We’re reducing our exposure to smartphone end markets and building up our position in an industrial giant

Shortly after the opening bell, we’ll be buying 55 shares of Caterpillar (CAT) at roughly $247 a share, and selling 100 shares of Qualcomm (QCOM) at roughly $132.25 apiece. Following Monday’s trade, Jim Cramer’s Charitable Trust will own 160 shares of CAT, increasing its weighting in the portfolio to about 1.3% from 0.86% and 375 shares of QCOM, decreasing its weighting in the portfolio to about 1.69% from 2.13%. Now that our trading restrictions are cleared, we can add to our position in Caterpillar . Shares of the machinery company slid after it reported an earnings-per-share (EPS) miss on Jan. 31 — a sell-off we thought was unwarranted given Caterpillar’s robust business fundamentals and steady demand for its construction-and-mining equipment. The EPS miss was also actually a beat when adjusting for currency fluctuations. But the fall, nonetheless, continued throughout last week, as investors repositioned out of cyclicals that outperformed in 2022 in favor of technology stocks that had been battered last year. More importantly, Caterpillar gave an upbeat view of 2023, noting it expects revenues and earnings to grow over 2022 levels, driven by demand in its construction and resources units. The outlook for construction on the non-residential side looks particularly bright to us, due to an expected rush of investment in infrastructure over the next year fueled by the federal government’s $1 trillion infrastructure spending law . With CAT shares down more than 5% since last Tuesday, we reiterate that the recent pullback is a long-term buying opportunity. To fund this purchase, we’re scaling back our position in Qualcomm on a near cash-for-cash basis. The semiconductor firm on Feb. 2 delivered softer-than-anticipated guidance , while warning that weak smartphone demand would keep handset chip inventories elevated through the first half of 2023, longer than expected. Qualcomm’s end-market exposure to smartphones — for which its chips are a key component — means it could be hurt by weakening consumer demand. At the same time, Qualcomm is starting to see some waning demand from its internet of things and industrial customers, denting the thesis the firm should be viewed as a diversified semiconductor company and not just a smartphone chip maker. As a result, we’re opting to reduce our exposure to the smartphone end market via a trim of Qualcomm, while maintaining our position in smartphone maker Apple (APPL), a stock that should be owned and not traded. We’ll realize a loss of about 16% on stock purchased in February 2022. (Jim Cramer’s Charitable Trust is long CAT, QCOM, APPL. 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.

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