view transcript

Now, let's get to the guts of the call and the guts of the call is about what we did, right? Sure. And what we did wrong. Let's kick off with something we did right--a company called XPO Logistics. I don't know if you've seen what's been happening with that stock, but it is considerably lower than where we bought it--down 40 percent. Okay. Before I get into why it was a great decision to exit the position and lock in a nice 27 percent gain instead of a 40 percent loss on our final sale on January second. It's always great to kick off the year with the win? Let's go back and recall how we got there.

Jim: We initiated XPO Logistics, a rising transportation logistics company in mid-November 2017, right before the strong holiday shopping season. I think that season--by the way--is stronger than this one. Our expectation was that the business would thrive as more and more retailers invest in e-commerce capabilities and the fuel of last mile delivery service would gain share versus competition.

Jim: We had some early success with the stock, but then we were given a terrific gift right before Christmas. On December 22nd, an unconfirmed report from the trade publication, Recode, came out and said Home Depot held internal talks about potentially acquiring XPO. But get this, the real kicker of the story was one of the reasons listed why Home Depot was interested--it was to keep XPO out of the hands of Amazon. Remember 2017 was the year Amazon acquired Whole Foods, so the brick and mortars were fearing what the Deathstar might do next to make that acquisition work even better. It's funny, I now think that Walmart could have the edge, but more on that. That's a bullpen name now. When this import broke, XPO shot up nearly 15 percent in a single day session creating a double digit game.

Jim: However, the unconfirmed acquisition report also put us in a predicament. On the one hand, we believed in the company and CEO, Brad Jacobs, and the report confirmed why XPO Logistics business was so important to the evolving e-commerce environment. But on the other hand, we knew from our homework on the company that Jacob's was more of a buyer of other companies, not a seller. Plus, it never really made sense why Home Depot would acquire XPO to begin with. Home Depot has a very tiny footprint outside the U.S. XPO is a big presence in Europe. Remember that, as a portfolio manager, you always have to be thinking not just is the news accurate, but is it giving you a chance to get out on a much higher price than expected in the near term? So, we gave them a few days to see if anything materialize and, when nothing did, we locked in a big win at the start of the year.

Jim: Sure, this stock continued to grind higher throughout the majority of 2018. I know I try not to kick myself on the wins, although it was painful to see the stock only go even higher than when we sold it. Then the company reported a small shortfall at the end of October, gave you a suboptimal forecast. Plus, Amazon decided to expand its last-mile business, and a short-seller issued a report questioning the company's financials, and the company denied it. What can we learn from this? It can be great to hold onto a stock when there are takeout rumors, because sometimes where there's smoke, well, there can be fires. As long-time club members know from what we have an NXPI, but more importantly, you have to be ready to go when nothing materializes, even if you still like the fundamentals of the company, because you risk giving up a sizeable gain. Otherwise, a bird in a hand can be worth a lot more than two in the bush.

Jim: How about the stock now? It's tough call. We've analyzed the short-sales report and don't see all that much to it. However, the business itself is now challenged, and as we can see from the decline also in the stocks of FedEx as well as the underperformance of United Parcel, it's a lethal combination of research that will not stop before it destroys the company. We think that is the intention and a client-turn-competitor that makes us take the stock out of the bullpen and put it back in the stands. It's tempting down here, I know, but what drove the stock higher? The rumors, the potential opposition by Amazon or home depot didn't come true. We've got a terrific price for our shares. Now we don't want to look back. Thank you to a very nice young woman who wrote on a Napkin when I was in the airport at Continental going into Newark saying, thank you so much for the wind that was XPO and I loved that.

Jim: You see me in the street, you're a club member. Tell me how to fix this. Tell me how to make it better and if you want to, thank me.

Jim Cramer broke down his winners and losers of 2018 in his final Action Alerts Plus conference call on Tuesday, Dec. 17.

One winner for Cramer's Action Alerts Plus portfolio was XPO Logistics (XPO - Get Report) . The portfolio sold out of its position in XPO on Jan. 2nd, 2018. 

Year-to-date, XPO is down around 42%. The stock trades around $53 currently. 

Cramer explained why he and his team decided to sell out of XPO in the December call. 

"I don't know if you've seen what's been happening with that stock, but it is considerably lower than where we bought it down 40 percent. Okay. Before I get into why it was a great decision to exit the position and lock in a nice 27 percent gain instead of a 40 percent loss on our final sale on January second. It's always great to kick off the year with the win? Let's go back and recall how we got there," Cramer told his Action Alerts Plus members.

He continued, "We had some early success with the stock, but then we were given a terrific gift right before Christmas. On December 22nd, an unconfirmed report from the trade publication, Recode, came out and said Home Depot held internal talks about potentially acquiring XPO. But get this, the real kicker of the story was one of the reasons listed why Home Depot was interested, it was to keep XPO out of the hands of Amazon. Remember 2017 was the year Amazon acquired Whole Foods, so the brick and mortars were fearing what the Deathstar might do next to make that acquisition work even better."

Want to be alerted before Cramer buys or sells a stock? Join Jim Cramer's Action Alerts PLUS investing clubLearn more now.