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We’re continuing to build back a position we exited at much higher levels a year ago


We’re buying 25 shares of Estee Lauder (EL) at roughly $213.94 each. Following Wednesday’s trade, Jim’s Charitable Trust will own 130 shares of EL, increasing its weighting to 1.05% from 0.85%. Wednesday’s small Estee Lauder buy comes as we continue to look for opportunities to increase the portfolio’s exposure to high-quality companies that are on sale but do not carry a lot of economic sensitivity. We believe Estee Lauder fits this criteria and this is a stock we started buying in late September . Although the market is not oversold according to the S & P Oscillator (which was at minus 3.02% after Tuesday’s session, still above from the minus 4% threshold), we are willing to nibble on EL into its slight weakness Wednesday because of the positive readthrough we found from the quarter of luxury goods giant LVMH. On Tuesday, LVMH reported a 10% increase in organic sales from its Perfume and Cosmetics segment, which is a great window into Estee Lauder because both companies operate in the Prestige category. LVMH’s quarter is a sign that this high-end category is still strengthening despite worries around the uncertain macro environment and on-and-off Covid lockdowns in China. LVMH also noted some bright spots in duty-free stores and Travel Retail, which still hasn’t fully recovered due to travel restrictions in Asia. Although this part of the business largely hinges on China’s stance towards Covid policy after its upcoming National Congress meeting, we remain constructive on its outlook. On valuation, we acknowledge that Estee Lauder isn’t a cheap stock, trading at about 28.5x its next 12-month earnings. But this multiple is down from roughly 46x earnings when we exited the position in December 2021 at around $360 . So the stock has already de-rated lower significantly this year in response to higher interest rates. Additionally, the stock’s forward price to earnings multiple is now back to its pre-pandemic levels, an important consideration during this great reset of valuations. As for the elevated multiple itself, we believe EL’s premium market multiple is justified given the high-quality nature of the company with its history of consistent growth and margin expansion. (Jim Cramer’s Charitable Trust is long EL. 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.

A sales assistant arranges lipsticks at an Estee Lauder store.
Qilai Shen | Bloomberg | Getty Images

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