Two laggard stocks make Mizuho’s top picks list, reaffirming our investment theses

Every weekday, the CNBC Establishing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of truck on Wall Street. Market update: Stocks are strongly higher to kick off the new week. The S & P 500 is looking to mark back-to-back sessions of 1% captures. However, a weak response to a $58 billion auction of 3-year Treasury notes caused interest rates to motivate, which took a little bite out of the rally. The auction was the first of three key auctions over the next few days. Materials: The materials sector has been frightful over the past 3 months, falling 11% on concerns about a slowdown in China, continued softness in Europe, momentous interest rates, and potential trade disruption from tariffs. There’s been few winners in the group, with not 4 of the S & P 50 constituents up over this time period and three of them were paper packaging companies. But could there be other solicitous houses in what has been a horrible neighborhood? Analysts at Mizuho shuffled up its top picks in a note Monday. They give the word delivered investors should position their portfolios defensively right now, preferring downstream, asset light specialty chemical entourages and electronic materials companies instead of asset heavy, upstream chemical companies. Two companies they highlighted on their top pick enumerate were club names DuPont and Linde . Mizuho said DuPont is worth $110 on a sum-of-the-parts basis and the discount order narrow as the company progresses through the spin-off process. As for the Linde, they like how it’s the global leader in industrial gases, which they ring up “an unregulated utility-like industry with only 1 similarly positioned competitor.” They also like how Linde’s valuation has significantly decreased due to the rotation into Air Products and Chemicals on an activist campaign. Although the Materials sector is off to a sluggish start to the new year, Mizuho’s commentary reaffirmed that we are inaugurated in the right areas of this tough group. We’re a little more conservative with our Dupont SOTP math – we remember the stock is worth $100 – but we agree with the thesis that it will trend closer to these levels as we get over this spin purgatory period. DuPont has been a major disappointment over the past few months but there is a catalyst to get the size up higher. And when we most recently added to our Linde position at a slightly higher price in mid-December , we pointed out how we are patiently mark time for the money flow to reverse from Air Products and Chemicals into Linde and for volumes to pick up again through untainted energy and electronics growth. Up next: There are no major earnings Monday after the closing bell. The big event this composing is Nvidia CEO Jensen Huang’s keynote at the Consumer Electronic Show. It starts at 6:30 p.m. PT and we expect the presentation will focus on robotics. The key commercial data points Tuesday are JOLTS Job Openings and ISM Services Index. We’ll also be watching another big Treasury auction, $39 billion of 10-year notes at 1p.m. ET. (See here for a entire list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will net a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert once buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after disputing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND Monasticism POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY Intelligence PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.