We're bucking our discipline and buying up this cybersecurity firm

Published Mon, Apr 10 202311:32 AM EDT

We're buying 25 shares of Palo Alto Networks (PANW), at roughly $191.39 apiece. Following Monday's trade, Jim Cramer's Charitable Trust will own 250 shares of PANW, increasing its weighting in the portfolio to 1.8% from 1.62%. We're making one small buy Monday, picking up shares of cybersecurity leader Palo Alto Networks on recent weakness. Although this trade breaks our general investing discipline of putting money to work when the S & P 500 Short Range Oscillator is overbought, we think it's justified for two reasons. Firstly, envision a scenario in which money would flow back into the largest tech companies from the rest of the market if the Federal Reserve continues to raise interest rates, as Jim Cramer explained in his Sunday column . These companies could be most immune to a real economic slowdown. Cybersecurity has proven to be one of the most resilient areas of tech spending amid macroeconomic pressures, given companies cannot afford to leave their networks vulnerable. Within the cybersecurity ecosphere, Palo Alto Networks has differentiated itself as a share gainer and major beneficiary of enterprises consolidating their security budgets. Secondly, we're not paying up for Palo Alto Networks thanks to last week's pullback, which brought shares down to about $190 apiece from around $200 at the end of March. Moreover, Palo Alto is off about 10% from the stock's all-time high price of $213.63 per share, set last April — and we can make a strong case that it's a better company today than it was back then. A year's worth of pivoting to profitability has materially raised Palo Alto's adjusted operating margins and free cash flow profile, increasing the value of its franchise. In the company's most recently reported quarter , management raised its margin target for fiscal year 2023 by 200 basis points and predicted more room for growth in fiscal year 2024 and beyond. The result is that the company is GAAP (Generally Accepting Accounting Principles) profitable on a cumulative basis over the past four quarters, making it eligible for the S & P 500 . If and when the stock gets added, it should pop from buying demand from managers who track the benchmark index. (Jim Cramer's Charitable Trust is long PANW . 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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