We’re buying 50 shares of Johnson & Johnson (JNJ) at roughly $175.11 each. Following Wednesday’s trade, the portfolio will own 325 shares of JNJ — increasing its weighting to 2.09% from 1.77%. With J & J shares pulling back to our overall cost basis, we want to take the opportunity to get some cash to work while increasing our exposure to this best-of-breed recession resilient name. Pressuring stocks: Before the opening bell Wednesday, the latest reading on consumer inflation came in hotter than expected. The market now expects about a 50/50 chance for either another 75-basis-point interest rate hike by the Federal Reserve or an even bigger 100-basis-point increase at this month’s policy meeting on July 26-27. That said, with a more aggressive Fed comes the increased risk of a recession — at the very least an economic slowdown is to be expected. That’s why we are focused on a Johnson & Johnson, because in addition to a strong financial position — J & J and Microsoft maintain a AAA credit rating — shares trade at approximately 16 times 2023 earnings estimates and sport a 2.6% dividend yield. Above all, J & J sells the type of products that provide for a resilient revenue stream despite weakening economic conditions. Lastly, in addition to the stock’s relatively attractive valuation and resilient revenue steam, we also have the breakup catalyst to look forward to. Recall, last November, management announced their intention to separate the consumer unit from the pharmaceutical and medical device businesses. As noted previously, we like the plan as we think it will streamline operations, and make capital allocation more efficient — as separating into two companies can increase their focus on and more effectively navigate industry specific trends to meet customer and patient needs. (Jim Cramer’s Charitable Trust is long JNJ and MSFT. 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.
We’re adding shares of a health-related company with a resilient revenue stream in rough times
Traders work on the floor of the New York Stock Exchange.
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