Cramer's Investing Club: We're buying more of a portfolio retailer, trimming a steelmaker

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We bought 300 shares of American Eagle Outfitters (AEO) at roughly $27.11 Tuesday morning. In addition, we sold 150 shares of Nucor (NUE) at roughly $119.80.

• Following the trades, the Charitable Trust owns 4,450 shares of American Eagle Outfitters and 750 shares of Nucor.
• The buy increases AEO’s weighting in the portfolio from 2.73% to 2.93%.
• This sale decreases NUE’s weighting in the portfolio from about 2.58% to about 2.16%.

American Eagle Outfitters reported third-quarter earnings before the opening bell, and the result looks like a blowout. Revenues increased 24% year-over-year to $1.27 billion, topping estimates of $1.23 billion. Operating Income of $210 million blew past estimates of $170 million. And adjusted earnings per share of 76 cents crushed the consensus of 61 cents. American Eagle Outfitters had a terrific quarter thanks to strong demand, higher full priced sales, and less promotional activity.

Despite these better-than-expected results, we are seeing a muted reaction in early trading. We think this is an opportunity to add to our position as this American Eagle Outfitters quarter should prove to be one of the best in specialty retail this earnings season. We’ll have more coverage on the AEO quarter later today.

For Nucor, with shares trading back near all-time highs in what has proven one of the Trust’s more volatile holdings, we want to lock in some gains and free ourselves up to be nimbler in the event of a pullback.

We still think that NUE is one of the cheaper stocks in the market, that pricing power can sustain longer than what many expect, and that the steel industry is one of the key beneficiaries of the Biden administration’s $1 trillion infrastructure package.  We also see demand for steel picking up next year on the easing of semiconductor shortages, which have held back the automotive industry, a huge end market for the company.

Although we believe the steel demand will be strong into next year, we do have some concerns on the supply side, partially due to an easing of tariffs on European imports may limit further upside. By making a trim today and locking in a profit, we want to be ready should an easing of tariffs put some pressure on shares down the line. We will realize a solid gain of about 11% with the NUE trim.

The CNBC Investing Club is now the official home to my Charitable Trust. It’s the place where you can see every move we make for the portfolio and get my market insight before anyone else. The Charitable Trust and my writings are no longer affiliated with Action Alerts Plus in any way.

As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Typically, Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If the trade alert is sent pre-market, Jim waits 5 minutes after the market opens before executing the trade. If the trade alert is issued with less than 45 minutes in the trading day, Jim executes the trade 5 minutes before the market closes. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. See here for the investing disclaimer.

(Jim Cramer’s Charitable Trust is long AEO, NUE.)