Foot Locker Inc - ReportWire

Wells Fargo CEO talks up reasons to love the stock — plus, what’s behind the market drop

Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Market pressure : The major stock benchmarks were moving lower Wednesday, with the Dow getting the worst of it again. Adding pressure on equities, bond yields moved higher following a poor auction of $44 billion worth of 7-year Treasury notes. Nvidia was bucking the overall market decline, but its modest gain was much cooler than the incredible march higher over the past three sessions after last week’s earnings. American Airlines shares sank roughly 15% after a company sales strategy backfired and the carrier cut growth guidance. Sector watch : All of the S & P 500 sectors were under pressure Wednesday, led by energy and utilities. Tech has been flirting with positive territory as Nvidia, which opened lower, reversed to the upside. Fellow Club names Apple and Microsoft were also in the green. Combined, the three account for nearly 49% of the tech sector index. Apple and Nvidia, our two “own, don’t trade” stocks were also the top performers among the entire 33 stock Club portfolio. Deal movers : ConocoPhillips has agreed to buy Marathon Oil in a $17 billion all-stock transaction. Marathon shares rose about 7.5%, while Conoco stock fell roughly 4%. Additionally, Hess shareholders approved the company’s pending merger with Chevron . And, Merck has reached a deal to acquire privately held Eyebiotech for $1.3 billion in cash. Banking news : Here’s a dispatch from our Investing Club reporter Morgan Chittum about what Wells Fargo CEO Charlie Scharf said Wednesday at Bernstein’s 40th annual Strategic Decisions Conference: Scharf said Wells Fargo has been focusing on investment banking in a “very, very targeted way.” There were several mentions of the bank’s quiet hiring spree to beef up its Corporate and Investment Banking (CIB) division, which we reported on last week . Building out lucrative underwriting and advisory fee capabilities is “staring us in the face,” he added, as long-dormant IPO and M & A activity have started to perk up. Expanding Wells Fargo’s Wealth Management franchise, another fee-based revenue stream is “one of the bigger opportunities” ahead, Scharf said. The bank has around 12,000 advisors and is better positioned than in years past, the CEO added. We have been encouraged by Wells Fargo’s push to boost fees business lines. Scharf said Wells Fargo remains focused on efficiency. The bank has cut staff to 225,000 from 275,000. “The conversation around efficiency is less [about] saving money and it’s more about how do we run a better company,” he added. When the Federal Reserve at some point removes its asset cap on Wells Fargo, Scharf said corporate lending and trading will be areas of growth for the bank. He said he dialed back those areas to stay under the Fed’s $1.95 trillion limit. “When you turn a consumer away, they’ll remember that forever,” Scharf said. Businesses understand and can be won back, he added. The CEO believes it’s just a matter of time before the asset cap is lifted and so do we. Scharf said Wells Fargo was able to get a key regulatory penalty removed back in February by stripping away things like certain incentive plans at branches. The so-called consent order was tied to the bank’s 2016 fake accounts scandal that predated Scharf. There are still several other orders outstanding. Quick hits : The FDA granted accelerated approval for Club name Eli Lilly ‘s Retevmo, which is used to treat certain kinds of advanced or metastatic medullary thyroid cancer in children two and older. Twelve years and older was the prior age threshold. Elsewhere, shares of HubSpot were bucking the broader market decline on further speculation that Club name Alphabet is indeed considering an acquisition. CNBC’s David Faber believes that should a deal occur, it would be all-stock. Up next : Salesforce is set to report earnings after Wednesday’s closing bell. AI monetization commentary and what the team has been seeing in terms of cross-selling opportunities will be key watch items. Foot Locker and Best Buy report before the bell Thursday. Costco is out with results Thursday evening. That will do it for Club name earnings, except for Broadcom, which is set to report next month. (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.

Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street.

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May 29, 2024

Foot Locker shares fall after heavy promotions lead to holiday-quarter losses

The Foot Locker logo is displayed in a store on May 19, 2023 in San Francisco, California.

Justin Sullivan | Getty Images

Shares of Foot Locker fell in premarket trading Wednesday after the sneaker retailer reported a holiday-quarter loss and issued weak guidance for the current year.

Here’s how the company did in its fourth fiscal quarter, compared with estimates from analysts surveyed by LSEG, formerly known as Refinitiv:

Earnings per share: 38 cents adjusted vs. 32 cents expected
Revenue: $2.38 billion vs. $2.28 billion expected

The company swung to a loss in the three-month period that ended Feb. 3. Foot Locker lost $389 million, or $4.13 per share, compared with an income of $19 million, or 20 cents per share, a year earlier.

Sales rose slightly to $2.38 billion, up about 2% from $2.34 billion a year earlier.

For fiscal 2024, Foot Locker is expecting sales to be between down 1% and up 1%, compared to estimates of down half a percent, according to LSEG.

It expects adjusted earnings per share to be between $1.50 and $1.70, compared with estimates of $1.40 to $2.30, according to LSEG.

It’s been a little over a year since CEO Mary Dillon took the helm of Foot Locker. During her tenure, sales have consistently fallen as the retailer grappled with a changing mix of sneaker brands and a target consumer that has felt the brunt of inflation more acutely than those in higher income brackets.

Foot Locker has also been repositioning its Champs Sports brand and has grappled with high inventory levels that, unlike its peers, it has struggled to curb.

In her past life as Ulta Beauty’s chief executive, Dillon skillfully won over buzzy beauty brands and turned the company into a powerhouse cosmetics retailer. When she took over as Foot Locker’s top boss in Sept. 2022, she was seen as the savior the legacy retailer sorely needed.

While Dillon inherited a slew of problems that existed long before she took over, and is still highly regarded across the retail industry, her turnaround of Foot Locker has come more slowly than some analysts had expected.

During its fiscal third quarter, Foot Locker eked out surprise beats on the top and bottom lines. Dillon told investors the company was making progress with its turnaround initiatives. The company inked a new marketing deal with the NBA, made plans to enter India and said the holiday quarter was off to a strong start.

Last March, Dillon touted a renewed and revitalized relationship with Nike, which has long been the largest driver of Foot Locker’s sales. She has also sought to reduce the company’s reliance on the sneaker giant as it has focused on driving direct sales and squeezing out wholesalers.

The relationship between the two brands still appears to be in a state of flux. On earnings calls, Nike routinely points to Dick’s Sporting Goods and JD Finish Line as its treasured wholesale partners.

But in mid-February, Foot Locker announced a new partnership with its longtime supplier. The partnership, dubbed The Clinic, brings together Foot Locker, Nike and Jordan Brand, and will feature “interactive activations, high reach media, real life basketball clinics, social media content, community events and more.”

The partnership officially launched during the 2024 NBA All-Star Game in Indianapolis, In.

Read the full earnings release here.

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March 6, 2024

Here are our top 5 stocks from mid-November until the eve of December's Monthly Meeting

