Jim Cramer's Action Alerts PLUS Weekly Roundup
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Jim Cramer's Action Alerts PLUS Weekly Roundup
Saturday, November 01, 2003 10:42 a.m. EST
Dear Action Alerts PLUS Subscriber,
It looks like we've played it right. We made it through some tough times last week, and recovered to up 26% for the year.
The market historically does very well this time of the year, which is why I'm only sitting on 1.7% cash. That said, if we break through Dow 10,000 before Thanksgiving, I'll think the market is too overheated and will take profits off the table.
Made a few changes to the portfolio this week.
First, I unloaded Pfizer (PFE:NYSE) because I feared the stock was going nowhere but down. There is a real push in this country to limit drug prices, which I don't believe major pharma companies will be able to sustain.
Yes, it turns out I also sold my FleetBoston (FBF:NYSE) position prematurely, but I'm happy to hear from your emails that some of you readers were still holding it for the Bank of America (BAC:NYSE) bid. I have to tell you that I would still be a seller of Fleet at these levels, had I not given up on that stock too soon.
I'd been thinking every sell was wrong and then we rediscovered on Friday, in the form of Skyworks (SWKS:Nasdaq), why it doesn't pay to be greedy!
The Ones are stocks that I would buy right now, whereas the Fours are stocks I want to unload.
ONES
AT&T Wireless (AWE:NYSE, $7.25, 32,500 shares, 7.44% of the portfolio): Added 10,000 shares on Wednesday when the stock finally came off my restricted list. Company has a strong balance sheet, and I believe it's too cheap ahead of likely industry consolidation.
Automatic Data Processing (ADP:NYSE, $37.74, 5,000 shares, 5.96%): Bought 500 shares on Wednesday because I'm convinced this is NOT going to be a jobless recovery. Dividend should be raised at the board meeting in two weeks.
Charter Communications (CHTR:Nasdaq, $4.27, 27,500 shares, 3.71%): Reports earnings on Monday morning, where we'll hear the latest about the company's refinancing efforts. Like its competitors, expect high-speed data revenue to offset basic subscriber losses.
As long as Charter is still below my cost basis, I'd buy another 2,500 shares when my restrictions allow.
Comcast (CMCSA:Nasdaq, $33.87, 4,500 shares, 4.81%): Reported a great quarter on Thursday, but the stock was hit with some profit-taking. I can't tell you how much I love the story at Comcast. I truly think it is going to outperform the market for the next couple of years.
I spoke with CEO Brian Roberts on my TV show this week, and believe that high-speed data is going to bolster near-term growth. Why is Comcast the best cable company out there? Because it has great customer service, great technology and continues to find ways to get customers to take more services.
Conexant Systems (CNXT:Nasdaq, $5.84, 10,000 shares, 1.84%): Would have been buying more shares on Friday if my restrictions allowed. Conexant reported a great quarter, and is taking market share in its two major business lines. Management has finally clawed its way back to profitability, and I think Conexant can continue to expand its margins in the coming quarters.
The company has a solid balance sheet, and I think the market has yet to realize the value of Conexant's strategic investments. I see this stock hitting $8 before too long.
EchoStar Communications (DISH:Nasdaq, $38.25, 4,500 shares, 5.43%): Bought 500 shares on Friday, as the stock dropped below $38. I still like the refinancing thesis here very much, and will continue to accumulate EchoStar if it remains down here.
InterActiveCorp. (IACI:Nasdaq, $36.81, 1,000 shares, 1.16%): Reinstated my position on Wednesday because I think the stock is unfairly trading at a discount to the rest of the Internet leaders.
Interactive has the best balance sheet in the business, and I believe that Barry Diller truly is a great manager. You don't think there's more upside potential in this group? Check out the buzz for the Google IPO. I think Interactive could be $45 when that deal prices next year.
