Investing Club: We're paring positions in two chipmakers in response to a more aggressive Fed

Published Mon, Apr 11 20228:42 AM EDTUpdated Mon, Apr 11 20228:52 AM EDT

We're trimming a couple of our semiconductor positions Monday morning. We're selling 300 shares of Advanced Micro Devices (AMD) at roughly $99.15 and 200 shares of Nvidia (NVDA) at roughly $222.50. Following the trade, the Charitable Trust will own 450 shares of AMD and 275 shares of Nvidia. Our position size in AMD will decline to 1.38% from 2.29%, and our position size in NVDA will decline to 1.96% from 3.34%. With our trading restrictions in AMD and Nvidia finally clear, we are reducing our exposure to these two semiconductor stocks in a tough but necessary move we talked about all last week — and at higher prices. Last Wednesday morning, we downgraded our ratings on all four of our semiconductor stocks, citing the need to reduce our exposure to the group because of what we think has become an aggressively hawkish Federal Reserve. The commentary the day before from Fed Governor Lael Brainard and Fed President Mary Daly — two former doves — reminded us of October 2018, when the Fed signaled it wanted to raise interest rates in lockstep fashion. Using that as our analog, among the hardest-hit stocks from October 2018 to the Christmas Eve bottom that year were the high multiple tech names in the Nasdaq, semiconductor stocks, and small caps. Marvell Technology (MRVL) was the only chip stock we were not restricted from trading Wednesday morning, so we trimmed our position at around $66 per share — a great sale with the stock expected to open below $62 this morning. As for the others, we downgraded NVDA at around $249, AMD at $104.45, and Qualcomm (QCOM) at $142.40 and further discussed our call of trimming semis during our Wednesday Morning Meeting . We wanted to trim all our semis that morning, but we could not make all the sales we wanted due to our trading restrictions. That's why it is more important to follow what we say instead of simply tracking the trades we make for the portfolio. During Thursday's Monthly Meeting video , we explained our "portfolio pivot" even further and highlighted how we would have sold Nvidia had we not been restricted from trading it. And then on Friday in our Morning Meeting we reiterated our plan to pare back our semiconductor exposure as soon as our restriction would allow. We reiterated this call later in the afternoon. We are going back through this timeline to emphasize the importance of listening to our commentary because we cannot always make the trades we want to. As a reminder, we can't buy or sell any stock Jim mentions on TV for 72 hours. Even though we get restricted from making certain moves at times, we will always tell you what we would buy and sell if we could in our articles and Morning Meeting videos. We cannot stress this enough because if you followed at the time of our original call last week, you would receive a much better price than what the Charitable Trust will get today. With our sale in NVDA, we will lock in a fantastic gain of about 560% on stock purchased in May and June 2019. For AMD, this sale will lock in a gain of about 16% on stock purchased in February 2021. (Jim Cramer's Charitable Trust is long AMD, MRVL, NVA, QCOM. 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.

The Epyc 2nd generation chip, manufactured by Advanced Micro Devices Inc. (AMD) is arranged for a photograph during a launch event in San Francisco, California, U.S., on Wednesday, Aug. 7, 2019.

David Paul Morris | Bloomberg | Getty Images

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