U.S. stocks have been trending higher since the Investing Club’s November Monthly Meeting as markets celebrate signs of cooling inflation and a seemingly less hawkish Federal Reserve . Watch our December Monthly Meeting at live noon ET and later on video. The S & P 500 has jumped 5.2% since the market close on the Nov. 15 meeting day through Monday’s close. Equities have sustained a rally after the U.S. central bank indicated that three interest rate cuts were on the table next year. A pullback in Treasury yields has also boosted risk assets. Here are the Club’s five top-performing stocks over that stretch ahead of Tuesday’s Monthly Meeting for December. They span three sectors from consumer to tech to banks. 1. Foot Locker Foot Locker came in first for gains since November’s Monthly Meeting. Shares of the company surged 34.2% over the period after posting better-than-feared quarterly results and upbeat commentary from Wall Street analysts. Piper Sandler analyst raised its rating on Foot Locker to a buy from a hold last week, saying that 2024 could be a big turnaround year for the embattled retailer. Analysts see margin expansion opportunities for Foot Locker as the firm’s inventory stabilizes to healthier levels. The stock popped on that positive note, but we’re optimistically cautious. FL YTD mountain Foot Locker (FL) performance year-to-date The stock has dragged this year, like many retailers, as shoppers continue pulling back on discretionary spending amid macroeconomic uncertainty and warnings of a recession. Shares are down 16% year-to-date. It’s a make-or-break quarter for Foot Locker, and we need to see more progress around its long-term prospects to stay in. Still, we’re hopeful on management’s track record around embattled companies, however. CEO Mary Dillon, who overhauled Ulta Beauty , was a key reason we invested in Foot Locker to begin with. 2. Salesforce Coming in second for gains is Salesforce . The Club stock popped 20.1% on the back of a strong fiscal 2024 third quarter . During the earnings call, management delivered a rosy outlook and CEO Marc Benioff named some “green shoots” for the business. CRM YTD mountain Salesforce (CRM) performance year-to-date Overall, we were happy with the cloud software company’s improving margins and growing sales. The stock’s rally continued Monday when Wolfe Research analysts shared a rosy outlook for the company. “This is one I would not take profits in,” Jim Cramer recently said of Salesforce . “I want it to run.” 3. Palo Alto Networks Palo Alto Networks jumped 20.06%, coming in third for gains over the period. In November, the company became the first in the cybersecurity industry to hit a whopping $100 billion market capitalization — a goal long held by management. PANW YTD mountain Palo Alto Networks (PANW) performance year-to-date “The winner and new champion of cybersecurity may actually be Palo Alto,” Jim said after the firm passed the market cap milestone on Nov. 30. The stock has cooled some since but the Club is bullish on Palo Alto compared to peers like Fortinet because its revenue streams are more diversified and less cyclical. Overall, CEO Nikesh Arora said he anticipates even more demand for Palo Alto’s offerings into 2024 as companies continue to face cybersecurity threats and various hacks. “This year has been a phenomenal year for cybersecurity stocks,” Arora told Jim during an interview Monday, adding that more businesses will rely on these kinds of services. “And I think it’s just the beginning.” 4. Broadcom Broadcom placed fourth in terms of gains. The stock has jumped 17.6% since November’s Monthly Meeting. The semiconductor giant was one of the S & P 500’s best-performers last week in a delayed reaction to a solid outlook for recently acquired VMWare. AVGO YTD mountain Broadcom (AVGO) performance year-to-date Since reporting earnings after the closing bell on Dec. 7, Broadcom shares gained 24% as of Monday’s close of $1,147. Last Friday, we increased our price target to $1,200 per share from $1,000. On Monday, we took some profits, selling 5 shares . We’re still big believers in the company and own 75 shares in our portfolio. 5. Wells Fargo Coming in fifth is Wells Fargo , whose stock has jumped 15.9% over the period. This comes amid a broader market rally, which has lifted lagging groups like financials. WFC YTD mountain Wells Fargo (WFC) performance year-to-date We remain upbeat on shares because of its multi-year turnaround plan. The Club sees even more long-term growth prospects once regulators lift the $1.95 trillion asset cap , which should in turn allow the firm to expand its balance sheet and rake in more profits. (Jim Cramer’s Charitable Trust is long FL, CRM, PANW, AVGO, WFC. 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.

Traders work during the opening bell at the New York Stock Exchange (NYSE) on August 16, 2022 at Wall Street in New York City.

Angela Weiss | AFP | Getty Images

U.S. stocks have been trending higher since the Investing Club’s November Monthly Meeting as markets celebrate signs of cooling inflation and a seemingly less hawkish Federal Reserve.

Watch our December Monthly Meeting at live noon ET and later on video.

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December 19, 2023

Signs of a sector rotation — plus 2 more themes to watch in the stock market

It was another win for the bulls this week. Wall Street started the month of December higher Friday — building on November’s rally, which broke a three-month losing streak. November really lived up to its stellar reputation, with monthly gains of nearly 8.8% for the Dow , about 8.9% for the S & P 500 and 10.7% for the Nasdaq . Historically, November is the best month of the year for the stock market, and December is third, according to the Stock Trader’s Almanac. The market was able to push higher Friday, despite Federal Reserve Chairman Jerome Powell saying talk of cutting interest rates is “premature” and that more hikes could still happen. Many investors assumed the Fed was done with its tightening cycle now that inflation has shown signs of moderating. More proof that the Fed’s battle with inflation is working came on Thursday when the central bank’s favorite inflation gauge showed a continued downtrend in price pressure. The core PCE (personal consumption expenditures) price index, which excludes the food and energy sectors, rose 0.2% in October and 3.5% on a year-over-year basis. Both gains were lower than estimates. Under the surface this week, we also saw signs of a possible market rotation in the works. That’s just one of three major themes to watch in the week ahead. 1. Rotation watch : We must look to next week’s trading for confirmation that we’re in the grips of a rotation or simply a head fake. Signs of the former were on display this week as the two of the biggest sector winners of the year, communication services and technology , trailed the market. The rotation was also evident at the index level, with the Dow the clear leader and the tech-heavy Nasdaq the laggard. The moves are not that surprising given our view that beyond the Magnificent 7 stocks that grab the headlines, there are many coiled springs that needed so-called less bad news for big upside moves. Foot Locker (FL) this week was a prime example, grabbing a better-than-feared financials surge in shares that propelled the stock to the top of our best-performers list for November. 2. Jobs, jobs, jobs : The most important release of the week comes Friday in the form of the November nonfarm payrolls report. This is an indirect but important read on the health of the economy and future path of inflation. Though it doesn’t provide information on prices or sales activity, it provides a read on buying power, after all, employment is key to continued spending power. For this reason, in addition to the headline number, economists expect to see 150,000 additions, we are keeping a close eye on the unemployment rate (3.9% expected) and wage inflation, where we are looking for 4% increase versus the year ago period. Prior to Friday’s upcoming jobs report, ADP’s look at hiring trends at U.S. companies is out Wednesday. Economists are expecting to see 125,000 new additions for November. The ADP’s track record has not been that great of a harbinger of the government’s monthly jobs data. But it’s still worth watching. 3. Club earnings : One of our late-reporting companies, Broadcom (AVGO), releases its quarter results after the closing bell Thursday. Expectations have likely been tempered on the back of earnings from Marvell Technology (MRVL), which reported better-than-expected results but provided slightly lower-than-expected sales and profit guidance. It’s a similar dynamic to what we saw from Cisco Systems (CSCO) two weeks ago. Networking is certainly going to be a key focus area for us at Broadcom. Last time around, CEO Hock Tan said Networking revenues were up 20% in the quarter – now representing 40% of semiconductor segment revenues – and guided for an acceleration in the then-current quarter to be reported. Commentary around custom chips will also be of interest as Broadcom is a known design and manufacturing partner for major artificial intelligence players like Club name Alphabet (GOOGL). We’ll also be looking for additional color on the recently finalized VMWare acquisition, which should now play into guidance, as we look to 2024. As of Friday, the market remains overbought, with the S & P Short Range Oscillator at 7.33%. Any reading of 4% or more means the market is technically overbought (a reading of less than minus 4% means oversold). Another pullback could be lurking. Here’s the full rundown of all the important domestic data in the week ahead after the Club sent out three trade alerts this week concerning four stocks. We also updated our price targets on six stocks and changed our rating on another. Monday, Dec. 4 10 a.m. ET: Factory orders Before the bell earnings: Science Applications (SAIC) After the bell: GitLab (GTLB), Joann (JOAN) Tuesday, Dec. 5 10 a.m. ET: ISM Services PMI 10 a.m. ET: JOLTS (Job Openings and Labor Turnover Survey) Before the bell: Nio (NIO), AutoZone (AZO), JM Smucker (SJM), Signet Jewelers (SIG), DSW-owner Designer Brands (DBI) After the bell: MongoDB (MDB), SentinelOne (S), Toll Brothers (TOL), Dave & Busters (PLAY), Stitch Fix (SFIX), Asana (ASAN) Wednesday, Dec. 6 8:15 a.m. ET: ADP private-sector employment Before the bell: Ollies Bargain (OLLI), Campbell Soup (CPB), Thor Industries (THO), Brown-Forman (BF), United Natural Foods (UNFI) After the bell: GameStop (GME), Chewy (CHWY), ChargePoint (CHPT), Sportsman’s Warehouse (SPWH) Thursday, Dec. 7 8:30 a.m. ET: Initial jobless claims Before the bell: Dollar General (DG) After the bell: Broadcom (AVGO) , lululemon (LULU), DocuSign (DOCU), Vail Resorts (MTN), Smith & Wesson (SWBI) Friday, Dec. 8 8:30 a.m. ET: Nonfarm payrolls (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.

