We're starting positions in 2 more defensive stocks to balance our AI exposure
We're initiating positions in two new stocks — buying 240 shares of BNY , formerly Bank of New York Mellon, at roughly $161 each and 365 shares of Kimberly-Clark at roughly $108.
Following Wednesday's trades, both BNY and KMB will each represent 1% of the portfolio. We're adding a couple of new positions to the portfolio following Tuesday's exit of Corning .
As we've discussed in our recent Morning Meetings, we want to shift some (but not all) of the portfolio's exposure away from the AI data center buildout into some less cyclical stocks with cheaper price-to-earnings multiples. Higher interest rates lead to higher discount rates applied to future earnings and cash flows, resulting in lower P/Es.
With the market expecting the Federal Reserve to hike rates at its September meeting in two weeks, we prefer to add some more defensive exposure. BNY YTD mountain BNY year to date First up is BNY. We added this trust bank to our Bullpen last month.
Unlike fellow Club name Wells Fargo , whose core business is collecting deposits and issuing consumer and commercial loans, BNY's main focus is collecting fees from servicing, safeguarding, and moving financial assets for institutions. Roughly 70% of its revenue streams are fee-based.
While it still issues some loans, BNY is not really levered to the credit cycle, changes in the bond market yield curve, or net interest income (NII). Asset growth (meaning market values ) is a main driver of its fees. The bank's credit strategy focuses on investment-grade clients that also use its non-credit services.
We've watched from afar how great a performer the stock has been under the leadership of Robin Vince, who took over as CEO in 2022 and transformed BNY and its culture, selling tools and services to customers across the investment industry and increasing the firm's investment in technology.
During this period, the company has delivered steady revenue growth, significant margin expansion, and ever-growing profitability metrics. From 2022 to 2025, BNY's revenues have grown from $16.5 billion to $20.1 billion, while pre-tax margin has improved from 21.1% to 35.1%, leading to earnings per share (EPS) growth from $2.88 to $7.40.
We are initiating the BNY position with a $180 price target, reflecting 17.5 times consensus 2027 EPS estimates of $10.25, according to FactSet. KMB YTD mountain Kimberly-Clark YTD Our second buy is Kimberly-Clark, the paper products specialist and parent company of the Cottonelle, Huggies, and Kleenex brands. We added this household product company back into the Bullpen on Tuesday.
We originally took a look at it back in November 2025, shortly after the company announced it was buying the consumer health company Kenvue at an enterprise value of approximately $49 billion. KMB fell from $120 to $102 in the days after announcing the deal. The stock still hasn't fully recovered from that decline.
When the deal closes, which is expected before the year is out, Kenvue will bring over-the-counter medicine, oral care, skin care, wound care, and additional baby products. We mentioned some of the primary concerns investors had around the deal – Tylenol-related lawsuits and the strategic fit of a toilet paper company getting into healthcare.
Kimberly-Clark CEO Mike Hsu addressed these risks when he appeared on "Mad Money" back then. We like this deal for the scale it adds to KMB. The combined entity will become the second-largest consumer health and wellness company by revenue, trailing only Procter & Gamble , thanks to 10 different $1 billion brands.
( We exited P & G in July looking for better growth prospects.) Synergy-wise, management expects to unlock $1.9 billion in cost synergies, and it looks like a reasonable target to us. With its added scale, Kimberly-Clark will be able to lower its cost of goods sold by negotiating contracts across jointly procured materials.
The company also expects to rationalize and consolidate systems and processes, while eliminating overlapping corporate and centralized resources. We expect some incremental revenue synergies too. With the deal expected to close before the end of this year, we like how there's a catalyst to look forward to.
KMB shares currently trade at roughly 14 times 2026 earnings estimates and sport a 4.75% dividend yield, which are characteristics we value in this market. We are initiating the position with a $120 price target, reflecting 16 times consensus 2027 EPS estimates of $7.46, according to FactSet. That's a nearly four-turn discount to P & G, which trades at about 20 times 2027 earnings estimates.
We think KMB stock can re-rate from the faster growth and higher margins Kenvue brings. (Jim Cramer's Charitable Trust is long BNY, WFC, KBM. See here for a full list of the stocks.)
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