriately manage the portfolio, especially in this volatile market. While Union Pacific did put up solid fourth-quarter earnings results , and it appears to be off to a strong start in 2022, we believe the stock to accurately reflect this dynamic. We believe our capital can work harder for us elsewhere when we consider the resiliency in UNP, as a result of the print, compared to the pressure in other high-quality names, which have been beaten down on near-term headwinds despite strong underlying fundamentals supportive of longer-term growth. Another reason is that UPN shares are roughly flat on the year near all-time highs versus an S & P 500 that's down ~5% year-to-date. A perfect example of where we see a more favorable risk/reward opportunity in the more economically sensitive industrial space is in Club stock Honeywell (HON). We believe the long-term underlying strength in HON is being masked by inflation, supply-side constraints and lingering Covid dynamics. We would be buyers of Thursday's sharp decline in the Dow stock, if not for our current restrictions. ( Here's our full breakdown of Honeywell's quarter .) As a result, we will book the ~17.5% gain in Union Pacific on our remaining position and look to reallocate the money into names that offer a more attractive risk/reward opportunity. (Jim Cramer's Charitable Trust was long UNP before the trade. 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

Scott Mlyn | CNBC

We're exiting our position in Union Pacific (UNP), selling 300 shares at roughly $250.89.