People walk by the New York Stock Exchange (NYSE) on November 02, 2023 in New York City.

Spencer Platt | Getty Images News | Getty Images

It was another win for the bulls this week. Wall Street started the month of December higher Friday — building on November’s rally, which broke a three-month losing streak. November really lived up to its stellar reputation, with monthly gains of nearly 8.8% for the Dow, about 8.9% for the S&P 500 and 10.7% for the Nasdaq. Historically, November is the best month of the year for the stock market, and December is third, according to the Stock Trader’s Almanac.

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December 2, 2023

These 10 stocks saw double-digit gains and outperformed November's strong market

November was a stellar month for Club stocks. The S & P 500 broke a three-month losing streak in November, rallying 8.92% to deliver the index’s biggest monthly gains since July 2022. Equities were bolstered in part by fresh signs the Federal Reserve may be done raising interest rates as part of its campaign to tame inflation. The benchmark index has increased over 19% year-to-date. And, most notably, around 42% of our holdings — 15 Club stocks — beat the S & P for the month. Here are the Club’s top 10 performers, along with our take on why each company’s shares surged in November. FL YTD mountain Foot Locker (FL) performance year-to-date Foot Locker (FL) climbed 28.3% during November, making it the Club’s No. 1 gainer for the second month in a row . The footwear retailer’s stock jumped more than 18% alone following a surprise third-quarter earnings beat this week. Jim Cramer called the results “very encouraging” and said they could indicate that CEO Mary Dillon’s “Lace Up” turnaround strategy is finally paying off. Even so, the company remains plagued by an inventory glut and more-cautious consumer. Foot Locker stock, down more than 26% year-to-date, closed 1.4% lower Thursday, at just under $27.28 apiece. CRM YTD mountain Salesforce (CRM) performance year-to-date Salesforce (CRM) shares jumped 25.4% in November, coming in second place for monthly gains. The company received another leg up on Wednesday after reporting strong quarterly results , which highlighted the enterprise-software firm’s ability to both grow sales and improve margins. We remain optimistic around Salesforce’s artificial-intelligence initiatives and encouraged by the solid demand for its products that management outlined this week. Shares of Salesforce, up more than 85% year-to-date, closed over 8% higher Thursday, at around $250 apiece. PANW YTD mountain Palo Alto Networks (PANW) performance year-to-date Palo Alto Networks (PANW) placed third in terms of gains for the month, with the cybersecurity leader’s stock jumping 21.4% in November. Palo Alto also briefly touched $100 billion in market capitalization Thursday — the first cyber firm to do so. On Wednesday, peer CrowdStrike (CRWD) posted strong third-quarter earnings, with management raising its fourth-quarter guidance. CrowdStrike stock surged, with knock-on effects for Palo Alto. Still, we prefer Palo Alto to its rivals because of its more-diverse and less-cyclical revenue streams, allowing the firm to service larger clients at greater scale. Palo Alto stock, up over 113% since the start of 2023, closed 2.9% higher Thursday, at $295 a share. DHR YTD mountain Danaher (DHR) performance year-to-date Danaher (DHR) stock surged 16.27% in November, with investors more confident that the company’s bioprocessing business is bottoming and will return to growth next year. We’re bullish on the company’s $5.7 billion acquisition of biotech firm Abcam (ABCM), which will help Danaher capitalize on the highly-lucrative protein consumables market. Management said the deal, which is set to close in early December, should be accretive to the life sciences firm on multiple levels, including earnings. Danaher stock, down 3.9% since the start of the year, closed less than 1% higher Thursday, at $223 a share. NVDA YTD mountain Nvidia (NVDA) performance year-to-date Nvidia (NVDA) — an “own it, don’t trade it” name — was the portfolio’s fifth-best performer in November. Shares of the chipmaker increased 14.69% over the month on another stellar earnings release last week, which handily beat Wall Street’s already lofty expectations. Management’s rosy outlook reassured investors, too. Nvidia stock continues its massive run – up over 225% year-to-date – amid the boom in generative artificial intelligence, which the semiconductor firm dominates due to its highly sought-after graphics processing units (GPUs). Shares of Nvidia closed 2.8% lower Thursday, at $467.7 apiece. DIS YTD mountain Walt Disney (DIS) performance year-to-date Walt Disney (DIS) stock rose 13.62% in November after posting solid quarterly results at the start of the month. The entertainment company’s earnings report delivered better-than-expected profits, while demonstrating management’s commitment to reining in costs. Meanwhile, activist investor Nelson Peltz’s renewed fight for a Disney board seat is positive for shareholders like us. Jim Cramer on Thursday urged investors who don’t own the company’s stock to “buy Disney right here, right now.” Shares of Disney, up 3.8% since the start of the year, closed slightly lower Thursday, at $92 apiece. ORCL YTD mountain Oracle (ORCL) performance year-to-date Oracle (ORCL) stock jumped 12.3% in November, coming in at No. 7 for largest monthly gains in our portfolio. The software giant’s stock was boosted by a new cloud-computing agreement with Club name Microsoft, vindicating its strategy around AI. The stock has been rebounding from a selloff following a mixed quarterly earnings release in September, which we maintain was overblown given Oracle’s long-term growth prospects. Oracle stock, up 38% since the start of the year, closed slightly lower on Thursday, at roughly $116 apiece. WFC YTD mountain Wells Fargo (WFC) performance year-to-date Shares of Wells Fargo (WFC) jumped 12.07% in November, as the broader market rally lifted financials. We remain bullish on Wells Fargo as the bank continues to execute its multi-year turnaround plan.The Club sees even more long-term growth prospects once the Fed’s $1.95 trillion asset cap is lifted, which should allow the firm to expand its balance sheet again. Wells Fargo stock, which has increased 6.7% since the start of the year, closed 1.7% higher Thursday, at $44.59 apiece. MS YTD mountain Morgan Stanley (MS) performance year-to-date Morgan Stanley (MS) stock rose 12.03% in November. We’re optimistic on Morgan Stanley, in part because of a potential pickup in the bank’s deal-making business, sparked by more mergers and acquisitions (M & A) and initial public offerings. This would boost a crucial and long-dormant part of the firm’s bottom line: investment banking. Morgan Stanley stock, which has slumped 7.4% since the start of the year, closed 1% higher Thursday, at $79.34 apiece. MSFT YTD mountain Microsoft (MSFT) performance year-to-date Shares of Microsoft (MSFT) jumped 12.01% in November, as the company continues to be a lead player in the advancement of AI. The stock notched a record high on Nov. 20 after management briefly hired ousted OpenAI CEO Sam Altman . OpenAI, known for ChatGPT and a key partner in Microsoft’s AI efforts, has since reinstated Altman as chief executive. The software giant owns a roughly 49% stake in OpenAI, harnessing the start up’s technology for numerous AI offerings, including Copilot 365 . Microsoft stock, which has surged 58% since the start of the year, closed slightly lower Thursday, at $378 a share. (Jim Cramer’s Charitable Trust is long NVDA, FL, DHR, FL, MS, MSFT, WFC, ORCL, DIS, PANW. 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.

Traders work on the floor of the New York Stock Exchange during morning trading on Nov. 1, 2023.

Michael M. Santiago | Getty Images

November was a stellar month for Club stocks.

