We're making four buys ahead of what could be the start of a Santa Claus rally

Published Wed, Dec 21 20229:37 AM ESTUpdated Wed, Dec 21 202210:11 AM EST

We're adding to four of our positions after Wednesday morning's open: Buying 40 shares of Estee Lauder (EL) at roughly $243 each, 100 shares of Emerson Electric (EMR) at roughly $96, 25 shares of Salesforce (CRM) at roughly $128, and 100 shares of Devon Energy (DVN) at roughly $64. Following Wednesday's trades, Jim Cramer's Charitable Trust will own 290 shares of EL, increasing its weighting in the portfolio to 2.48% from 2.15%; 350 shares of EMR, increasing its weighting to 1.20% from 0.86%; 425 shares of Salesforce, increasing its weighting to 1.97% from 1.86%; and 500 shares of Devon Energy, increasing its weighting to 1.07% from 0.86%. These buys come as our favorite technical analyst Larry Williams suggested earlier in the week that a Santa Claus rally was in the play. While stocks opened nicely higher on the great earnings reports from Nike (NKE) and FedEx (FDX) — and we never like to chase an up opening — we note that markets are still down roughly 4% over the past week and broader sentiment into the new year is still very negative. We are adding to our position in the prestige beauty company Estee Lauder . This trade is in violation of our low average cost basis of about $217, but we are willing to break our rules because we've been waiting for it to come down and the stock is down almost 3% over the past few days. As we've written before, we think Estee Lauder represents one of the best ways to play a reopened China. We got an early sign Tuesday night from the Nike quarter, which showed consumer spending in China is rebounding as Covid mitigation measures ease. That's a positive readthrough to Estee Lauder because the region represents about a third of the company's total business, and it's a key area for growth. The travel retail market is also a major opportunity for the company, and we are finally seeing promising signs of a rebound in tourism in the Hainan region. Hainan is known as the Hawaii of China. We're also making our next small buy of Emerson Electric as part of our process of gradually scaling into the stock over time. We started a position in this industrial name last week , citing management's portfolio reshuffling into a pure-play automation company as a key reason why we like it. While the industrial sector has made a big move over the past couple of months, we think EMR screens attractively on EV to EBITDA (enterprise value to earnings before interest, taxes, depreciation, and amortization), compared to another automation company, Rockwell Automation (ROK). That's despite similar scale and better margins. Lastly, we appreciate the consistent cash returns EMR gives to its shareholders. The company is a dividend aristocrat with 66 straight years of increases, $2 billion is earmarked from share repurchases in 2023, and management has $8 billion in dry powder sitting on the balance sheet to make accretive deals that are aligned with its core automation business. We're upgrading our Salesforce rating to a 1 and adding to our position. During our "Monthly Meeting" last week, we expressed interest in adding to this customer relationship management software leader due to a combination of factors, including resilient orders, a weaker U.S. dollar, cost discipline, and the prodding of activist hedge fund Starboard. While a lot has been made recently about the departure of co-CEO Bret Taylor and other executives, not all were voluntary departures. With Salesforce management continuing its focus on profitable growth, expanding margins, and managing dilution through its big share repurchase program, we think investors have gotten far too negative on this enterprise software name. We are adding to an oil position, Devon Energy . After Jim's conversation with RBN Energy's Rusty Braziel on Tuesday evening on "Mad Money," our constructive view of the oil market was reaffirmed as a China reopening should help boost prices. Although an economic recession represents a major question mark, prices may have a high floor because OPEC+ may be unwilling to let prices get too low. With this backdrop, we're adding to Devon Energy, a position we've trimmed much higher and have been slow to build back up. Even at $70 per barrel West Texas Intermediate crude , we believe Devon can continue to give out hefty dividend payments to its shareholders. (Jim Cramer's Charitable Trust is long EL, EMR, CRM and DVN. 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.

A trader works on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., December 14, 2022.

Andrew Kelly | Reuters