The CNBC Investment Club held its May monthly meeting on Wednesday, with Jim Cramer and Director of Portfolio Analysis Jeff Marks in attendance, covering all 33 stocks in the portfolio. Jim gives his unvarnished view on stocks and spotlights four of his favorite stocks that new club members can buy. Jeff also detailed the two new positions and why we started them. One of the themes Jim emphasized was the importance of diversification, even when one dominant theme is driving the market. Now, artificial intelligence is winning. There are many AI winners. But our discipline as long-term investors requires us to own other stocks as well. So let’s take a look at what Jim and Jeff have to say. The four stocks that Jim recommended new club members buy are marked in bold. Tech giant winners Alphabet: It was a mistake to sell it last spring. I was drawn to the powerful combination of Google Search, Gemini, Google Cloud, YouTube, and robotaxi service Waymo, and I made the right decision to buy back the company. For new members, Google is what Jim wants to buy right now. Amazon: This is another company with a collection of notable companies. From its cloud arm Amazon Web Services and its custom silicon chips to its Prime membership program and advertising business, all of this is worth more than its current stock price indicates. Some investors may be concerned about the huge AI investment, but profits should start flowing as early as next year. Apple: Stock suddenly turned optimistic on AI products. Apple’s slow rollout of AI worried many investors, but we’re glad they didn’t end up with a mediocre product. Apple is focused on being the best, not the first. Look for the long-awaited AI-powered Siri to debut at the company’s annual developer conference on June 8th. Nvidia : The AI chip giant is in a similar situation to Apple over a decade ago, and should follow the iPhone maker’s lead and embark on a massive share buyback program combined with consistent and significant dividend increases. Nvidia’s best buy right now is its own stock. Big tech laggard Meta Platforms: CEO Mark Zuckerberg is known for his tolerance for underperformance, and that’s exactly what this stock has done recently. We’re afraid to sell it, but soon after we do, Meta will have a breakthrough in AI. So we’re keeping it. Microsoft: Similar discussion here. We all know there’s a real problem here, but it’s hard to imagine that CEO Satya Nadella and CFO Amy Hood aren’t aware of it as well. Give them one more quarter of time to show something that improves their prospects in the AI era. We’ve owned this for almost 10 years and don’t want to give back any more of that interest. Savings from AI play a role in Arm Holdings: The second newest company name after FedEx has been a rocket ship since acquiring the chipmaker last month. Concerns about securing sufficient manufacturing capacity from TSMC remain. It’s just that the enthusiasm for all things data center-related has made that question less important to stock prices. We booked more profits on Tuesday. Broadcom : This service has stagnated recently, likely due to concerns that Marvell is a real threat in the custom AI chip business and a lack of announcements to new customers. But we can’t forget the strength of its networking portfolio and the proven ability of CEO Hack Tan. As Broadcom continues to be the data center mainstay, we’re happy to wait for sellers here. Eaton: This is a great example of a company doing its best to alleviate the power issues caused by data center expansion. Eaton makes cooling and electrical equipment that keeps data centers running smoothly and without interruption. GE Vernova: Another great choice to play up the AI’s insatiable appetite for energy. GE Vernova is a winner because it is a leading manufacturer of natural gas turbines that power data centers. Corning : This stock is our biggest winner as data center operators move away from slow copper connections and move toward fiber connections. Corning is a great and valuable American company, and it’s a great name to own because it continues to be rediscovered by the analyst community. Qnity: Qnity, which was spun off from DuPont in the fall, is collapsing due to the AI chip boom. Even though we made some money, we still like it, especially considering the stock is still under the radar on Wall Street. If more technology-focused analysts, rather than chemistry experts, start covering this space, we may see the next upswing. Technology outside the data center CrowdStrike : It took courage to hang on to cybersecurity stocks during the “AI is eating software” crash earlier this year. We’ve ignored the downside here and benefited from stocks soaring to all-time highs. There’s no need to worry about the stock’s slight pullback on Wednesday after peer ZScaler’s disappointing outlook. Palo Alto Networks: The long-term importance of cybersecurity has not diminished. So for now, there’s nothing wrong with owning a second cyber stock in Palo Alto. Both CrowdStrike and Palo Alto will report earnings next week. Salesforce : Our toughest tech stocks will report earnings after the close of trading on Wednesday. Discussion: If it takes time to understand the impact of AI, why not sell it? Why not just buy it back if you really want to? Once we get the latest quarterly numbers, we’ll have a better idea of what to do. Diversification Factors The Club’s goal is to operate a diversified portfolio that is durable and performs over the long term. That means you can’t just own the data center and the AI play. We must also