JDS Uniphase (JDSU:Nasdaq, $3.53, 25,000 shares, 2.79%): Market overreacted to news of the company's $400 million debt sale. I view any declines like this as buying opportunities because I believe Kevin Kennedy is preparing to reposition JDS in the businesses that will return the company to profitability.
Newell Rubbermaid (NWL:NYSE, $22.80, 14,000 shares, 10.08%): Reported a much better quarter than I thought we'd see, and this is my largest holding! Newell's cash flow is very solid, and I think the company will ultimately exceed its conservative 2004 guidance.
Like JDS, this is a company that has to make some tough decisions about what business lines it really wants to be in. By the time Newell reports its fourth quarter, I wouldn't be surprised if the operational structure looks much different than it does today.
Wall Street is too bearish on this stock, and I wouldn't be surprised to see Newell reach $25 following some analyst upgrades.
US Bancorp (USB:NYSE, $27.22, 2,500 shares, 2.15%): Bought 1,000 shares on Tuesday following the Fed meeting. I don't expect interest rates to move higher anytime soon, which bodes well for the banks. I think US Bancorp is a buy up to $28.
UnitedHealth Group (UNH:NYSE, $50.88, 2,000 shares, 3.12%): Picked up 500 shares on Monday. I'm surprised the stock has sold off so much after buying Mid Atlantic Medical (MME:NYSE); the deal makes sense strategically and should quickly add to earnings.
ValueClick (VCLK:Nasdaq, $8.13, 9,000 shares, 2.31%): Sold 2,500 shares on Monday, and was able to buy 1,000 of those back nearly $2 lower on Friday. ValueClick reported 20% organic growth in a seasonally slow period for advertising, and has a pristine balance sheet.
I think investors are overreacting to how much ad-services companies like this would be affected by anti-spam legislation. I'm willing to build my stake back up to 10,000 if ValueClick continues to struggle.
TWOS
Autobytel (ABTL:Nasdaq, $10.45, 2,000 shares, 0.66%): Very tempted to add to my stake, but I have to be true to my cost basis. I'd double my position in Autobytel the next time the stock drops below $10.
Cendant Corporation (CD:NYSE, $20.43, 4,000 shares, 2.58%): Cheap stock and management consistently beats its guidance. I'd add to my stake if Cendant pulled back a dollar.
E*Trade Group (ET:NYSE, $10.30, 22,500 shares, 7.32%): Whole sector should benefit if TD Waterhouse finds a buyer. E*Trade has considerable upside, but I already have a sizable stake 10% lower than the current quote.
Intel (INTC:Nasdaq, $32.95, 1,000 shares, 1.04%): CEO Craig Barrett said the company is looking to make small acquisitions to bolster its communications chip business.
That said, PC growth will lead gross margin expansion in the near term. As Intel puts up good numbers quarter after quarter, I think the stock can move higher.
J.P. Morgan (JPM:NYSE, $35.90, 3,000 shares, 3.40%): Highly leveraged to an improving economy. US Banc is still my favorite stock in the sector, but J.P. remains attractive at these levels. I believe the stock is worth north of $40, which is where it will be when we hit Dow 10,000.
Limited Brands (LTD:NYSE, $17.60, 4,500 shares, 2.50%): Announced on Thursday that Chuck Turlinski would take over the company's flagship chain. He's been with the company for seven years, and is reportedly known best for improving operating efficiency, which is where the company's apparel division needs the most help.
Nextel Communications (NXTL:Nasdaq, $24.11, 4,000 shares, 3.04%): Took 500 shares off the table on Friday because I'd made 65% in just four months. I like to let my winners run, but it's just plain piggish to not book that kind of profit in this market.
Schering-Plough (SGP:NYSE, $15.27, 11,000 shares, 5.30%): Why am I holding this stock, even though I sold Merck (MRK:NYSE)? Because Schering-Plough has a great management team, led by Fred Hassan, who has proven in the past that he knows how to turn around a struggling pharma business.
