We're buying a tech stalwart and a beer stock for two different reasons

Published Fri, May 6 202211:07 AM EDTUpdated Fri, May 6 20221:41 PM EDT

We're adding 50 shares of Microsoft (MSFT) at roughly $276.43 each. We're also buying 25 shares of Constellation Brands (STZ) at roughly $248.78 each, one day after initiating the position . Following Friday's trades, the portfolio will own 325 shares of MSFT — increasing its weighting in the portfolio to 2.94% from 2.5%, and 125 shares of STZ — increasing its weighting in the portfolio 1.02% from 0.82%. With the market in oversold territory as indicated by the S & P Short Range Oscillator, we are stepping in to do some more buying. The Oscillator is below minus 5%. A minus 4% signals the oversold threshold. While shares of Microsoft were under some pressure, we have already received earnings from the company, which point to sustained momentum for the actual underlying fundamentals of the business. As members know, when volatility strikes and stocks decline, we always like to look to those names that already reported strong earnings. That allows us to pay less for the stock and get the same, if not better, earnings potential than was the case when the stock was higher. With this buy, we are repurchasing less than half of the shares we sold when they were trading over $300 back on April 5 and April 6 . With this buy, we are upgrading shares to a 1 rating . As for Constellation Brands, we think this is a stock that can work against the incredible uncertainty regarding the future path of the economy. For starters, as Jim Cramer called out on Friday's "Morning Meeting," we have actually seen that beer historically does well in a recession. Constellation Brands may not be what many investors think of as a defensive stock, in the way they might consumer staples giant Procter & Gamble (PG) or insurance company Humana (HUM). But we believe there's upside potential to STZ earnings, even if the macroeconomic environment deteriorates further. Of course, if the economy avoids a recession or it comes later, we also think shares of Constellation Brands can work because the company sells the kinds of beers — Corona, Modelo and Pacifico — that people love to drink when going out during the hot summer months. Especially with Covid restrictions being lifted, that means we stand to see a lot of pent-up demand following two relatively restricted summer seasons. Bottom line The bottom line is, when the Oscillator is flashing that we're oversold and we're coming off of a day like Thursday, where the trading on the NYSE finished with roughly 95% down volume, you have to hold your nose and do some buying. That doesn't mean buy anything. We still have no interest in profitless so-called story companies. But it does mean that you must go in search of either a high quality name that either may not be working in the current environment but have come down enough to justify riding out the storm. That's the case with MSFT, which is trading its lowest valuation since 2019, also the valuation we saw at Covid lows. It's likely be one of the first down and outers to rebound. Another approach is to target more defensive companies that can work in an uncertain environment due to their staple-like nature, as is the case for Constellation Brands. (Jim Cramer's Charitable Trust is long MSFT, STZ, PG and HUM. 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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