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December 1, 2023

Jamie Dimon’s stock-moving trades show why investors should track CEOs’ buying and selling

For the first time in nearly two decades running JPMorgan Chase, CEO Jamie Dimon will voluntarily sell stock in the bank. The disclosure, in a securities filing Friday, detailed next year’s planned sales — pressuring JPMorgan (JPM) shares and the Dow Jones Industrial Average and highlighting why tracking trades made by executives involving the companies they lead should be an important part of every investor’s homework. Dimon is setting up the trades through a predetermined plan that executives at publicly traded companies use to protect against insider trading accusations. It will mark the first time that the 67-year-old CEO has offloaded shares of JPMorgan for non-technical reasons, such as exercising options. The planned sales – amounting to roughly 12% of the JPMorgan stock owned by Dimon and his family – are being done for tax planning and personal wealth diversification reasons, the bank said. Both are common reasons for executives to sell stock in their firms. The bank also said Dimon continues to believe JPMorgan’s prospects are “very strong,” and his planned trades are not related in any way to succession. Such sales are often seen when CEOs get close to retirement. As you can see, making sense of insider transactions can sometimes be a tall task. When they buy, it’s generally seen as an encouraging sign by Wall Street — and there is, perhaps, no better example of this than another move by Dimon in 2016, when he purchased JPMorgan stock. Fears of a weakening global economy sent stocks into a tailspin in early 2016, driving shares of JPMorgan down nearly 20% and the S & P 500 down more than 10% at their lows. But that weakness didn’t last long. The trajectory of the market changed just six weeks into the new year. That’s when Dimon disclosed — after the closing bell on Feb. 11, 2016 — that he bought 500,000 shares of the bank, worth about $26 million at the time. Dimon’s stock purchase , intended to show confidence in the financial sector, has become legendary on Wall Street. It ultimately coincided with — or perhaps was the reason for — the closing lows for not only shares of JPMorgan in 2016 but also the S & P 500 overall. Jim Cramer has since dubbed Feb. 11, 2016: “The Jamie Dimon Bottom.” JPMorgan finished up 30% that year, while the S & P 500 ended more than 9% higher — both huge turnarounds. While executive stock sales — such as Dimon’s planned transactions next year — are not universally red flags, they can get complicated. Case in point: Moderna (MRNA) and Pfizer (PFE) executives made a series of sales during the Covid-19 pandemic, as their companies worked to develop a vaccine for the virus. The rebuke in the court of public opinion and on Capitol Hill was sharp. Despite executing the sales through the same kind of predetermined plan that Dimon will use, the executives nevertheless faced criticism around the appearance of the sales, including from Jim . To remove any questions, he said at the time: “Memo to Moderna: You don’t have to sell. You can sit on it.” Jim was pointing out that predetermined sales can be canceled. Monitoring executive trades — both sales and purchases – is one piece to the larger buy-and-homework process that Jim advocates for investors who wants to own individual stocks. “In many cases, the insider sale might be immaterial,” according to Eliezer Fich, a finance professor at Drexel University, who has extensively researched executive stock trades. Still, investors should “absolutely” keep an eye on both types of transactions for any signals they send to the market, he said. At the Club, we view stock purchases by executives and directors as bullish indicators. The decision to buy stock — when a sizable portion of executive compensation packages are already equity-related — appears like a straightforward sign of confidence in the enterprise. The only reason an insider would buy is to make money, Jim often says. Stock sales, on the other hand, are more nuanced and may be harder to draw conclusions from, particularly with predetermined plans. There are many reasons an executive might choose to sell shares, including everything from tax purposes to personal wealth diversification – just like Dimon’s stated reasons for his planned sales. The Securities and Exchange Commission earlier this year enacted tougher disclosure rules for predetermined stock-trading arrangements — known as 10b5-1 plans — in an attempt to limit abuses, though many experts say there is still room for improvement. But, in general, the changes offer more assurance that stock sales are done in good faith. Plans made before then were grandfathered in. Insider stock sales Executive stock trades are usually disclosed through SEC filings known as Form 4 documents and accessible through the regulator’s EDGAR database — the electronic data gathering, analysis, and retrieval system. Thanks to the changes implemented earlier in 2023 , these filings now contain the most important piece of information for investors to make sense of a transaction: whether it took place as part of a Rule 10b5-1 trading plan, or was done on the open market. Of course, open-market sales are not automatically nefarious. But they will be viewed differently and often more critically than one completed through a Rule 10b5-1 plan, according to Chester Spatt, a finance professor at Carnegie Mellon’s Tepper School of Business and a former chief economist at the SEC. The very nature of their jobs means executives are in possession of material, non-public information quite frequently — and deciding to buy, or sell, stock based on that confidential info is against the law. At the same time, the market recognizes there’s an “important, legitimate basis for selling” stock, Spatt said, particularly because equity grants nowadays make up a large portion of their total compensation package. Rule 10b5-1 trading plans came into the fold just over two decades ago to reconcile these two discordant facts. Adopting Rule 10b5-1 trading plans gives public-company executives a way to protect against allegations of illegal insider trading in the future. Essentially, these plans allow executives to establish a plan for how — and when — they want to sell stock over a given period. Executives are supposed to adopt a plan in “good faith,” at a time when they did not possess material, non-public information. The plans can vary in structure and complexity, but generally must specify the amount, price and date on which the security will be sold, or bought. More complex plans may be structured around a formula that determines when and how much stock will be sold. Third-party brokers execute the trades. “The executive could say, ‘I’m going to be selling X amount of shares in three-month intervals over the next two years,” Fich, the Drexel University professor, explained in an interview with CNBC. “Nine months from now, one of those transactions is executed, and all of a sudden it happened to coincide with a patent approval that’s thought to be really, really important for the firm, which causes its stock price to increase. [The executive] can say, ‘Well, I set this up about a year ago. I didn’t know this was going to happen.’” Under the new SEC rules to address perceived shortcomings with 10b5-1 plans, a company’s executive officers and directors are now subject to a mandatory “cooling-off” period, which requires them to wait at least 90 days from the time a 10b5-1 plan is adopted or modified before they can trade. In a 2021 paper , researchers at Stanford University and the University of Pennsylvania’s Wharton School argued that short cooling-off periods — or none at all, with trades occurring the same day as adoption — were among the biggest red flags with Rule 10b5-1 plans. “We find that trades of plans with short cooling-off periods avoid significant losses and foreshadow considerable stock price declines that are well in excess of industry peers,” researchers wrote later in the paper. They added, “With longer cooling-off periods, opportunistic trading disappears.” Under the SEC modifications, companies now must disclose in their quarterly 10-Q and annual 10-K filings whether any officers and directors adopted, modified or terminated a Rule 10b5-1 plan during the reporting period. For example, in its most recent 10-Q , Club holding Meta Platforms (META) disclosed that Chief Financial Officer Susan Li entered into a Rule 10b5-1 trading plan during the three months ended June 30. The plan is scheduled to end Dec. 31, 2024, according to the filing. This new requirement seeks to partially address a shortcoming that academics including Drexel’s Fich have highlighted in research on executive stock trades: The ability to opportunistically cancel, or change them, without notice to the investing public. While a plan cannot be modified if the executive is in possession of material, non-public information, it can technically be canceled at any time , Stanford and Wharton researchers noted. In the past, there would never be an SEC filing for a trade that didn’t occur because of a terminated plan. Not anymore, which is good news for investors because the additional information around plan adoption, modification and cancellation can, over time, help investors appropriately interpret the insider stock sales. Drexel’s Fich said he believes a major lingering “loophole” with Rule 10b5-1 trading plans is the use of limit orders, which in practice can prevent stock from being sold if it falls below a certain price on the day it was supposed to be sold. In its December 2022 report announcing amendments to Rule 10b5-1, the SEC said insiders may use limit orders in their trading plans to help protect against “significant market fluctuations” over the months “and even years” that the plans are in effect. In that same report, the U.S. regulator indicated it was concerned about “abnormally profitable insider trading under Rule 10b5-1,” which has been documented in various academic studies. However, it said it appears limit order use “cannot account for the entirety of the abnormal returns documented” in research studies. The SEC opted to still permit the use of limit orders, given that enhanced disclosure requirements may make it easier for other market participants to “gauge some information about the officer’s or director’s trading strategy,” and possibly sell ahead of them, pushing down the stock price by the time the executive’s next tranche of sales is executed. The SEC’s new rules also limited executives’ ability to have multiple overlapping plans and placed restrictions on the use of single-trade plans — two additional practices that had drawn scrutiny. Now, executives can only employ one single-trade plan over a 12-month period. 