FedEx's troubles signaled more urgency to bolster our defensive stocks, so we added to one of them

Published Fri, Sep 16 202211:29 AM EDTUpdated Fri, Sep 16 202211:37 AM EDT

We're buying 25 shares of Procter & Gamble (PG) at roughly $137.84 each. Following Friday's trade, Jim Cramer's Charitable Trust will own 865 shares of P & G, increasing its weighting in the portfolio to 4.22% from 4.11% The abysmal guidance from FedEx (FDX) has to be factored into everyone's thinking. As we noted on Thursday evening, FedEx's business touches every tentacle of the global economy — so we're looking through our portfolio with an eye on recession resilient names —defensive, not economically sensitive. For us, that's P & G because their products hold a higher priority when it comes to how consumers spend their money. You'll probably delay upgrading your wardrobe before you delay your next buy of laundry detergent, soap or toilet paper. We're also getting signals that P & G's input cost pressure — inflation that hits companies — is starting to abate. Consider these two recent data points: Oil prices have been declining since mid-June. Now, containerboard — P & G products ship in boxes after all — is seeing a large glut. Jefferies on Friday downgraded International Paper (IP) and Packaging Corporation of America (PKG) to their equivalent of a sell rating. Jefferies also cut numbers on Westrock (WRK), saying price cuts are "imminent." Just last week at the Barclays Global Consumer Staples Conference, P & G management said they see some "good news on commodity input costs, sequentially. So, that's a little bit of help versus the numbers that we're underlying our guidance. Transportation in the U.S. is easing a little bit." While pass-through from suppliers and foreign exchange remain headwinds, overall the input cost picture appears to be improving. Management also noted that as of now, they are still seeing no real signs of trade-down in P & G products to cheaper alternatives. Remember, just because input costs may be improving doesn't mean that the sales price of P & G's goods are set to come down. The price in the store will be more sticky than the price P & G pays for logistics or the prices they are able to negotiate with suppliers. As a result, we think margin pressure may have peaked and profitability is set to improve while the top line remains resilient. Given our commentary on Thursday's "Monthly Meeting" for Club members that we wanted to pick up more shares at $130 to ensure we didn't violate the basis of our lowest buy, we are only picking up half of the 50 shares we were contemplating. Normally we would hold off completely, however, we think the update from FedEx could trigger a rotation back into defensive groups and the anticipated further decline in key commodities is enough to warrant putting a little more cash to work in a defensive name. (Jim Cramer's Charitable Trust is long PG. 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.

Tide, a laundry detergent owned by the Procter & Gamble company, is seen on a store shelf on October 20, 2020 in Miami, Florida.

Joe Raedle | Getty Images

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