We bought more shares of this mall retailer on dips in omicron

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On May 15, 2020, Matthew Mitchell (middle) talks with customers while adjusting the denim display at the American Eagle/Aerie store in Easton Town Center, Columbus, Ohio.

Andrew Spear | Washington Post | Getty Images

(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.)

After you receive this email, we will purchase 250 shares American Eagle Apparel Company (AEO) Approximately $22.85. After the transaction is completed, the charitable trust will own 4,950 shares of American Eagle. This purchase will increase the weight of AEO in the portfolio from approximately 2.63% to 2.77%.

As the November retail sales report was weaker than expected, retail stocks suffered heavy losses on Wednesday. The downward trend confirmed and exacerbated the massive sell-off that the group experienced at Monday’s meeting, which may be related to concerns that the rapidly spreading omicron variant will keep shoppers away from shopping centers and stores for the rest of the holiday season.Investors take a more defensive stance on retail, which explains why we see a large number of rotations in department store stocks and specialty retailers such as American Eagle Outfitters, as well as buying interest in companies like these Walmart (WMT).

But think about it: due to this week’s decline, AEO’s stock price has now rebounded to levels the company has not seen since February. Although Aerie has gained all market shares and new customers, AE’s profit margin has improved due to the advantages of casual wear and denim, as well as smart acquisitions that have made all improvements to the supply chain/logistics through all improvements that should prove to be a pair . We obviously started buying AEOs too early, but we will not let the weakness of stocks frighten us.

American Eagle Outfitters is currently performing well and reported the best third quarter in its group. This is not a troubled retailer, but if you only focus on the stock price and not the strength of its category as explained on the third quarter earnings call, you would not know this.

In the end, we hope to stick to AEO at these levels, because investors receive considerable dividends. And due to the recent stock price decline, the dividend yield has risen to around 3.17%. We believe that dividends of this size should at least provide some support for the already low P/E ratio of the equity.

Boeing is on the watch list

Outside of AEO, we are seriously studying Boeing (BA)Yes, Boeing is a potential buyer, although the company faces well-documented challenges. The appeal of Boeing’s fall back to $191 is that the stock has now almost erased all the gains from China’s 737 MAX airworthiness order issued earlier this month. Recall that this is an important milestone in the aircraft’s return to the world’s second largest domestic aviation market. In addition, we like the momentum Boeing has shown in its orders and 737 MAX deliveries.

In the end, we decided not to increase our Boeing position here because we are unwilling to violate our low average cost basis of approximately $179 in the established position. However, we would like to point out what we see as an opportunity, especially if the stock price rises further due to concerns related to the continued suspension of 787 deliveries and the impact of increased omicron cases on international travel.

Eli Lilly and Nucor update

In other news, Eli Lilly (LLY) and Nucor (NUE) After the two companies provided updated guidance, it made headlines on Wednesday. Their stocks are moving in the opposite direction, and Eli Lilly, which we have been buying steadily for the portfolio, led the S&P 500 index this morning in response to its improved 2021 outlook and optimistic 2022 forecast.

At the same time, we sold some stocks for around US$120 at the end of November. After management’s record fourth-quarter earnings range fell short of street expectations, Nucor was the biggest laggard of the day.

We will have more ideas for Nucor and Eli Lilly later today, but we hope Investing Club members know that we think NUE’s weakness is more of an opportunity to repurchase products that we sell higher. In fact, if we do not have a place in the charitable trust, we will buy Nucor in this decline. But from our own point of view, we won’t get any stock in this decline because we are waiting for a level that can improve our average cost base of $101.46.

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 alert 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 holds AEO, BA, LLY, and NUE for a long time.)


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