Why Jim Cramer Is Trimming Walmart To Buy This Petroleum Stock

Jim Cramer is making moves in his Charitable Trust portfolio. He announced Tuesday that he is trimming his Walmart Inc (NYSE: WMT) position in order to add to Chevron Corp (NYSE: CVX).

"While we applaud management’s commitment to everyday low prices and unwillingness to pass inflation onto its loyal customers, the pressure it has created on margins may limit the stock’s upside in the near term," Cramer said Tuesday in a letter to members of CNBC's "Investing Club."

Inflation concerns could keep Walmart's stock in check and investors need to see more progress with Walmart+ before granting it a higher price-to-earnings multiple, according to Cramer.

He still expects Walmart to have a strong holiday season and continue to narrow the gap with Amazon.com Inc (NASDAQ: AMZN). He made it clear that he is not exiting the position, rather trimming his holdings in Walmart stock to use the cash elsewhere.

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"We’ll take the cash raised from the WMT sale to get bigger in Chevron," Cramer said. "Chevron is generating more cash today than they did at any point in company history."

Chevron has increased its cash position by lowering operating costs, increasing production and being more capital efficient, according to Cramer.

He also pointed to the company's recent increase in its share buyback program and Chevron's 4.63% dividend yield as reasons for the portfolio move.

"The dividend is well-protected because even at $60 a barrel, a level that is still well below current prices, Chevron believes they can generate $25 billion of excess cash over five years," Cramer said.

WMT, CVX Price Action: At publication time, Walmart was up 0.95% at $144.94 and Chevron was up 0.66% at $116.65.

Related Link: Walmart Backed Supply Chain Company Symbotic Gets SPAC Deal: What Investors Should Know

Photo: Mike Mozart from Flickr.