10b5-1 sale questions To place executive stock sales in the proper context, investors should consider how much stock in the company the insider owns after the trade is completed. Fich told CNBC he asks that question regularly. As an example, he pointed to sales by a handful of executives at Coca-Cola (KO) earlier this year that he chalked up as the non-concerning variety. “There might be some troubling sales, in general, when many executives are selling a lot of shares at the same time,” Fich acknowledged, but Coke’s recent history doesn’t rise to that level when considering the larger picture. “Coca-Cola insiders sold about $2.7 million worth of shares over the past three months, but these guys own $1.8 billion worth of shares” in a company with a market value over $200 billion, Fich explained in early August. “So, I’m not worried.” In a follow-up exchange with CNBC, Fich also noted the net effect of Coke’s insider sales was partially offset by the exercise of stock options. Such was the case with Chief Technical Officer Nancy Quan’s trades in early May, according to Form 4 filings . Quan exercised stock options that resulted in the acquisition of 75,826 shares, on May 2, and the same day sold 85,906 shares. She owned 219,790 shares of Coke before the two transactions, and ended the day owning 209,710 — a decrease of only 4.6%. This illustrates that, with insider sales, the devil is in the details. Putting it all together, executive stock sales that amount to only a tiny fraction of an insider’s overall holdings are unlikely to be cause for immediate concern — just like recent transactions from Salesforce co-founder and CEO Marc Benioff. Despite a steady series of sales since mid-July, Benioff’s overall stake in Club name Salesforce (CRM) has declined only 4.6%, to around 25.27 million shares, securities filings show. Benioff remains the largest individual shareholder in Salesforce, owning a 2.6% stake that’s worth around $5.2 billion based on recent stock prices. Put another way, Benioff’s sales have been relatively minor, considering how much Salesforce stock he still owns, and how much his economic interests still align with the rest of the customer-relationship-management software group’s shareholders. Another assuring fact: Benioff’s sales continued to occur, even as Salesforce’s stock declined from around $229 per share in July, to around $205 this month. CRM YTD mountain Salesforce YTD Investors should also consider executives’ individual histories when assessing their latest transactions, Carnegie Mellon’s Spatt suggested. “If the executive has a history of selling a certain number of shares — or a fraction of his portfolio — each period, I’d be less concerned about that than I would be with very spikey and unusual sales,” Spatt said. This is hardly the first time Benioff has steadily sold shares of Salesforce, not in conjunction with the conversion of stock options. For example, a similar sequence took place beginning in September 2020 and continued through October. He also sold a basket of stock in November 2021 and November 2022, according to SEC filings reviewed by CNBC. Insider stock buys After the stock market closed on May 12, 2022, then-interim Starbucks CEO Howard Schultz disclosed in an SEC filing that he had bought roughly $10 million worth of the coffee chain’s stock. It came at a rocky time for the company, as it sought to counter a growing unionization push among its baristas. On that day, Starbucks (SBUX) shares had closed under $70 each for the first time since April 7, 2022 — in the throes of the first wave of the Covid pandemic while stores were temporarily shuttered. In the first trading session after Schultz’s May 2022 announcement, shares of Starbucks soared 8.15%. The market’s reaction to Schultz’s purchase demonstrates that Wall Street — and the Club, too — likes to see insiders buying their own stock. We started a position in August 2022, shortly after the Schultz buy. It’s typically interpreted as a sign of confidence in the company’s outlook. Otherwise, the thinking goes, why would the executive put their own cash to work when so much of their compensation is already coming in the form of securities? “It’s not so common for the executives to be buying stock in the company,” said Carnegie Mellon’s Spatt. “In and of itself, that’s part of the reason why it’s a pretty positive signal. … The executive is naturally so long in the stock, because of the structure of his compensation. For the executive to be buying … that must mean he’s very optimistic.” That’s the message we took in June 2018, when Nikesh Arora was appointed CEO of Palo Alto Networks (PANW). Not long after, Arora bought around $20 million worth of stock in the cybersecurity firm in open-market transactions. PANW mountain 2019-06-01 Palo Alto Networks’ stock performance since June 2019, when Nikesh Arora took over as CEO. Arora’s big bet helped attract us to Palo Alto Networks for the first time, realizing that the executive was quite literally putting his money where his mouth was. Although we left the stock for a few years, beginning in September 2019, we returned in February as the seeds Arora planted upon his arrival were sprouting a story too good to ignore any longer. More recently, Broadcom (AVGO) board member Check Kian Low bought $9.6 million worth of stock in the company following its post-earnings decline — more than tripling his stake, to 15,951 shares. AVGO YTD mountain Broadcom YTD Jim believes there was initial confusion about Low’s reason for buying — namely, was it to meet minimum-ownership levels required by Broadcom board members? That has since been proven to be an open-market purchase. And, we take that as a very encouraging sign for one of the newest Club holdings. In moments of market-wide turmoil, executive stock purchases can take on broader importance to the rest of the investment community, soothing collective fears. Such was the case with Dimon’s now-legendary purchase in 2016. The increased insider buying activity observed in March 2020, as the pandemic roiled global stock markets, also was viewed at the time as a strong expression of confidence on top of the unprecedented monetary stimulus unleashed by the Federal Reserve. The S & P 500’s Covid-era low came on March 23, 2020. Since then, the index has roughly doubled. Insider buying in March 2020 – including about $5 million from Charles Scharf, CEO of Club holding Wells Fargo (WFC) — reached its highest level since March 2009, CNBC reported at the time , citing data from Washington Service, a firm that tracks such transactions. As it happens, March 2009 is the same month the S & P 500 hit its global financial crisis low . To be sure, even though executive stock purchases are a bullish signal, that doesn’t mean future gains for the stock are automatic, cautioned Columbia Business School professor Sehwa Kim. Investors should be mindful that some executives may be “overconfident about their capability” to create value at a firm when they decide to buy its stock, Kim said in an interview with CNBC. “Whether the firm’s prospect is truly good or not, they have a strong belief in their ability,” he said. Club holding Foot Locker (FL) offers a lesson in interpreting insider purchases, and the patience that investing in the stock market requires. FL YTD mountain Foot Locker YTD This year, Foot Locker CEO Mary Dillon, revered for turning around at Ulta Beauty (ULTA), has twice bought stock in open-market transactions — buying about $501,000 worth of shares on March 28, then nearly $250,000 worth about two months later, on May 30. The first purchase of 12,614 shares came at an average price of $39.74, not long after Foot Locker held an Investor Day that detailed Dillon’s revitalization strategy for the company. That excited Wall Street analysts and investors, including our portfolio managers at the Club. The second buy, which totaled 9,525 shares, came at $26.20 each, on average. As those dramatically different price levels indicate, a lot happened to the market’s perception of Foot Locker between those two transactions. The main turning point arrived May 19, when the company’s disappointing first-quarter earnings report and revised guidance sent shares tumbling 27%. Right now, Dillon may very well be as optimistic on Foot Locker’s long-term prospects as she was in late March when buying that first tranche of stock — even if she’s underwater on that lot. She signaled as much to the market with May’s purchase and in September when she bought $100,000 worth of Foot Locker stock, at an average of $18.17 per share. These transactions might offer a modicum of assurance, but don’t completely change the reality that this year has been a roller coaster for shareholders. Foot Locker shows that the favorable signal being sent by an executive stock purchase might be obscured, or forgotten, by other, more-pressing facts. In the retailer’s case, its first-quarter results and lowered outlook — dragged down by discounting and inventory issues – painted an uglier near-term picture than any insider buys. Indeed, even after Dillon’s second buy on May 30, Foot Locker shares fell on May 31 and June 1. To be sure, the message Dillon attempted to send may breakthrough down the road as the turnaround plan progresses. While disappointed in the performance of Foot Locker shares, we recognize that overhauling a troubled company takes time — even if it’s taking longer than we thought. Bottom line As part of the buy-and-homework process, we keep tabs on how executives, particularly in the C-suite, are trading their own stock while recognizing it’s only one piece of the larger investment-research puzzle. Insider stock sales are best analyzed with a big-picture context, given we know that some sales can be misinterpreted for reasons that include optics, like when the CEOs of drug companies making Covid vaccines were selling stock through predetermined plans and making huge profits. The necessary context starts with understanding whether the trade was made pursuant to a Rule 10b5-1 plan. Fortunately, the new SEC rules should enhance transparency. Then, taking into account the selling executives’ remaining ownership and previous history adds a more robust frame of reference. On the other side, the market views executive stock purchases quite favorably, and so does the Club. Compared with a tiny stock sale executed through a predetermined plan, executive stock buys generally send a much stronger signal: The executive wants to make money, too. And in some cases, like in the case of huge stock buybacks by a company, we’re happy to be right there to buy alongside them. (Jim Cramer’s Charitable Trust is long WFC, META, AVGO, FL, CRM and SBUX. 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.

