We’re making two small buys Wednesday. We are buying 30 shares of Dover at roughly $149. Following the trade, Jim Cramer’s Charitable Trust will own 630 shares of DOV, increasing its weighting to 3.3% from 3.14%. We are buying 30 shares of Texas Roadhouse at roughly $151. Following the trade, the Trust will own 530 shares of TXRH, increasing its weighting to 2.8% from 2.66%. After the nasty intraday reversal in the market Tuesday, the S & P Short Range Oscillator moved even deeper into oversold territory to minus 10.62%. We don’t see the Oscillator get this low that often, but history suggests you have to be constructive when it is this oversold. According to MarketEdge, the Oscillator has hit that level 12 times in the past 17 years. If you look out and examine how the market did 30 days later, the S & P 500 was on average 2.57% higher. Not every situation saw immediate gains. Ten of those 12 times, the market was up and two times it fell 30 days later. The two exceptions were in August 2011 and the Covid crash of 2020. The Oscillator reached minus 10 on Aug. 5 2011 and got as low as minus 11.75 three days later. Still, the oversold conditions did not provide any relief as the S & P 500 was 2.12% lower 30 days later due to fallout from the U.S. debt ceiling crisis. The other exception was in 2020, which was a pretty unique situation since the market did not know how to account for a global pandemic. The first time the Oscillator hit minus 10% was on February 27, 2020. The market and oscillator continued to fall through March, with the Oscillator hitting a record low of minus 24.36% on March 18. But 30 days after the Oscillator low, the S & P 500 was up significantly. What this data shows is that history is on your side if you gradually put money to work after the Oscillator reaches minus 10. While nothing is guaranteed and deeply oversold conditions do not mean the market is in the clear, the Oscillator serves as a reminder that stock prices have come down fast and sentiment is extremely negative. Any bit of good news could spark a rally. Out of discipline to the historically oversold conditions, we’re putting a small amount of money to work in Wednesday’s volatile market. The two buys are in Dover and Texas Roadhouse. Both companies are not immune to weakening macroeconomic conditions, but Dover is appealing to us because it has one of the best balance sheets out of any industrial. The company ended 2024 with $2.8 billion of dry powder made up of $1.5 billion of excess cash and $1.3 billion of debt it could tap into and still maintain its 2.5 times target leverage. That $2.8 billion of firepower now represents about 13% of the company’s total market capitalization of $20.44 billion. We suspect management plans to use that cash to opportunistically repurchase shares — which could help support the stock — and/or pursue value-creating deals. Texas Roadhouse is a purely domestic company that isn’t in the crosshairs of tariffs or tit-for-tat trade wars. A weakening consumer is a risk, but we think the restaurant’s same-store sales will prove to be more resilient compared to others because of its value-oriented pricing. The company also has an aggressive share repurchase program in place. (Jim Cramer’s Charitable Trust is long DOV, TXRH. 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.
