Persistent broader stock market selling gives us a chance to make a couple small buys

Published Mon, Apr 25 20229:31 AM EDTUpdated Mon, Apr 25 20229:41 AM EDT

We're buying 25 shares of Salesforce (CRM) at roughly $169.60 veach, and 150 shares of Halliburton (HAL) at roughly $36.37 each. Following Monday's trades, the portfolio will own 355 shares of CRM, increasing its weighting in the portfolio 1.95% from 1.81%, and 2,150 shares of HAL, increasing its weighting to 2.59% from 2.42%. We're making a couple of small buys Monday into this down open. Although the market is still far from being oversold per the S & P Oscillator, which came in at minus 2.87% on Friday, we're willing to nibble and buy small because there's a lot of negativity out there in the market. Additionally, we previously raised all that cash in preparation for a decline like this. For Salesforce, we acknowledge the risks of elevated volatility due to the stock's roughly 37x forward earnings multiple. But history says such a valuation down here is the right level to get more constructive. In a research note published Monday morning by Jefferies, the analysts pointed out that CRM troughed at 4.5x next twelve month revenue in 2016, and the stock has "historically bounced" off 5x forward revenue. As of Monday morning, CRM traded a little more than 5x 2022 estimated sales and 4.5x estimated 2023 sales. We also note that business software giant Salesforce passed our alternative Rule of 40 test for a more selective market we introduced last Thursday on "Mad Money." To pass our Rule of 40, a software stock must have more than 20% revenue growth and more than 20% operating margins. With 21.1% estimated year-over-year revenue growth and 19.9% operating margins. Salesforce just passed our test. We're rounding up on margins because management has guided for 20%. Finally, we want to point out that CRM has come down significantly since our sale of 50 shares on March 31 . With the valuation starting to look attractive on a historical basis the fundamentals attractive according to our Rule of 40, we are upgrading our rating to a 1 , and buying back half the stock we sold at much higher prices. Energy stocks were getting hit Monday and the price of oil dropped to about a two-week low of about $97 per barrel on demand concerns related to Covid lockdowns in China and a broader economic growth scare in the United States and Europe. We think this weakness represents yet another opportunity to pick up shares of oilfield services company Halliburton, which benefits from the need for investment in drilling activity to increase in North America and around the world excluding Russia to improve tight energy supply. When Halliburton reported last week, we thought management's view of the upcycle and the shift to short-term investments sounded much more secular than cyclical than what we have heard before. With its equipment supply market already tight as is, we think Halliburton will have plenty of power to put through prices increases — and expand margins — over the next several years. Lastly, this purchase fits the playbook that we often use when the market gets extremely volatile during earnings season. When the whole market is in sell-off mode, we like to go back with visibility and buy the stocks of companies who already reported and said great things about their quarter and outlooks. (Jim Cramer's Charitable Trust is long CRM and HAL. 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 Salesforce Tower, left, and the Salesforce West office building in San Francisco, California, U.S., on Tuesday, Feb. 23, 2021.

David Paul Morris | Bloomberg | Getty Images