Jamie Dimon, chairman and chief executive officer of JPMorgan Chase & Co. says the new U.K. government should be “given the benefit of the doubt.”

Al Drago | Bloomberg | Getty Images

For the first time in nearly two decades running JPMorgan Chase, CEO Jamie Dimon will voluntarily sell stock in the bank.

The disclosure, in a securities filing Friday, detailed next year’s planned sales — pressuring JPMorgan (JPM) shares and the Dow Jones Industrial Average and highlighting why tracking trades made by executives involving the companies they lead should be an important part of every investor’s homework.

Dimon is setting up the trades through a predetermined plan that executives at publicly traded companies use to protect against insider trading accusations. It will mark the first time that the 67-year-old CEO has offloaded shares of JPMorgan for non-technical reasons, such as exercising options.

The planned sales – amounting to roughly 12% of the JPMorgan stock owned by Dimon and his family – are being done for tax planning and personal wealth diversification reasons, the bank said. Both are common reasons for executives to sell stock in their firms. The bank also said Dimon continues to believe JPMorgan’s prospects are “very strong,” and his planned trades are not related in any way to succession. Such sales are often seen when CEOs get close to retirement.

As you can see, making sense of insider transactions can sometimes be a tall task.

When they buy, it’s generally seen as an encouraging sign by Wall Street — and there is, perhaps, no better example of this than another move by Dimon in 2016, when he purchased JPMorgan stock.

Fears of a weakening global economy sent stocks into a tailspin in early 2016, driving shares of JPMorgan down nearly 20% and the S&P 500 down more than 10% at their lows.

But that weakness didn’t last long.

The trajectory of the market changed just six weeks into the new year. That’s when Dimon disclosed — after the closing bell on Feb. 11, 2016 — that he bought 500,000 shares of the bank, worth about $26 million at the time.

Dimon’s stock purchase, intended to show confidence in the financial sector, has become legendary on Wall Street. It ultimately coincided with — or perhaps was the reason for — the closing lows for not only shares of JPMorgan in 2016 but also the S&P 500 overall.

Jim Cramer has since dubbed Feb. 11, 2016: “The Jamie Dimon Bottom.” JPMorgan finished up 30% that year, while the S&P 500 ended more than 9% higher — both huge turnarounds.

While executive stock sales — such as Dimon’s planned transactions next year — are not universally red flags, they can get complicated.

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October 28, 2023

Here’s a rapid-fire update on all 35 stocks in the Club’s portfolio, including a new buy

Jim Cramer ran through all 35 Club stocks during our September Monthly Meeting on Thursday.

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September 21, 2023

Cramer: This is my game plan for the week ahead after Friday’s surprise rally

What the heck really did happen on Friday, when the Dow jumped 700 points on a strong jobs reading ? Why such a viscerally positive reaction to an employment number that was hotter than expected? Was it because wages didn’t spike? Was it all that perfect — a Goldilocks report? Here’s my take on Friday’s rally. Going into the debt ceiling crisis, there was a belief that House Speaker Kevin McCarthy couldn’t control his own Republican party. Senate Majority Leader Charles Schumer wasn’t much better off with the Democrats. Both had lost control of their parties to the extremists. That meant the United States would default on its debt. It seemed pretty logical. I truly believe the extremists never believed a default would mean more than a few weeks of setbacks and more brinkmanship. Who can blame them? President Joe Biden lamely floated that he could invoke the 14th Amendment to avoid this and any future debt limit fights; the amendment includes a clause that some legal scholars say overrides the statutory borrowing limit set by Congress. No matter what, it was pretty clear that chaos was our destiny. But when McCarthy and Biden agreed to temporarily suspend the debt ceiling and cap some federal spending in order to prevent a default, we got a deal that was even less contentious than the 2011 bargain . (The coming together brought to mind the legendary coalition of President Ronald Reagan and House Speaker Tip O’Neil in the 1980s, memorialized in Chris Matthews’ “Tip and the Gipper: When Politics Worked.”) It was the compromise debt limit deal — not the employment number — that caused the market to rally. Sure, the jobs report showed wage inflation was cooling, which is good news in the Federal Reserve’s fight against inflation. But the job creation in May and the revisions were insanely strong. What matters most is that Fed Chair Jerome Powell, who is far more powerful than the independents on the Fed’s board who have such a hard time keeping their mouths shut, is reasonable. He seems to understand that it’s time to wait a bit on any more rate hikes. Not because he thinks things are cooler, but because he actually doesn’t even know. We have a young workforce coming into the market akin to when I got out of school in 1977 — nary a job to be had anywhere. This is potentially a monumental moment. The new debt limit legislation sets the date for resuming federal student loan repayments, which have been on hold since March 2020. We have the end of Supplemental Nutrition Assistance Program (SNAP) benefits and other pandemic breaks. Why not wait two months to see if unemployment naturally goes up and wages come down? To sum things up: We came into Friday shocked that there was a shocker of a deal and a not-red-hot employment number (at least one that didn’t send rates higher). This is what triggered the long-awaited buying of stocks outside of the Magnificent Seven that have led the market all year: Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL), Tesla (TSLA), Meta Platforms (META), Apple (AAPL), and Nvidia , which briefly joined the $1 trillion valuation club. We each have our own way of monitoring these things. I used Club name Caterpillar (CAT) as my judge. On Thursday afternoon, CEO Jim Umpleby went into the lion’s den of Sanford Bernstein and told a tale about de-cyclization. Shares of the heavy equipment maker had a tiny snap back. One day later and armed with the budget deal and the employment number, CAT shot up seventeen points — an unheard-of short squeeze. This took the stock back to when it reported a good number that was converted into a bad number by bearish analysts still unwilling to admit that the company had changed its bi-polar ways. Of course, the bears would say that it only went up because of one more silly stimulus by China, this time to adjust rents. I say Caterpillar went up because it was overly shorted, like so much of the market, including retail, health care, financials, other industrials including the commodities (the oils!). We even saw the imperfect chipmakers and heavily challenged enterprise software stocks come alive. The shorts were correct to press their bets if there was no debt deal and we got an employment number that was a steamer. But they were wrong on both counts. This plus a rare wave of new money coming in and massive buybacks by companies capable of plundering after their reports, caused the broadening that had been bemoaned as non-existent as recently as the day before. You could argue it was a short squeeze of monumental proportions. A short squeeze happens when short sellers having to buy stocks to cover their short positions, pushing prices higher. But every time there has been a broadening since FANG, it’s always been called a short squeeze. That’s just how things work, although it’s never been acknowledged by anybody. Which brings us up to date for Monday. We have a blackout of the Fed speakers. We have no real macroeconomic data. We have no landmines of earnings. And no Fed meeting until mid-June. A true interregnum. We are going to have to take more things off the table if we get a rally into an overbought setting. Yes, we have some real stinkers — Disney (DIS), Foot Locker (FL), Emerson Electric (EMR), Estee Lauder (EL) — and we can battle them. But the important thing is that we have so many winners that we have to ring the register on some stocks if all goes our way. Of course I obsess on the losers. I didn’t think that Fabrizio Freda at Estee Lauder and Mary Dillon at Foot Locker could both blow it that badly. I had reason to dislike the Emerson team, but it still gave me more than I can handle. I have no idea how Disney’s stock could be this weak in a long-on-money-short-on-time moment. I am furious at myself for not seeing around any of these corners. But I am not going to throw good money after bad and I see no good on these names — yet. This leaves us with the big question: Which winners to trim? As long as we are not subsidizing losers, we aren’t breaking protocol. But we have two tasks. One is to come up with a new name that hasn’t moved that we actually like. And two is to trim into strength as we get overbought. I want both resolved by our next Club meeting on June 14. That’s what I am working on right now. Do we need so much Salesforce (CRM), even as it reported a good quarter all things considering? Do we even need Advanced Micro Devices (AMD) when it has nothing to rival Nvidia? I just don’t know. I want the market to tell me what to do. I think it will. Where does this leave us? In a sanguine week that will allow us to see if the short squeeze continues. If it does and continues to broaden, we can both peel some winners. See which caterpillars can develop into, well, Caterpillars. Maybe add Take-Two (TTWO), which gave us a two-year outlook, possibly aided by a new Grand Theft Auto game and better Nvidia cards. Just one of many ideas. But one Jeff Marks and I are trying to get our arms around. Some who read might ask: “Shouldn’t there be more of a thesis behind a bullish move?” I say no, no more than you needed in 2011, when the debt ceiling deal led to a fantastic rally because Armageddon was avoided. We cannot sit back and relax. But what we can do is accept that it is a better moment than we thought not that long ago. There are cracks. The Dollar General (DG) call was a compendium of weakness for the lower middle class and the Macy’s (M) call was a confusion of negativity. But who is to say that these companies just don’t have the “it” of Five Below (FIVE) or Lululemon (LULU). We are close enough to the infrastructure money wave to handle another rate hike if we need it. But Powell recognizes the futility of another rate hike right now because it lowers mortgage rates, making his job even harder. What we can do is watch and wait as battlegrounds get resolved — like CAT did on Friday. We can anticipate better things from a Johnson & Johnson (JNJ) — especially with a 3M (MMM) deal — and from GE Healthcare (GEHC). We can lick our Estee and Foot Locker wounds. And we can be glad that we got through the debt deal and wax in the wave of new money that will at last be coming in. No, we can’t be complacent. Too many needs for the shorts to save themselves. They have been run over in so many places that they have to make a comeback somewhere. Their number didn’t get so strong before the debt ceiling deal that they can’t all cover at once. Nevertheless, we have enough money to put to work if we want to in a new name that hasn’t moved and has a special situation thesis. But I do not want to be so relieved as to think there is no woods, just that we are out of it for now. Personally, the last few weeks have been hard ones, ameliorated by members who have made money with the club. Some mistakenly believe that we missed this entirely rally. It galls me because I gave up being a hedge fund manager years ago and I know the truth: This may be the best we’ve ever been, and this time it is for you, not the entitled class. I thank you all for letting us have the floor to help and not be tools of the traders who have infiltrated our ranks. So let’s take and make some gains and be ready for the next storm after the calm, wherever it might be coming from. Rest up. We have gotten past the systemic chaos into business as usual, where we can glow in a world where stock picking matters. (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.

