Jim Cramer's Action Alerts PLUS Weekly Roundup (original) (raw)

Dear Action Alerts PLUS Subscriber,

Time to remember the lessons learned in 2000: Don't be afraid to take some off the table, or else your big gains can quickly turn into big losses. I'm not saying that this market is done going up. In fact, I'm actually quite bullish after Friday's employment figure, which suggests that the economy isn't too hot that the Fed needs to cool things off by raising rates.

That said, we must identify where we have made big gains and make sure we don't get caught being greedy. The moves in the market the last couple of weeks were major sector rotations. Big chunks of money were moving from the cyclicals into defensive stocks, and then back again into companies with economic and financial leverage.

The way to make money in this market is to stay flexible and pick your spots. I took a lot of action this week, and again like the way the portfolio is positioned. Techs, "smokestack" cyclicals and brokerages do the best in this kind of environment. I've got 9.9% of the portfolio in cash ready should we get a pullback and the room to add a new stock.

FIELD BET (4.98% of the portfolio)

Sold out of AES (AES) this week. Took a double-digit gain off the table because this was the most volatile of the stocks in my basket, and I didn't want to see it turn into a losing trade.

Dynegy (DYN) was able to close the Illinois Power sale to Ameren (AEE) this week, but the stock dropped 10% on two analyst downgrades. I believe folks are missing the big picture here. The company has sufficient liquidity, and will be able to refinance even more high-coupon debt if the Fed keeps its neutral stance.

It was also a wild week for El Paso (EP) . The company said it plans to write down its production assets on Monday, but ended the week on a high note with news of another 375millionassetsale.IadmitI′vebeengreedywiththisfieldbet,andI′veletalotofunrealizedgainsevaporate.I′llbereadytosellsomeElPasothenexttimethestockmovesuparound375 million asset sale. I admit I've been greedy with this field bet, and I've let a lot of unrealized gains evaporate. I'll be ready to sell some El Paso the next time the stock moves up around 375millionassetsale.IadmitI′vebeengreedywiththisfieldbet,andI′veletalotofunrealizedgainsevaporate.I′llbereadytosellsomeElPasothenexttimethestockmovesuparound8.75.

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Before heading into the Roundup, as a refresher, the Ones are stocks I would buy right now; the Fours are stocks I want to unload.

ONES

Alcoa (AA:NYSE, $35.07, 5,000 shares, 4.86%): Bought 500 shares on Tuesday because the rotation out of cyclicals has played itself out. The supply/demand dynamic of the aluminum business continues to improve, and I believe Alcoa has limited downside from these levels.

Charter Communications (CHTR:Nasdaq, $4.68, 45,000 shares, 5.82%): Bought a total of 5,000 shares this week. The bears won the early battle this week when Charter faced some negative news stories, but at the end of the day I think cable valuations will resume their move higher on industry consolidation. Charter can't stop fighting the rising tide forever, and I'm ready to take this position up to 50,000 shares should the market continue to shun the stock. Don't forget, the company will be able to refinance more debt if the Fed keeps interest rates down.

DuPont (DD:NYSE, $44.45, 2,500 shares, 3.07%): Added 1,000 shares on Friday. This company has leverage to an uptick in cyclical demand and little defense with the 3.2% dividend - - my kind of stock. As a reminder, shareholders at the close of trading on Feb. 10 will qualify for DuPont's next 35- cent quarterly dividend.

EMC (EMC:NYSE, $14.26, 8,500 shares, 3.36%): Picked up 2,500 shares over the course of the week. I love it when the market misses the opportunity to jump on a great stock like EMC because it gives me the chance to buy more. The company is hosting a Webcast on Monday to launch several new storage products, and I wouldn't be surprised if the company also tells Wall Street that its estimates for the current quarter are too conservative.

Intel (INTC:Nasdaq, 30.88,2,000shares,1.7130.88, 2,000 shares, 1.71%): Was finally able to buy 1,000 shares on Wednesday, and I think the stock remains attractive anywhere around 30.88,2,000shares,1.7130. For one thing, it's still early in the rotation back into cyclicals. For another, Tom Kurlak on RealMoney remains bullish on the group, and he's been spot-on with this group since the beginning of the rally.

InterActiveCorp (IACI:Nasdaq, $31.95, 8,000 shares, 7.08%): Bought 500 shares on Tuesday, before the entire Internet sector started to reverse its slide. I expect the company will turn in a solid quarter Monday morning, led by the recently acquired travel businesses. Barry Diller's ability to integrate these purchases will shine through in 2004, which will in turn drive InterActiveCorp higher.

Phelps Dodge (PD:NYSE, $77.10, 4,000 shares, 8.54%): Bought 500 shares Thursday, ahead of the 4-point rally the next day. Last week, everyone thought the Federal Reserve was the problem quelling the rally. Well, guess what, it turns out the economy just wasn't as good in January as everyone thought it was, and rates aren't going higher. This means Phelps' estimates need to move higher, and the stock has 15 points of upside potential compared with 5 points of downside.

