Dover wisely shuffles its portfolio — and why we're upgrading a struggling consumer stock

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Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Markets: Stocks were up nicely in midday trading, with the S & P 500 adding 1.1% and the tech-heavy Nasdaq climbing even more. The small-cap Russell 2000, one of the hottest trades of late, also moved higher. It has been a flipped script compared with what we saw last week when the market rotated out of the "Magnificent Seven" and high-flying semiconductor stocks in favor of small caps. In Monday's session, the S & P 500's technology, communication services and consumer discretionary sectors outperformed. Meanwhile, energy and consumer staples were the only two sectors in the red. M & A moves: Club holding Dover said Monday it will sell its Environmental Solutions Group business to Terex Corporation for $2 billion in cash. Dover's environmental unit specializes in the waste collection industry and makes things like garbage trucks and trash compactors. It generated approximately $750 million in revenue in 2023, or roughly 9% of Dover's total sales. The deal is expected to close before the end of the year. We're not quite sure why Dover shares are down nearly 2% on the news. OK, maybe Terex got the better end of the deal on paper — its stock shot up about 10% on the news, and you typically don't see the acquirer up that much on M & A. However, this is the type of active portfolio management that Dover is known for. We're always fans when companies divest non-core businesses with less attractive growth profiles and use the money to either make bolt-on acquisitions in more attractive spaces or increase cash returns to shareholders like buybacks. Dover didn't say Monday what it might use these proceeds for, but that's besides the point right now. Effective portfolio management is what separates good multi-industry companies from great ones. That's why we're not surprised that fellow Club industrial Honeywell has finally started to move again after all its recent dealmaking. We're still waiting for the other side of the ledger when it divests some non-core assets. Both Dover and Honeywell are set to report earnings Wednesday morning. Upgrade brewing: Shares of Starbucks fell Monday after bucking the market's downward trend last week thanks to a nearly 7% jump Friday. The catalyst for Friday's gains: A report in The Wall Street Journal that said Elliott Management took a stake in the coffee chain. This is a major positive development for Starbucks and its beaten-up shareholders. The presence and collaboration with a rigorous firm like Elliott should lead to positive changes and keep management accountable. Our expectation is they will find ways to create value. We stuck by Starbucks after its horrendous earnings miss and outlook cut April 30 because we thought its problems were mostly self-inflicted and not due to a brand issue. Although turnarounds do not happen overnight, the combination of an already de-risked outlook and Elliott on the shareholder's side makes us buyers. We're upgrading our rating back to 1. Up Next: Monday is the big steel night with earnings from Nucor and Cleveland-Cliffs . In tech, NXP Semiconductors and Cadence Design Systems are set to report. Before the bell Tuesday, Danaher will report, and we're hoping this Club name says its bioprocess business is on track with its recovery. Other notable earning reports include Spotify , United Parcel Services , GE Aerospace , GM , Coca-Cola , Freeport-McMoRan and HCA Healthcare . (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before 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 issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED. Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street.