We're making two trades, willing to take some pain to 'high grade' our portfolio

Published Thu, May 12 202210:12 AM EDT

We're selling 75 shares of Boeing (BA) at roughly $124.66 each; and buying 30 shares of Procter & Gamble (PG) at roughly $152.47 each. Following Thursday's trades, we'll own 275 shares of Boeing, decreasing their weighting in our portfolio to 1.25% from 1.58%, and 590 shares of P & G, increasing their weighting to 3.14% from 2.99%. The moves represent a shift that Jim Cramer calls a "high-grade" to our portfolio. Let's dig in on what "high-grade" means. We're talking about taking a little bit of pain on a small position that is not right in this environment, stocks with high price-to-earnings multiple, too much economic sensitivity and no capital returns. We're using some of the cash from the Boeing sale to buy more shares in P & G, a high-quality company that does fit our mantra of "make stuff and do things for a profit, return cash to shareholders through dividends and buybacks, and trades at a reasonable valuation." This high-grading process will also further the defensive positioning we've emphasized since early April —in addition our mantra above, we prefer companies that will not see demand for their products and services destroyed by a Federal Reserve -mandated slowdown to fight inflation. It's demonstrated by our recent exits of United Parcel Service , Nucor , and Mastercard at higher prices — and new initiations of Procter & Gamble, health insurance company Humana (HUM), beer, win and spirits giant Constellation Brands (STZ), and Coterra Energy (CTRA). While it's tough to part with some Boeing at these prices, this isn't the first time we have trimmed our position on concerns about management execution. We sold 25 shares on Feb. 9 at around $214 and another 25 on March 31 at around $194 for great profits of 26% and 15%, respectively. We think Thursday's action is a necessary move due to the lack of trust we have in Boeing's management. They have used very poor judgment and have failed to deliver on important issues related to the 787 and 737 Max. We're realizing a tough loss of about 25% on Thursday's sale. We're taking half of the cash from Thursday's Boeing sale to buy more Procter & Gamble, the exact type of company we like in this uncertain and volatile environment. P & G has some of the best consumer product brands that people won't stop buying even when budgets are constrained by inflation and the prices at the pump. Procter is a company that can raise prices to offset its own inflationary business costs. Last quarter, the company reported a 10% increase in organic sales, with half of that increase related to price. Those price increases on products tend to be sticky, which could create opportunities for margin expansion — if and when — the company's operating costs begin to roll over. We also appreciate Procter & Gamble's cash returns. The company repurchases stock quarter after quarter — $1.2 billion last quarter — and investors can collect a solid dividend yield of about 2.4% at the current stock price, slightly higher than we noted in our recent look at the dividend yields and buyback status of all 34 stocks in our portfolio. (Jim Cramer's Charitable Trust is long BA, PG, HUM, STZ and CTRA. 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.

Bottles of Tide detergent, a Procter & Gamble product, are displayed for sale in a pharmacy on July 30, 2020 in Los Angeles, California.

Mario Tama | Getty Images