We're thinking about buying more shares in these 3 companies. Here's our internal debate

Published Mon, Nov 6 20234:09 PM ESTUpdated Wed, Nov 8 20239:39 AM EST

Buying the dip and adding 150 more shares of DuPont (DD) on Monday is indicative of how we're looking to put cash to work in a market that flipped late last week from severely oversold to overbought, according to the S & P Short Range Oscillator . The strategy, which has served us well in past earnings sessions, is to target companies, like a DuPont, whose stocks are down in price but whose businesses show promise. DuPont's decline from last week's mixed quarter screamed buying opportunity to us. So, we acted. As mentioned during Monday's Morning Meeting , three other names that immediately came to mind as possible buys were cybersecurity leader Palo Alto Networks (PANW), health insurer Humana (HUM) and industrial giant Caterpillar (CAT). Here's a look at why we're considering beefing up our positions. PANW YTD mountain Palo Alto Networks YTD Shares of Palo Alto Networks dropped another 4% on Monday, adding to Friday's more than 2.5% decline on Fortinet's disappointing full-year guidance. The warning, which came after the closing bell Thursday, sent Fortinet shares down more than 12% on Friday and pressured anything even remotely related to cybersecurity. Investors were making assumptions about what Fortinet's concerns might mean for Palo Alto. But we've seen this movie before, twice actually. In August , we told members to pick up shares of Palo Alto, which were down then, like now, on comments from Fortinet's management team. Back in May , it wasn't Fortinet but worries after quarterly duds from Tenable (TENB) and Cloudflare (NET) that pressured the group. In both instances, Palo Alto shares were indeed a buying opportunity — because as we learned and believe to still be the case, the pain being felt by its peers is due to their lack of a broad-based cybersecurity ecosystem. Since Palo Alto has built out a broad portfolio able to protect clients at every attack vector, the company has proven to be a winner thus far as clients look to save costs without compromising security by consolidating their spending to one vendor, or a select few. We would bet that this same dynamic plays out again — and as a result, we're looking at this most recent bout of weakness as a buying opportunity. CAT YTD mountain Caterpillar YTD Caterpillar is another recent underperformer we find interesting. Despite rebounding from recent lows, shares were below the level they were trading prior to the company's third-quarter earnings release on Oct. 31. We don't think that move is reflecting the strong underlying fundamentals and positive setup into 2024 on the back of continued infrastructure spending by the U.S. government. While the backlog declined a bit as of the end of Q3, we're reiterating that this was expected and not concerning because it was a function of an improving supply chain, not a deterioration of end market demand. Against the backlog decline, we saw an increase in dealer inventories. Dealers are independent businesses and are unlikely to increase inventory levels unless they see strong demand continuing. HUM YTD mountain Humana YTD Humana is another name whose stock price action simply does not reflect the fundamentals we saw in the company's most recent earnings report , out last Wednesday. Humana reported better-than-expected sales and earnings. However, the benefits expense ratio (also known as the medical loss ratio or MLR) in the key insurance segment was greater than expected, weighing on shares for the rest of the week. That's certainly not ideal, but we have to remember that you don't get buying opportunities when results are ideal. You get them when a little bit of bad news – such as an elevated MLR outlook – dings a company with an otherwise strong outlook. With Humana shares roughly 7% since reporting earnings compared to the S & P 500's over 4% gain during the same stretch, we think the stock has been beaten down more than enough to reflect any disappointment. Additionally, at 15.3 times 2024 earnings estimates (below their 5-year average of 17.5 times), we think shares can be bought at current levels. We are therefore upgrading HUM to a 1 rating. (Jim Cramer's Charitable Trust is long DD, PANW, CAT, HUM. 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.

Traders work on the floor of the New York Stock Exchange (NYSE) on November 02, 2023 in New York City.

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