TWOS

Cendant (CD:NYSE, $22.08, 3,000 shares, 1.84%): Bought back 500 shares on Thursday, when the stock went down despite reporting a decent quarter. This company has a lot of exposure to the pickup in travel demand, and is returning profits back to investors in the form of share buybacks and an upcoming dividend. With all of that in mind, I think Cendant is just too cheap at 13 times earnings.

Comcast (CMCSA:Nasdaq, 33.38,3,500shares,3.2433.38, 3,500 shares, 3.24%): Reports earnings Wednesday morning. I think a stock like Comcast will be successful if the market remains choppy over the next few weeks. The company is the best franchise in its business, and its profile is neither too defensive nor too cyclical. The stock is 33.38,3,500shares,3.242 above my cost basis, so I'd wait for a pullback before adding to my position.

Conexant (CNXT:Nasdaq, $6.59, 15,000 shares, 2.74%): Quiet week for the stock. I'm done selling Conexant for now because I think the Jazz Semi IPO will drive the shares even higher by summer.

E*Trade (ET:NYSE, 14.15,10,000shares,3.9214.15, 10,000 shares, 3.92%): If I didn't already own this stock down at 14.15,10,000shares,3.929, I would've been buying more. Ameritrade (AMTD) raised its guidance once again this week, and I doubt that E*Trade will be far behind.

JDS Uniphase (JDSU:Nasdaq, $4.89, 20,000 shares, 2.71%): Business is finally starting to tick higher, and we've already taken some profits off the table. I'm letting the rest of my JDS stake run because we're playing with the house's money, and I don't think Kevin Kennedy has showed his entire hand yet.

Micron Technology (MU:NYSE, 16.15,7,500shares,3.3616.15, 7,500 shares, 3.36%): Believe the shares will still move higher from here, but I already own the stock 16.15,7,500shares,3.363 lower. DRAM prices continue to move higher, and Micron is another beneficiary if the Fed is going to stand pat on interest rates.

Schering-Plough (SGP:NYSE, 18.55,10,000shares,5.1418.55, 10,000 shares, 5.14%): Ended phase III trials on a cancer pipeline product. This drug wasn't in anyone's model yet, so I don't expect to see Schering slide any further. If it pulls back to 18.55,10,000shares,5.1417, I'd be ready to start buying more shares.

Time Warner (TWX:NYSE, 17.53,10,000shares,4.8617.53, 10,000 shares, 4.86%): Eyeing this name on a pullback to 17.53,10,000shares,4.8616. I think any weakness at America Online and the cable division is largely priced in, but I must keep in mind my original cost basis.

UnitedHealth Group (UNH:NYSE, $59.62, 1,500 shares, 2.48%): Don't worry, we don't have another Cigna on our hands. UnitedHealth is a steady grower and still trades at a discount to its earnings power.

US Bancorp (USB:NYSE, $27.86, 3,500 shares, 2.70%): A dollar above my cost basis, but the stock looks attractive with the yield approaching 3.5% again.

THREES

AT&T Wireless (AWE:NYSE, $11.10, 20,000 shares, 6.15%): With the Feb. 13 offer deadline less than a week away, Verizon Wireless and Vodafone are rumored to be making a bid. I'm actually surprised the stock isn't trading higher because I believe one of these suitors will come in at a decent premium in an all-cash offer.

Automatic Data Processing (ADP:NYSE, $43.13, 3,500 shares, 4.18%): Sold a total of 1,000 shares this week ahead of Friday's disappointing jobs data. I am holding onto my remaining stake because the company ultimately will benefit from the improving business environment.

ChevronTexaco (CVX:NYSE, $85.42, 1,000 shares, 2.37%): Another stock where I'm kicking myself because I didn't book the profit 3 points ago when I had the chance. At this point, I'm holding onto Chevron for the next quarterly dividend, which we'll qualify for at the close of trading on Feb. 12.

EchoStar Communications (DISH:Nasdaq, $38.02, 2,000 shares, 2.11%): Sold another 1,000 shares this week because I think the market is too optimistic about the company's upcoming earnings report. I still like EchoStar the company, but DISH the stock needs a reality check.

Nextel Communications (NXTL:Nasdaq, 26.94,2,000shares,1.4926.94, 2,000 shares, 1.49%): Could gain another point or two once it's finally confirmed the company won't be buying AT&T Wireless. It's hard to let this stock go, but I already have a 43% gain. It would be greedy of me not to take some more profits over 26.94,2,000shares,1.4928.

ValueClick (VCLK:Nasdaq, $10.57, 6,000 shares, 1.76%): Finally reporting earnings on Thursday morning, and I'd expect the stock to sell off if management doesn't raise guidance. With that in mind, I'd take some more profits into the next rally.

Regards,

James J. Cramer

DISCLOSURE: At the time of publication, Cramer was long Alcoa, AT&T Wireless, Automatic Data Processing, Cendant, Charter Communications, ChevronTexaco, Comcast, Conexant, DuPont, Dynegy, EchoStar Communications, El Paso, EMC, E*Trade, Intel, InterActiveCorp, JDS Uniphase, Micron Technology, Nextel Communications, Phelps Dodge, Schering- Plough, Time Warner, UnitedHealth Group, US Bancorp and ValueClick.