We're exiting this position to raise some cash after July's big market rally

Published Mon, Aug 1 20229:11 AM EDTUpdated Mon, Aug 1 20229:12 AM EDT

We are exiting our position in Walmart (WMT), selling 250 shares at roughly $131.78. Following the trade, the portfolio will own zero shares of Walmart. We are moving on from Walmart, taking a small loss of less than 2% on our remaining shares. Despite a couple of downbeat earnings-per-share guides over the past few months, Walmart shares have slightly outperformed the broader market this year, falling about 9% compared to a roughly 13% decline in the S & P 500. But it has underperformed its peer Costco (COST), which we continue to prefer of the two for its membership model and superior execution with inventory management. It was a good sign that Walmart shares clawed back all of its losses from its pre-announcement last week because this could mean this was a clearing event that investors had been waiting for, but our concern is that this cut will not be the last one. Walmart is feeling the pain right now because food and fuel inflation has shrunk the discretionary budgets of its customers, causing them to spend less on general merchandise and apparel categories that typically sell at a higher margin compared to groceries. The shift in spending habits from goods to services has further exacerbated this headwind. But it is not just food and fuel prices that are up. Household product companies like Procter & Gamble (PG) have put in price hikes to offset rising costs. On Procter & Gamble's earnings call Friday, management said its recently announced price increases take effect this quarter. The impact of these industry-wide changes could put a further strain on the consumer. Walmart's customer base seeks value and this plays to the retailer's favor during times of an economic slowdown. This is the main reason why we have held on to this stock for so long. But if we are struggling to see why discretionary sales at Walmart will pick up in the near term without heavy discounting, then we think the stock will have an overhang on it until earnings visibility improves. We also believe it is prudent to raise some extra cash following the best month for stocks since 2020. In addition, the market is technically said to be overbought, per the S & P Oscillator , which was 7.9% after Friday's rally. As a reminder, any time the Oscillator moves above 4%, the market is technically said to be overbought, which means it could be due for a pullback. Of course, the Oscillator could become more overbought from here, and stocks can always move higher. But at a minimum, we think an overbought Oscillator serves as a reminder that stocks have had a great run and we shouldn't be greedy. If the market pulls back a bit, we will be in a great position to buy more of our favorites with great long-term outlooks. (Jim Cramer's Charitable Trust is long COST, PG, WMT. 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.

Walmart is building four high-tech fulfillment centers that will simplify and speed up the picking and packing of online orders. The first one will open this summer in Joliet, Illinois.

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