US President Joe Biden, accompanied by Speaker of the House Kevin McCarthy, Republican of California, arrives for the annual Friends of Ireland luncheon on St. Patrick’s Day at the US Capitol in Washington, DC, on March 17, 2023.

Saul Loeb | AFP | Getty Images

What the heck really did happen on Friday, when the Dow jumped 700 points on a strong jobs reading? Why such a viscerally positive reaction to an employment number that was hotter than expected? Was it because wages didn’t spike? Was it all that perfect — a Goldilocks report?

Here’s my take on Friday’s rally. Going into the debt ceiling crisis, there was a belief that House Speaker Kevin McCarthy couldn’t control his own Republican party. Senate Majority Leader Charles Schumer wasn’t much better off with the Democrats. Both had lost control of their parties to the extremists. That meant the United States would default on its debt. It seemed pretty logical.

I truly believe the extremists never believed a default would mean more than a few weeks of setbacks and more brinkmanship. Who can blame them? President Joe Biden lamely floated that he could invoke the 14th Amendment to avoid this and any future debt limit fights; the amendment includes a clause that some legal scholars say overrides the statutory borrowing limit set by Congress.

No matter what, it was pretty clear that chaos was our destiny. But when McCarthy and Biden agreed to temporarily suspend the debt ceiling and cap some federal spending in order to prevent a default, we got a deal that was even less contentious than the 2011 bargain. (The coming together brought to mind the legendary coalition of President Ronald Reagan and House Speaker Tip O’Neil in the 1980s, memorialized in Chris Matthews’ “Tip and the Gipper: When Politics Worked.”)

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June 4, 2023

Five takeaways about the consumer from Walmart, other retailers after a big week of earnings

A Target department store in North Miami Beach, Florida, May 17, 2023.

Joe Raedle | Getty Images

More grocery purchases, fewer ambitious do-it-yourself projects and last-minute splurges at the store.

This week, some of the biggest retailers in the country reported earnings and described how their customers are shopping. As Home Depot, Target and Walmart reported their quarterly sales and shared full-year outlooks, the companies offered up the latest clues about the health of the American consumer and previewed what could be ahead for the economy.

Some smaller retailers also offered warning signs for the current quarter and this year.

Next week will give even more insight into the retail industry and economy. Best Buy, Lowe’s, Costco, Dollar Tree and Kohl’s are among the earnings on tap. Some mall retailers are also reporting earnings, including Gap, American Eagle and Abercrombie & Fitch.

Here are some of the emerging themes.

Sales trends have weakened

So far, at least five retailers — Target, Walmart, Tapestry, Bath & Body Works and Foot Locker — have spoken about sales trends across the country getting worse.

As the three-month period went on, shoppers spent less, especially on discretionary merchandise, Target CEO Brian Cornell said on a call with investors. Walmart noticed the same pattern.

Both big-box retailers reported a sharp sales drop after February.

Walmart’s Chief Financial Officer John David Rainey attributed the decline, in part, to the end of pandemic-related SNAP benefits and a decrease in tax refunds.

Cornell said headline-grabbing events could have shaken consumer confidence too. He pointed to the March banking crisis. Silicon Valley Bank collapsed that month, sparking fears of broader economic woes.

Bath & Body Works saw sales fall off in March. Yet, sales recovered in April as the retailer turned to a common playbook: promotions. It got a boost as customers spent money at sales events toward the end of the quarter, CFO Wendy Arlin said on a Thursday earnings call.

Foot Locker also said it may have to motivate shoppers with markdowns for the rest of the year. The company cut its full-year forecast Friday, as it reported earnings that missed expectations. CEO Mary Dillon said in a statement, “sales have since softened meaningfully given the tough macroeconomic backdrop.”

On a call with investors Friday, Dillon said the sneaker seller’s sales got hurt by lower tax refunds and high inflation as customers spent more on food and services. While she said sales rebounded in April, “they did not improve nearly to the extent we expected, and that weakness has continued into May.”

A few other retailers that reported earnings had specific factors working in their favor.

When Tapestry, the parent company of Coach and Kate Spade, reported earnings last week, the company said sales softened as the quarter progressed and into April as consumers became more cautious.

But it has a factor going for it that some other retailers don’t: A growing business in China and other international markets to offset some of those softer sales.

