Buy more retailers, cut steel manufacturers

Read Time:3 Minute, 22 Second


On Wednesday, March 6, 2013, a customer was holding a shopping bag from American Eagle Outfitters Inc. while waiting in line for a transaction in a store in San Francisco, California.

Bloomberg

(This article was first sent to members of the CNBC Investment Club with Jim Cramer. To get real-time updates in your inbox, Subscribe here.)

On Tuesday morning, we purchased 300 shares of American Eagle Outfitters (AEO) for approximately $27.11. In addition, we sold 150 shares of Nucor (NUE) for approximately US$119.80.

  • After the transaction is completed, the charitable trust owns 4,450 shares of American Eagle Outfitters and 750 shares of Nucor.
  • This purchase increased the weight of AEO in the portfolio from 2.73% to 2.93%.
  • The sale reduced the weight of NUE in the portfolio from approximately 2.58% to approximately 2.16%.

American Eagle Outfitters announced third-quarter earnings before the opening, and the results looked like a blowout. Revenue increased by 24% year-on-year to US$1.27 billion, higher than the expected US$1.23 billion. Operating income of 210 million US dollars exceeded expectations of 170 million US dollars. Adjusted earnings per share were 76 cents, which was lower than the consensus consensus of 61 cents. Due to strong demand, higher full-price sales and fewer promotional activities, American Eagle Outfitters performed very well in the quarter.

Although the results were better than expected, we saw a lacklustre response in early trading. We think this is an opportunity to increase our position, because this American Eagle Outfitters quarter should prove to be one of the best professional retailers in this earnings season. We will report more on the AEO quarter later today.

For Nucor, as the stock price rebounds to near historical highs, which has proven to be one of the most volatile holdings of the trust fund, we hope to lock in some gains and make ourselves more flexible in the event of a correction.

We still believe that NUE is one of the cheaper stocks in the market, the pricing power can be longer than many people expected, and the steel industry is one of the main beneficiaries of the Biden government’s $1 trillion infrastructure plan. We also see that due to the alleviation of semiconductor shortages, the demand for steel will rebound next year, which hinders the automotive industry, which is a huge end market for the company.

Although we think steel demand will be strong next year, we do have some concerns on the supply side, partly because the relaxation of European import tariffs may limit further upside. Through today’s adjustments and locking in profits, we hope to be prepared when tariff easing puts a certain amount of pressure on the stock price. We will achieve a stable gain of about 11% through NUE adjustment.

The CNBC Investment Club is now the official location of my charitable trust. Here, you can see every move we do for the portfolio and gain my market insight before anyone else. The Charitable Trust and my work are no longer affiliated with Action Alerts Plus in any way.

As a subscriber to the CNBC Investment Club with Jim Cramer, you will receive transaction reminders before Jim makes a transaction. Normally, Jim waits 45 minutes after sending a transaction alert before buying or selling the stocks in his charitable trust portfolio. If the trade alert is sent before the market opens, Jim will wait 5 minutes after the market opens before executing the trade. If the trading alarm is issued for less than 45 minutes during the trading day, Jim will execute the trade 5 minutes before the market closes. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing a trade alert before executing the trade. Please see here for the investment disclaimer.

(Jim Kramer’s charitable trust is the long-term AEO, NUE.)


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