Time Warner (TWX:NYSE, $15.29, 10,000 shares, 4.83%): The New York Times finally caught on to the fact that the company is seeing a pickup in the online ad business. I've already got my position for when the market realizes the value of Time Warner's media assets. Do you have yours?
Zoran (ZRAN:Nasdaq, $16.70, 11,500 shares, 6.06%): Picked up another 500 shares Monday. I think we already saw the bottom in this stock last week, and that Zoran is attractive on a pullback below $16.
THREES
Honeywell Int'l. (HON:NYSE, $30.61, 5,000 shares, 4.83%): Declared its latest 18.75-cent quarterly dividend on Friday. Investors holding the stock through Nov. 18 will receive the Dec. 10 payment.
I sold 500 shares of Honeywell on Thursday, trading around a position we bought $6 lower. As inexpensive as Honeywell is, I fear any upside will be capped here without a solution for the asbestos trust fund.
Watson Pharmaceuticals (WPI:NYSE, $39.27, 1,000 shares, 1.24%): Made a small acquisition this week of an oral controlled-release delivery technology, adding new generic and branded product opportunities.
A big merger in the generic space on Friday boosted the stock 3%. Every Medicare plan I've seen benefits low-cost drug providers like Watson, which is why I'm holding on to my remaining shares for the time being.
Raytheon (RTN:NYSE, $26.48, 5,500 shares, 4.60%): Facing a strike by 2,000 workers in the missile division. Just one more issue for a company that has far too many problems to contend with at once. I'd be selling more shares into any rally, if my restrictions allowed.
Regards,
James J. Cramer
DISCLOSURE: At the time of publication, Cramer was long AT&T Wireless, Autobytel, Automatic Data Processing, Cendant Corporation, Charter Communications, Comcast, Conexant Systems, EchoStar Communications, E*Trade, Honeywell Int'l, InterActiveCorp., Intel, JDS Uniphase, J.P. Morgan, Limited Brands, Newell Rubbermaid, Nextel, Raytheon, Schering-Plough, Time Warner, UnitedHealth Group, US Bancorp, ValueClick, Watson Pharmaceuticals and Zoran.
Dear Action Alerts PLUS Subscriber,
It looks like we've played it right. We made it through some tough times last week, and recovered to up 26% for the year.
The market historically does very well this time of the year, which is why I'm only sitting on 1.7% cash. That said, if we break through Dow 10,000 before Thanksgiving, I'll think the market is too overheated and will take profits off the table.
Made a few changes to the portfolio this week.
First, I unloaded Pfizer (PFE:NYSE) because I feared the stock was going nowhere but down. There is a real push in this country to limit drug prices, which I don't believe major pharma companies will be able to sustain.
Yes, it turns out I also sold my FleetBoston (FBF:NYSE) position prematurely, but I'm happy to hear from your emails that some of you readers were still holding it for the Bank of America (BAC:NYSE) bid. I have to tell you that I would still be a seller of Fleet at these levels, had I not given up on that stock too soon.
I'd been thinking every sell was wrong and then we rediscovered on Friday, in the form of Skyworks (SWKS:Nasdaq), why it doesn't pay to be greedy!
The Ones are stocks that I would buy right now, whereas the Fours are stocks I want to unload.
ONES
AT&T Wireless (AWE:NYSE, $7.25, 32,500 shares, 7.44% of the portfolio): Added 10,000 shares on Wednesday when the stock finally came off my restricted list. Company has a strong balance sheet, and I believe it's too cheap ahead of likely industry consolidation.
Automatic Data Processing (ADP:NYSE, $37.74, 5,000 shares, 5.96%): Bought 500 shares on Wednesday because I'm convinced this is NOT going to be a jobless recovery. Dividend should be raised at the board meeting in two weeks.
Charter Communications (CHTR:Nasdaq, $4.27, 27,500 shares, 3.71%): Reports earnings on Monday morning, where we'll hear the latest about the company's refinancing efforts. Like its competitors, expect high-speed data revenue to offset basic subscriber losses.
