Today, I want to examine a few stories that, right now, appear to be defeats and tell you how we look at these defeats beyond the failing grades we deserve — without extra credit that could save us, because this isn’t high school. We remonstrate, but we act and stubbornly refuse to accept defeat in the long term. Start with some of the challenges DIS YTD mountain Disney YTD performance We got started too early with Walt Disney (DIS) and we got too close to the company. We were led to believe by the highest of sources that former CEO Bob Chapek, so successful at theme parks, would be the ideal person to take care of creative talent and build out the Disney+ streaming service. But Chapek was a disaster and an incompetent, leading to the return of Bob Iger as CEO late last year. So why not bolt? Simple: there is no way this franchise could be worth so little given its intellectual property, its physical sites, and its its cruises and hotels. Not to mention, the possibility of the board ultimately bringing in a young CEO who understands how to motivate talent and fix linear television. I like the odds. EL YTD mountain Estee Lauder YTD performance We saw Estee Lauder ‘s (EL) stall-out coming, but we didn’t believe it would become the worst-performing stock in the S & P 500 that fateful reporting day earlier this month. I have had an excellent decade-long relationship with CEO Fabrizio Freda, and he had been such an able leader, until Covid-19. Since then he has been uneven. When China abandoned its Covid restrictions and reopened duty-free stores, Freda was assured big business was coming with a wave of travelers from the mainland. But that scenario ended up not panning out. Now, there is a ton of Estee Lauder in the big, bad channel of duty free, which assures us a terrible next quarter. So why keep it? Because sometimes there is nothing better than a well-warned terrible quarter. I think Freda will have something else that works that will blunt the loss of duty free. I am giving him credit for eight years and demerits for two. EMR YTD mountain Emerson Electric YTD performance Emerson Electric (EMR) infuriates me. I had loved the mosaic of Emerson, including power management, which meant playing a role in the much-needed digitization of the grid. I liked CEO Lal Karsanbhai’s idea of taking a big stake in a company like Aspen Technology (AZPN), which had the software needed to optimize the grid. It seemed bold and a break with the past. Instead, the whole thing now looks like a fool’s errand. After an initial hostile-takeover bid for National Instruments (NATI) earlier this year, Emerson ended up paying up to close the deal — cash that could have been spent on a much-needed buyback. The company is in purgatory, though I think Emerson could escape it with another good quarter . If it doesn’t deliver, we’ll say goodbye, as we did with Qualcomm (QCOM). Let’s hit some of the winners COST YTD mountain Costco YTD performance I can’t say enough good about Costco (COST) because it has kept its prices low and its quality high, giving it a chance to grow much faster than its name-brand competitors like Walmart (WMT). Costco’s so good that when it reported a widely-panned quarter in March, the stock still went higher. That’s a sign that the sellers don’t even know what Costco is. I’m used to being surprised at how ignorant people are about this company, which favors volume over price because it is, after all, a club, not a store. My advice to the sellers: go join the club — executive card, please! — and you won’t sell it again. HON YTD mountain Honeywell YTD performance I don’t like the way Honeywell (HON) trades and I am hoping it’s because investors don’t yet know newly-appointed CEO Vimal Kapur , set to take over the top job on June 1. Honeywell has long been among the best performing industrials. Now, it owns the cockpit for all commercial airliners, has a terrific climate-control business and lots of chemicals that make the dirty business of oil cleaner. Yet it’s been stalled at these levels for ages — trading at around $194 a share — and that could be an opportunity, which is why we upgraded our rating to a 1 on Monday. I know patience is a dirty word on Wall Street, but we want aerospace and we want companies that help keep the environment clean, so let’s roll with it — at least until we see if Kapur is as good a steward as the last two chief executives were. I initially had been thinking: What has Amazon (AMZN) really done besides develop a cloud-storage web service? Then I dug deeper. Amazon is using artificial intelligence (AI) to re-ignite its $40 billion advertising business. It’s designing campaigns with no marginal cost — and it might have the best AI of all. Similarly, four weeks ago I thought Alphabet ‘s (GOOGL) Google was finished. But they have become the consultant to those who want to cash in on AI. Moreover, Nvidia (NVDA), Advanced Micro Devices (AMD), Meta Platforms (META) and Salesforce (CRM) are all Club names with big AI potential. Bottom line Overall, we’ve got a lot more winners than losers. But make no mistake, it’s the losers that drive us, as the winners always take care of themselves. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) 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.
Today, I want to examine a few stories that, right now, appear to be defeats and tell you how we look at these defeats beyond the failing grades we deserve — without extra credit that could save us, because this isn’t high school. We remonstrate, but we act and stubbornly refuse to accept defeat in the long term.
Read the full article here