Investing Club: Buying on the oil dip, taking profits elsewhere help us maintain high cash levels

Published Wed, Mar 9 202211:17 AM ESTUpdated Wed, Mar 9 202211:30 AM EST

We're selling 100 shares of United Parcel Service (UPS) at roughly $207 each. Additionally, we're buying 500 shares of Halliburton Company (HAL) at roughly $35 each. Following Wednesday's trades, the portfolio will own 250 shares of UPS and 1,000 shares of Halliburton. UPS' weighting will decrease to 1.39% from 1.93%, while HAL's weighting will increase to 0.93% about from 0.47%. Following the U.S. announcement of a ban on Russian oil imports, we're taking the opportunity to add to our position in oil services company Halliburton, which we kept small given the rally we bought into Tuesday. While Wednesday's decline in HAL was giving much of this week's earlier gains, we maintain that the loss of supply must ultimately be replaced and therefore, drilling activity, especially in the U.S., must increase. That's something we spoke to during Wednesday's "Morning Meeting." There's certainly a geopolitical premium baked into the price of oil. We expect that even should we see positive developments in the Russia-Ukraine fighting, crude prices will remain elevated versus recent history as they were on the rise even before the conflict escalated. Additionally, in our initiation alert, we noted that we felt quite certain that earnings estimates on Halliburton will prove to be too low. Supportive of both these views, analysts at Susquehanna raised their price target on shares Wednesday morning to $45 from $33 following its annual Oilfield Services Mini-Conference this week. In the note, the analysts raised their price targets by an average of 30% across the oilfiled services sector. They also said, "The overall tone of the meetings was very upbeat, with the companies offering a much more constructive outlook than we have heard in several years. Though recent developments in Russia and the Ukraine have precipitated a sharp move higher in crude oil prices, most companies indicated that they were already anticipating a long runway of growth with oil in the $80-$100/bbl range." On Halliburton specifically, the analysts called for "improved U.S. drilling activity, improved [fracking] pricing and margin expansion." As noted Tuesday, we think investments in digitization and automation will not only aid margins but also reduce health and safety concerns, accelerate service delivery improvements, and decrease the environmental footprint of the total operation. On the other hand, we're trimming our stake in UPS. While we continue to believe that management is effectively executing on their "better, not bigger strategy," the portfolio management need to maintain elevated cash levels eclipses our positive view for the time being. With shares relatively outperforming the S & P 500 year to date, we believe Wednesday's bounce provides a nice opportunity to do just that. This won't be our highest sale to date, but we'll still lock in a healthy roughly 25% gain on shares sold while protecting our cash levels as we do not think this period of volatility is over. (Jim Cramer's Charitable Trust is long HAL and UPS . 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.

People walk along Wall Street near the New York Stock Exchange on March 08, 2022 in New York City.

Spencer Platt | Getty Images