Home Depot bucked the slowing sales trend, but that may have to do more with what it offers than consumer health.

Spring is peak season for home improvement. The retailer’s comparable sales in the U.S. declined 4.6% in the quarter versus the year-ago period. In February, its comparable sales were down 2.8%. March was its weakest month of the quarter, as comparable sales fell nearly 8% year over year in the U.S.

Home Depot’s trends were still negative in April but saw a slight improvement as comparable sales slid 3.7%, according to CFO Richard McPhail. Customers may have been buying more spring items such as potted plants.

Inflation is still a key factor

Inflation is easing, according to a Labor Department report this month. Yet, that’s cold comfort for shoppers who are still paying a lot more at the grocery store than they were a few years ago.

Stubbornly high prices, especially for food, are a storm cloud that hangs over many families who shop at Walmart, and looms over the retail industry as a whole, the big-box giant’s CEO Doug McMillon said. On a call with investors Thursday, he called the persistent inflation “one of the key factors creating uncertainty for us in the back half of the year.”

“We all need those prices to come down,” he said on the call. “The persistently high rates of inflation in these categories, lasting for such a long period of time, are weighing on some of the families we serve.”

For example, he said general merchandise costs in the U.S. are lower than a year ago, but still higher than two years ago. In dry grocery and consumables categories, Walmart is seeing high single-digit to low double-digit cost inflation on items such as toilet paper or paper towels. For food, inflation has climbed more than 20% on a two-year basis, according to Walmart’s Rainey.

A shopper browses the eggs section at a Walmart store in Santa Clarita, California.

Mario Anzuoni | Reuters

Walmart is feeling the inflation crunch even though it is better positioned to manage higher costs than other retailers. As the nation’s largest retailer and biggest grocer, Walmart can use its scale to manufacture private-label merchandise or negotiate with vendors over price.

One rare item that dropped dramatically in price? Lumber. Home Depot cited the sharp price decrease as a factor that contributed to its fiscal first-quarter revenue miss.

In plenty of other categories, however, inflation is still driving a higher average ticket for customers, Home Depot CEO Ted Decker said on an earnings call Tuesday.

Consumers are spending on needs, not wants

Target, Home Depot and Walmart all saw a noticeable pattern: fewer pricey and fun items in shopping carts.

At Home Depot, customers bought fewer big-ticket items such as appliances and grills in the fiscal first quarter.

Home projects got more modest, too, Decker said on an investor call. Contractors and other home professionals noticed a change from large-scale remodels to smaller renovations and repairs.

Decker said consumers’ increased focus on value could be contributing to that shift, along with an uptick in spending on traveling, dining out and other services. He added some homeowners already tackled big projects and bought some high-priced home items during the early years of the Covid-19 pandemic, leaving less for them to do or to buy now.

Oppenheimer's Brian Nagel on Home Depot Q1 earnings: This is a weak report

The trend extended beyond home improvement.

Customers at Walmart have become more selective when shopping for electronics, TVs, home items and apparel, Rainey told CNBC. The items have become a tougher sell and when customers do buy them, they often wait for a sale, he said.

At Target, sales declined in some discretionary categories as much as low double-digits as customers bought less clothing and home decor, Chief Growth Officer Christina Hennington said on an investor call. Groceries and essentials drove a bigger portion of the retailer’s quarterly sales.

One exception? Beauty. Hennington said Target’s beauty category was its strongest in the fiscal first quarter. Sales grew in the mid-teens year over year, showing shoppers are still willing to replenish the cosmetic case and get a new tube of lipstick.

Weather dampened demand (literally)

Weather has not worked in retailers’ favor, at least not yet.

As the weather turns warm and sunnier, it can inspire shoppers to buy summer dresses, beach towels or gardening supplies.

Yet, Home Depot said cooler and wetter weather in California and parts of the western U.S. hit its sales, contributing to its biggest revenue miss in more than 20 years.

Walmart is eager for warmer weather too. Sam’s Club has noticed slower sales of patio sets, perhaps because of the later-to-hit spring weather, its CEO Kath McLay said on an investor call. Walmart has seen a sharp drop in air conditioner sales at its big-box stores, its CFO Rainey said.

“We’re ready to get some spring or summer weather,” he said on a call with CNBC.

Target noted it’s looking forward to another upcoming season: back-to-school.

The discounter expects to get a sales boost in the back half of the year due to the big shopping season, Hennington said on an investor call. She said the return to classrooms and college dorms triggers sales across almost every department of its store, from lunch ingredients in the grocery aisles to new outfits in the kids’ clothing department.

Shoppers have become more last-minute

Retailers may be saying so long to the days of stockpiling and early shopping.

Company leaders said there are signs shoppers are reverting to some of their old ways.

At Walmart-owned Sam’s Club, McLay said shoppers are not just opting for lower price points. They’re also shopping later for seasonal items. For example, she said, customers used to buy patio furniture just as soon as it was set at the stores.

“Now we’re seeing people wait a little bit later into the season,” she said.

It saw a similar pattern with Mother’s Day sales, she said.

McLay said that may indicate people have returned to shopping habits of 2018 and 2019. The trend could be fueled by shoppers’ reluctance to open their wallets or because they’re not as worried about out-of-stock items — or a combination.

At Target, shoppers have also embraced more procrastinator tendencies, especially for discretionary items such as apparel.

“Guests are shifting to shop more just in time in these categories, as they wait until the last moments before key events to invest in new decor or wardrobe refreshes,” Hennington said on an earnings call.

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May 19, 2023

Citi just named 4 new picks, including a Buffett-backed stock it says could soar 70%

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April 11, 2023

Stocks making the biggest moves midday: Tesla, First Republic, KeyCorp, UBS and more

Image taken with a drone) A Tesla collision center is seen in this aerial view in Orlando.

Paul Hennessy | Lightrocket | Getty Images

Check out the companies making headlines in midday trading Tuesday.

Tesla — Shares popped 5% after Moody’s upgraded Tesla to Baa3 rating from its junk-rated credit. Moody’s called the electric-vehicle maker the “foremost manufacturers of battery electric vehicles” and said the upgrade reflects Tesla’s prudent financial policy and management’s operational track record.

First Republic, KeyCorp, U.S. Bancorp — Regional bank stocks rebounded on Tuesday as Treasury Secretary Janet Yellen said the government would consider backstopping deposits at more banks in order to protect the financial system. Shares of First Republic jumped more than 41%, while KeyCorp added 9%. U.S. Bancorp rose nearly 8%.

JPMorgan, Bank of America — Shares of larger U.S. banks rose on Tuesday as investors showed increased optimism after Yellen’s remarks. JPMorgan gained about 3% and Bank of America rose by 3.5%.

Foot Locker — Foot Locker gained 6% after Citi upgraded the retail stock to a buy from neutral after its investor day on Monday. The firm said the company’s move away from malls and toward digital, kids and loyalty projects is a step in the right direction.

Harley-Davidson — Shares of Harley-Davidson rose more than 5% after Morgan Stanley upgraded the motorcycle maker and said its focus on its core business can lift the stock by more than 30%. Jefferies also upgraded the stock, saying the company’s risk and reward are more balanced after a recent decline.

UBS — U.S.-listed shares of the Swiss-based bank gained 12% during midday trading following its agreement over the weekend to buy Credit Suisse for $3.2 billion. Credit Suisse rose 5% after taking a nearly 53% plunge on Monday.

Roblox — Shares rose more than 3% after D.A. Davidson said the online game platform has an “underappreciated” opportunity in artificial intelligence.

Emerson Electric — Shares added nearly 2% after Morgan Stanley said shares of the multinational tech company are too attractive to ignore . The firm upgraded the stock to overweight from equal weight.

Exxon Mobil — The oil and gas giant’s stock price gained 3% after Morgan Stanley said it likes the company’s robust “competitive positioning.”

— CNBC’s Alex Harring, Jesse Pound, Tanaya Macheel and Michelle Fox Theobald contributed reporting.

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March 21, 2023

Tag: Foot Locker Inc

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