We're buying 2 stocks in the beat-up financial sector — and downgrading a tech name

CNBC Finance

4 min read

We are buying 30 shares of Capital One at roughly $192, increasing the weighting in Jim Cramer's Charitable Trust to 3% from 2.85% and increasing our COF share count to 610. We are buying 25 shares of Wells Fargo at roughly $84, increasing the weighting in Jim Cramer's Charitable Trust to 3.47% from 3.41% and increasing our WFC share count to 1,625. After this latest purchase of 30 Capital One shares, we will have bought back all 60 shares we sold in late December at around $242 each. We bought the first half last Wednesday at $208 per share. The stock was clobbered on Monday after a report from Citrini Research outlined a scenario in which AI could negatively affect American Express. The disruption was twofold: softening in the labor market and the rise of agentic commerce, which could theoretically bypass the interchange fees credit card companies collect on each transaction by using stablecoins instead. The report singled out American Express, but it also dragged down Capital One's shares. It will take time to fully understand AI's impact on the labor market, but this stablecoin part of the story may be a big overreaction, which is why we are scooping up more Capital One. Analysts at Wells Fargo quickly came to the defense of American Express yesterday, reiterating their view that "stablecoin would not be a meaningful threat to AmEx's payments revenue model, unless regulatory rules were permitted that essentially disintermediate US bank deposits. We don't see this happening in the U.S." The recent sell-off has brought Capital One shares down to less than 10 times consensus 2026 earnings-per-share estimates and less than 8 times 2027 projections. With a large buyback program in place, we expect management to aggressively repurchase shares at these low multiples. In addition, we are buying back a sliver of the Wells Fargo stock we sold at much higher prices in October and January, at roughly $86 and $94 per share, respectively. We are upgrading our rating to a buy-equivalent 1, with shares down about 13% from their record close of $96.39. The big banks have been hit hard in this AI sell-off, but we remain in the camp that AI will be a net positive, driving productivity and efficiency gains and leading to a positive net impact on earnings. Lastly, we are downgrading Palo Alto Networks to a 3, from 1, meaning sell into strength . This rating change is not based on a change in our view of AI's impact on the cybersecurity market. We strongly disagree with the notion that AI tools built on large language models (LLMs) will replace best-of-breed security vendors, and we remain convinced that broader AI adoption will only increase the need for cybersecurity solutions. So why downgrade, given Palo Alto shares are down 21% year to date? As Jim explained during the Morning Meeting , this is a portfolio management decision driven by owning two cybersecurity companies â Palo Alto and CrowdStrike â in a 33-stock portfolio. If the pullback in software continues, we want to circle our wagons around one individual name. (Jim Cramer's Charitable Trust is long COF, WFC, and PANW. 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 discussed a stock on CNBC, 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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We're buying 2 stocks in the beat-up financial sector — and downgrading a tech name

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