As long as Charter is still below my cost basis, I'd buy another 2,500 shares when my restrictions allow.
Comcast (CMCSA:Nasdaq, $33.87, 4,500 shares, 4.81%): Reported a great quarter on Thursday, but the stock was hit with some profit-taking. I can't tell you how much I love the story at Comcast. I truly think it is going to outperform the market for the next couple of years.
I spoke with CEO Brian Roberts on my TV show this week, and believe that high-speed data is going to bolster near-term growth. Why is Comcast the best cable company out there? Because it has great customer service, great technology and continues to find ways to get customers to take more services.
Conexant Systems (CNXT:Nasdaq, $5.84, 10,000 shares, 1.84%): Would have been buying more shares on Friday if my restrictions allowed. Conexant reported a great quarter, and is taking market share in its two major business lines. Management has finally clawed its way back to profitability, and I think Conexant can continue to expand its margins in the coming quarters.
The company has a solid balance sheet, and I think the market has yet to realize the value of Conexant's strategic investments. I see this stock hitting $8 before too long.
EchoStar Communications (DISH:Nasdaq, $38.25, 4,500 shares, 5.43%): Bought 500 shares on Friday, as the stock dropped below $38. I still like the refinancing thesis here very much, and will continue to accumulate EchoStar if it remains down here.
InterActiveCorp. (IACI:Nasdaq, $36.81, 1,000 shares, 1.16%): Reinstated my position on Wednesday because I think the stock is unfairly trading at a discount to the rest of the Internet leaders.
Interactive has the best balance sheet in the business, and I believe that Barry Diller truly is a great manager. You don't think there's more upside potential in this group? Check out the buzz for the Google IPO. I think Interactive could be $45 when that deal prices next year.
JDS Uniphase (JDSU:Nasdaq, $3.53, 25,000 shares, 2.79%): Market overreacted to news of the company's $400 million debt sale. I view any declines like this as buying opportunities because I believe Kevin Kennedy is preparing to reposition JDS in the businesses that will return the company to profitability.
Newell Rubbermaid (NWL:NYSE, $22.80, 14,000 shares, 10.08%): Reported a much better quarter than I thought we'd see, and this is my largest holding! Newell's cash flow is very solid, and I think the company will ultimately exceed its conservative 2004 guidance.
Like JDS, this is a company that has to make some tough decisions about what business lines it really wants to be in. By the time Newell reports its fourth quarter, I wouldn't be surprised if the operational structure looks much different than it does today.
Wall Street is too bearish on this stock, and I wouldn't be surprised to see Newell reach $25 following some analyst upgrades.
US Bancorp (USB:NYSE, $27.22, 2,500 shares, 2.15%): Bought 1,000 shares on Tuesday following the Fed meeting. I don't expect interest rates to move higher anytime soon, which bodes well for the banks. I think US Bancorp is a buy up to $28.
UnitedHealth Group (UNH:NYSE, $50.88, 2,000 shares, 3.12%): Picked up 500 shares on Monday. I'm surprised the stock has sold off so much after buying Mid Atlantic Medical (MME:NYSE); the deal makes sense strategically and should quickly add to earnings.
ValueClick (VCLK:Nasdaq, $8.13, 9,000 shares, 2.31%): Sold 2,500 shares on Monday, and was able to buy 1,000 of those back nearly $2 lower on Friday. ValueClick reported 20% organic growth in a seasonally slow period for advertising, and has a pristine balance sheet.
I think investors are overreacting to how much ad-services companies like this would be affected by anti-spam legislation. I'm willing to build my stake back up to 10,000 if ValueClick continues to struggle.
TWOS
Autobytel (ABTL:Nasdaq, $10.45, 2,000 shares, 0.66%): Very tempted to add to my stake, but I have to be true to my cost basis. I'd double my position in Autobytel the next time the stock drops below $10.
