Investing Club Member Update
Explaining Jim Cramer's Charitable Trust Investing Club members have been sending in several questions each day about the club, including specific questions about the charitable trust. The Investing Club team wants to dedicate this email to explaining Jim Cramer's charitable trust and the portfolio.
Why did Jim create the Trust?
Jim established the Trust in 2005 with a personal contribution of $3 million so that he could manage a real investment portfolio within the Trust, have his money at risk, and share his investment ideas and trading strategy with viewers on CNBC and subscribers to his investment club.
Why does the Trust give all profits to charity?
To avoid conflicts of interest the Trust requires all portfolio income and realized capital gains be distributed to qualified publicly supported charitable organizations. Jim does not benefit personally from any portfolio gains or income, however his personal funds are at risk for any losses related to the portfolio investments.
The Trust structure enables Jim to speak freely to his viewers and subscribers about his investment recommendations and importantly provides an excellent educational tool for subscribers as they can view his current investments, trading history, holding periods, gains and losses, weighting, and diversification. The portfolio of investments and related data is fully transparent to club subscribers.
Each year accountants at Anchin, Block & Anchin review the trust transactions and confirm the number of charitable donations required by the terms of the trust. Since its inception, the Trust has generated over $3.25 million in charitable contributions. This year, at its new CNBC home, Jim anticipates the Trust portfolio will generate a record annual charitable contribution of over $500,000.
What is the difference between the Trust and the “Portfolio”?
The Trust is a financial account that holds assets and sets rules for the disposition of related income and realized gains. The Portfolio is simply the current assets held in the Trust. Jim Cramer is the grantor of the Trust and is the sole owner of the trust assets and is responsible for the investments held by the Trust. Jim utilizes the Trust’s portfolio of investments primarily as a teaching tool for his subscribers.
Is the Trust an Investment Fund?
The Charitable Trust is not an investment fund. The portfolio of stocks held in the Trust reflects Jim’s recommendations on individual stocks that he and his team feel are attractive investments. Jim backs up his recommendations by putting his money at risk for each recommended stock. No one other than Jim has an interest in the Trust portfolio.
How should the performance of the Trust portfolio be judged?
The portfolio is not managed like an investment fund or hedge fund and should not be viewed or evaluated as one. Jim has established trading rules for the Trust that further eliminate conflicts of interest but restrict the timing and scope of trust transactions and can impact performance. Jim’s subscribers are not limited by any of these restrictions and can act on his recommendations whenever they deem appropriate.
The portfolio does not have a designated investment style or performance criteria and it is not managed against a specific stock index. Jim does not employ derivative investments or leverage to enhance the returns of the portfolio. The focus on transparency and education combined with Trust trading restrictions make comparisons to market indexes somewhat subjective. The performance of the portfolio investments is provided for subscribers, however our goal is for each subscriber and investor to utilize our recommendations and market insights to build a portfolio that most suits their investments needs and to be as successful as possible in meeting their investment goals.
How should the Trust and Portfolio be viewed by subscribers?
The Trust portfolio represents a collection of stocks that Jim and his team currently think merit investment. Not all recommended stocks are appropriate for every investor and the portfolio composition will not suit all investor goals. The purpose of the investment club is to provide thorough analysis on recommended stocks, provide insights on market developments and the potential impact on individual stocks, and educate subscribers to assess risks to specific stocks, weigh upside vs downside, and equip them to make informed investment decisions.
Highlights From This Past Week
Jim Cramer explained why the club is buying more shares on Investing Club holding Morgan Stanley after the stock fell 2% and shared its investing thesis.
"(The Investing Club) think the market will reward MS for this transformation by applying a higher price-to-earnings multiple on the stock. Morgan Stanley also has a strong commitment to returning capital to shareholders. The bank bought back roughly $3.6 billion worth of shares in the third quarter as part of their $12 billion authorization."
Investing Club holding Walmart reported stronger-than-expected third quarter results Tuesday morning. The Investing Club broke down the results and explained when they plan to buy the dip.
"If the market keeps putting Walmart on sale and the stock falls below our average cost basis of $142.51, we will look to step in and buy back the stock we sold higher."
Investing Club holding Nvidia reported earnings this past week and while the headline numbers were pretty great, they almost pale in comparison to the guidance management provided. The Investing Club explained why they still believe it's a growth story.
"Now consider that potential revenue stream along with the ~90% of servers that have yet to implement GPU acceleration technology, growing adoption of gaming, rapid growth we are seeing on the pro visualization front and the fact that the automotive segment is still in its infancy, and compare that upside to the ~$26 billion analysts expect Nvidia to generate this year and you start to realize that as incredible as the growth story at Nvidia has been to date, we are still in the very early innings."
The CNBC Investing Club is now the official home to Jim Cramer's Charitable Trust. It’s the place where you can see every move we make for the portfolio and get Jim's market insight before anyone else. The Charitable Trust and Jim's 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.
(Jim Cramer's Charitable Trust is long MS, WMT, and NVDA.)
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