We are selling bank stocks and buying other beer stocks

Traders work on the floor of the New York Stock Exchange (NYSE) in Manhattan, New York, U.S., November 11, 2022.

andrew kelly | Reuters

We sell 125 shares of Morgan Stanley (MS) at around $90.44 each and buy 45 shares of Constellation Brands (STZ) at around $242.25 each.

After Friday’s trades, the portfolio will hold 1,475 shares of Morgan Stanley, reducing its weighting in the portfolio to 4.69% from 5.07%; and 435 shares of Constellation Brands, bringing its weighting to 3.58% from 3.22%

The Morgan Stanley trim will adjust our position, which had reached a weighting of more than 5% due, in part, to its spectacular rise over the past month. We are also downgrading the stock to a 2 rating, which also reflects its recent strength and not a change in our long-term view. We still believe very much in the future of Morgan Stanley. This sale will ensure a small gain of around 1% on the shares purchased in July 2021.

Following our consistent buying of Morgan Stanley from spring to early summer in the $80s and the stock’s outperformance over the past month – up nearly 18% vs. 10% for the S&P 500 – our position in Morgan Stanley had swelled to second place. in the wallet. Although we are scaling this position after strength on Thursday and Friday, we continue to like this investment bank’s stock and asset-raising for its push into fee-based revenue, a potential resurgence in the stock market. IPOs and its regular dividend and buyback programs.

We are taking funds from Morgan Stanley and redeploying them in Constellation Brands almost dollar for dollar. It was a landmark week for brewer Corona, as it received enough shareholder votes at a special meeting to execute its plan to scrap its dual-class share structure. We wrote all about the event on Thursday, explaining why it’s great news from a corporate governance perspective and should lead to a more shareholder-friendly capital allocation policy. We anticipate less costly and unprofitable acquisitions, greater investments in growing the beer portfolio and more share buybacks.

If Constellation allocates its capital in this manner, we expect the stock’s price/earnings multiple to increase over time. But with shares down a bit on Friday — more so when we mentioned buying in the ‘morning meeting’ — some may wonder if the drop is an indictment of Constellation’s decision to pay a premium. to remove the Class B High Voting Shares. We don’t believe this is the case and believe that STZ is getting carried away by this sector rotation out of defensives. Given our propensity to buy strength and sell weakness, we are adding to our STZ position.

(Jim Cramer’s Charitable Trust is long MS and STZ. See here for a complete stock list.)

As a CNBC Investing Club subscriber 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 talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade.

THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AS WELL AS OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY DUTY EXISTS, OR IS CREATED BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.

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