Cendant Corporation (CD:NYSE, $20.43, 4,000 shares, 2.58%): Cheap stock and management consistently beats its guidance. I'd add to my stake if Cendant pulled back a dollar.
E*Trade Group (ET:NYSE, $10.30, 22,500 shares, 7.32%): Whole sector should benefit if TD Waterhouse finds a buyer. E*Trade has considerable upside, but I already have a sizable stake 10% lower than the current quote.
Intel (INTC:Nasdaq, $32.95, 1,000 shares, 1.04%): CEO Craig Barrett said the company is looking to make small acquisitions to bolster its communications chip business.
That said, PC growth will lead gross margin expansion in the near term. As Intel puts up good numbers quarter after quarter, I think the stock can move higher.
J.P. Morgan (JPM:NYSE, $35.90, 3,000 shares, 3.40%): Highly leveraged to an improving economy. US Banc is still my favorite stock in the sector, but J.P. remains attractive at these levels. I believe the stock is worth north of $40, which is where it will be when we hit Dow 10,000.
Limited Brands (LTD:NYSE, $17.60, 4,500 shares, 2.50%): Announced on Thursday that Chuck Turlinski would take over the company's flagship chain. He's been with the company for seven years, and is reportedly known best for improving operating efficiency, which is where the company's apparel division needs the most help.
Nextel Communications (NXTL:Nasdaq, $24.11, 4,000 shares, 3.04%): Took 500 shares off the table on Friday because I'd made 65% in just four months. I like to let my winners run, but it's just plain piggish to not book that kind of profit in this market.
Schering-Plough (SGP:NYSE, $15.27, 11,000 shares, 5.30%): Why am I holding this stock, even though I sold Merck (MRK:NYSE)? Because Schering-Plough has a great management team, led by Fred Hassan, who has proven in the past that he knows how to turn around a struggling pharma business.
Time Warner (TWX:NYSE, $15.29, 10,000 shares, 4.83%): The New York Times finally caught on to the fact that the company is seeing a pickup in the online ad business. I've already got my position for when the market realizes the value of Time Warner's media assets. Do you have yours?
Zoran (ZRAN:Nasdaq, $16.70, 11,500 shares, 6.06%): Picked up another 500 shares Monday. I think we already saw the bottom in this stock last week, and that Zoran is attractive on a pullback below $16.
THREES
Honeywell Int'l. (HON:NYSE, $30.61, 5,000 shares, 4.83%): Declared its latest 18.75-cent quarterly dividend on Friday. Investors holding the stock through Nov. 18 will receive the Dec. 10 payment.
I sold 500 shares of Honeywell on Thursday, trading around a position we bought $6 lower. As inexpensive as Honeywell is, I fear any upside will be capped here without a solution for the asbestos trust fund.
Watson Pharmaceuticals (WPI:NYSE, $39.27, 1,000 shares, 1.24%): Made a small acquisition this week of an oral controlled-release delivery technology, adding new generic and branded product opportunities.
A big merger in the generic space on Friday boosted the stock 3%. Every Medicare plan I've seen benefits low-cost drug providers like Watson, which is why I'm holding on to my remaining shares for the time being.
Raytheon (RTN:NYSE, $26.48, 5,500 shares, 4.60%): Facing a strike by 2,000 workers in the missile division. Just one more issue for a company that has far too many problems to contend with at once. I'd be selling more shares into any rally, if my restrictions allowed.
Regards,
James J. Cramer
DISCLOSURE: At the time of publication, Cramer was long AT&T Wireless, Autobytel, Automatic Data Processing, Cendant Corporation, Charter Communications, Comcast, Conexant Systems, EchoStar Communications, E*Trade, Honeywell Int'l, InterActiveCorp., Intel, JDS Uniphase, J.P. Morgan, Limited Brands, Newell Rubbermaid, Nextel, Raytheon, Schering-Plough, Time Warner, UnitedHealth Group, US Bancorp, ValueClick, Watson Pharmaceuticals and Zoran.
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