recognize that not everything will rise at once. Goldman Sachs: Usually a sales and trading company, but excels in the much more profitable IPO and M&A markets. I wouldn’t be surprised if the nearly $1,000 stock price rises 25% from here by fall. So many large-scale initial public offerings and mergers are about to happen. This is another stock that Jim said new members could consider purchasing. Wells Fargo: If the bank reports another bad quarter, it might be time to say goodbye. We lowered our stock price because the company’s previous financial results announcement was very disappointing. CEO Charlie Scharf is perplexed because he has done a great job. Capital One : It’s hard not to be disappointed after this bank’s top and bottom line misses in late April and subpar quarters before that. CEO Richard Fairbank is an exceptional leader, but Capital One has yet to streamline the Discover business it acquired last year as much as we had hoped. It’s an undervalued stock, so I’d like to be a little more patient with it compared to Wells. Eli Lilly: We’ve had this for years and we’ve finished it well. The company’s next-generation injectable ritartide is poised to be a real game-breaker, allowing Lilly to permanently separate itself from its main rival, Novo Nordisk. Cardinal Health : There’s no escaping the fact that the name Medical Equipment and Ancillary Health Care involves grueling and destructive rotations. The reaction to last month’s results was excessive for a company of Cardinal’s size. This is a stock worth fighting for. Johnson & Johnson: Another victim of the market’s disdain for health care. However, management has an exciting portfolio and pipeline of new drugs and medical technology products to accelerate growth in the coming years. Additionally, it has adopted a stronger legal strategy to avoid talc litigation and refocus investors on the fundamentals of the business. J&J said its new once-daily psoriasis drug could be one of the company’s biggest-ever drugs. Home Depot: This was our main bet on lower mortgage rates and a strong rebound in housing activity. Unfortunately, that hasn’t happened despite the Fed’s recent interest rate cuts. But we don’t want to remove this hedge because we don’t know when that catalyst will arrive. Costco: Far better than Home Depot in the retail world is Costco, reports Thursday night. This quarter should be okay as they are selling cheap gas to attract new cardholders. TJX Companies : Another retail winner. I purchased it before last week’s settlement of accounts, and I’m glad I did. TJ Maxx and the Marshalls’ parent team may still be cheap enough for those joining the club for the first time. Yes, that’s good. Starbucks: We’re obsessed with this. I’m glad I didn’t bail when Wall Street got fed up with the $80s and $90s. Recent results show CEO Brian Nicol’s turnaround is working. The stock should have further upside as he overcomes a long list of problems. Procter & Gamble: Like Home Depot, P&G is a hedge. In this case, this is a way to protect against severe slowdowns. I didn’t say war was imminent, but I also didn’t foresee war in the Middle East. you just don’t know. Nike : This stock was disappointing. That can’t be denied. If the apparel maker reports another lackluster quarter and Wall Street is forced to cut estimates again, we’ll be out of luck. CEO Elliott Hill may have been treated too badly. Industrial Boeing: This is another product that Jim said new members should consider purchasing. As monthly deliveries increase, the stock should continue to rise towards that $300 level. Shares were up nearly 2% Wednesday afternoon after Chief Executive Officer Kelly Ortberg said at a press conference that the company has met regulatory requirements to increase production of the 737 MAX. Honeywell: We took some cuts on Tuesday because the stock is operating for ridiculous reasons. Because it owns half of the publicly traded quantum computing companies. The excitement overwhelmed the market’s judgment. Honeywell’s Quantinum stock actually means little to shareholders like us. The real trigger is the upcoming breakup of this industrial conglomerate. DuPont: This is an imitation of chemicals, plastics, filtration, and safety materials. However, it is difficult for investors to respond, which is why stock prices have remained directionless for some time. DuPont has a lot of value. CEO Lori Koch needs to make that clear soon. If we don’t, we will be leaving our positions. The former electronics business, now trading as Qnity, has become the real star of the show. Dover: This is a great conglomerate that touches so many different parts of a growing economy. However, it is difficult to evaluate Dover stock. It appears to be trading up and down in thin air while other names soar. This is something we monitor closely to determine if it’s worth staying in our portfolio. Linde: The good thing about this industrial gas company is that it works with a variety of industries, including healthcare, semiconductors, wine, and carbonated beverages. Linde is a good stock when the economy is good and a great stock when the economy is good. FedEx: We called FedEx on May 18th from our bullpen watch list. CEO Raj Subramaniam has done a great job improving FedEx’s operations. Next week’s spinoff of its freight forwarding business is another opportunity for investors to make money. We like spin-offs in this space because they help companies have a clearer focus. (See here for a complete list of Jim Cramer Charitable Trust stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
