One key to successful investing is taking advantage of interim price movements to tweak your portfolio holdings.
Jim Cramer and the Action Alerts Plus team recently took two such actions -- one tied to a merger announcement, and the other to a regulatory action.
In the first case, they reduced their holdings in NortonLifeLock NLOK, which announced plans in August to acquire Avast in an $8 billion+ deal to create a cybersecurity giant.
Shares of NortonLifeLock rose in the ensuing weeks, close to their all-time high set in June.
"The catalyst that kicked off the move back toward the highs, of course, was the company's merger announcement with Avast that, if approved, creates the global leader in consumer cyber security with a dominant market share position with strong margins and cash flow generation," Cramer and the AAP team wrote earlier this month.
So why the sale?
"We would not be surprised if the merger approval process was a lengthy one given the fact that the new company will have a dominant market share position. For that reason, we think it is best to peel some stock off (at what will be our highest sale price to date) during this rally back to the highs."
Indeed, the timing proved to be correct, as NortonLifeLock shares have fallen more than 6% since their close at $27.38 on Sept. 9, the date of the column.
In the second case, Cramer and the AAP team added to the portfolio's holdings of AbbVie ABBV after an FDA regulatory decision at the beginning of the month requiring an additional warning label on its Rinvoq drug, which is used to treat rheumatoid arthritis. AbbVie stock fell more than 10% in the ensuing days, prompting Cramer and the AAP team to take another look.
"With shares starting to level off after news that the FDA is requiring new and updated warnings for AbbVie's Rinvoq and Eli Lilly's Olumiant following a review of Pfizer's Xeljanz, we are taking an opportunity to pick up more shares," they wrote.
"We continue to believe that Rinvoq has a favorable risk-benefit profile ... Additionally, we believe that the potential hit to Rinvoq's revenue potential is now being baked into estimates.