We’re exiting this beauty store with a nice return

An Estee Lauder cosmetics stand in Los Angeles, California.

Lucy Nicholson | Reuters

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

We have left our positions in Estee Lauder (EL), sells 100 shares for about $365.67. After the trade, the Charity Foundation no longer holds any position for NCT.

We bought Estee Lauder early in the summer because we see the company as one of the great plays of reopening, because we believe that people want to look their best when they leave the house and gather around the house. the social environment. We also think Estee Lauder will be one of the main beneficiaries of the easing of Covid restrictions such as mask regulations and travel restrictions.

Our thesis went as we expected. Estee Lauder posted good results for the most recently reported quarter, with strong double-digit growth in categories such as skin care, fragrance and makeup and recovery in travel demand.

As much as we still consider EL a great reopening game, we wanted to be a little more careful here due to the rapid spread of the omicron variation. One of Estee Lauder’s key markets is tax-free, and the near-term slowdown in tourism could make the near-term numbers overly optimistic. Plus, the potential return of quests and mask limits to social gatherings could further complicate the short-term monetization story.

Often, our patience and long-term investment horizon means we are prepared to weather any short-term hit to the earnings story. But here it is. Unlike many stocks on the market today, Estee Lauder trades at all-time highs. If stocks are down 5% or more from their peak, we can argue that Covid uncertainty is already priced in. However, EL has weathered recent volatility in the market despite its price-to-earnings multiple.

We never want to force ourselves to be greedy amid uncertainty, and therefore we will sell our small Estee Lauder position near its all-time high with an average gain of around 22%.

Despite our withdrawal today, we still think Estee Lauder is an exceptional performer and a long-term winner in its category. We will continue to monitor the stock for better risk-reward pullbacks.

Ultimately, this sale should free up some room in the portfolio for a potential new name. This concept goes back to one of the portfolio management principles we explained last Thursday in Opening the meeting of the Investment Club. We firmly believe that every portfolio manager should limit the number of shares he or she owns at any given time. If you are constantly adding new stocks to your portfolio without ever dropping anything, you run the risk of cutting short the daily homework assignments needed to stay on top of your portfolio. If we want to buy something new – and we are always on the lookout for new ideas – we end up parting with something in a less attractive risk-reward portfolio.

Separately, we’d like to call attention to the big move that’s happening right now in United Parcel Service (Ups). UPS had a good day Wednesday after Citi upgraded its buy rating and raised its price target to $250, thanks in part to confidence in CEO Carol Tome’s “Better, No Bigger” strategy . Positive action is underway through Thursday, with shares edging even higher as investors continue to focus on companies with strong fundamentals and trading at earnings multiples. Imports are priced very reasonably. We also think UPS could trade higher in anticipation of what many hope are earnings announcements that are “not as bad as feared” from FedEx (FDX) after the closing bell tonight.

We’re not trying to call out the FDX quarter, but their inconsistent track record and struggles with cost management make us more inclined to be defensive when it comes to UPS, especially with The volume of goods has increased sharply in the past few days. For that reason, we would cut 100 of our 725 UPS shares if we weren’t restricted from trading.

As a reminder, we are restricted from trading any stock Jim mentions on TV for three days after mentioning it. While we cannot make transactions for Charity Funds, our restrictions should never prevent us from telling an Investment Club what we will buy or sell and when we will do it.

The CNBC Investment Club is now the official home of My Charity Foundation. It’s where you can see every move we make to our portfolio and get insight into my markets before anyone else. The charity and my articles 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 a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trading alert before buying or selling a stock in his charity portfolio. If Jim had talked about a stock on CNBC TV, he would have waited 72 hours after issuing a trading warning before taking a trade. See here for investment disclaimer.

(Jim Cramer’s charitable foundation is the enduring UPS.) We’re exiting this beauty store with a nice return

Emma James

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