We’re selling 30 shares of Humana (HUM) at roughly $468 each. Following Wednesday’s trade, Jim Cramer’s Charitable Trust will own 120 shares of HUM, decreasing its weighting to 1.98% from 2.46%. Wednesday’s small sale in Humana comes one day before the company’s investor event. It’s not like us to trade around an investor event or immediately following a maelstrom in the market like Tuesday. However, we read a research note Wednesday morning that has us a little concerned about short-term expectations. In Cowen’s preview of Humana’s Thursday investor event, the analysts noted that they believe hedge funds expect the company to raise its long-term earnings per share growth outlook of 11% to 15%. While an increase is certainly within the range of outcomes for Thursday, it would not be surprising to see management simply reiterate its current target but provide optimistic commentary about the future given the near-term uncertainty in the economy. With hedge funds all bulled up around Humana, we think this makes the set up Thursday difficult. Unfortunately, as we learned from Tuesday’s selloff, disappointment tends to follow when hedge funds lean aggressively in one direction. Of course, we could be wrong, and Humana could raise its target Thursday, causing the stock to rally. We would actually prefer to see this happen because the size of our sale Wednesday is much smaller than our remaining position. However, given the difficulty of this market, we think it’s prudent to protect against the possibility of a sell the news reaction. Should the stock fall on heightened expectations, we would potentially look to upgrade our rating back to a 1. What we like about a company like Humana is that it has very little sensitivity to interest rates, the dollar, or the economy. So when the market sells off and drags Humana down with it because the 2-year Treasury yield is at the highest levels since 2007 or the strong dollar is basically at parity with the euro or the U.S. economic outlook looks bleak, we think those pullbacks will create an opportunity. We’ll realize a small gain of about 1% on HUM stock purchased in April 2022. Although the gain isn’t much, we’ll gladly take it under the context that the S & P 500 is down more than 10% over the same period. (Jim Cramer’s Charitable Trust is long HUM. 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 Wall Street in New York City on August 16, 2022.
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