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Jim Cramer's Action Alerts PLUS

Weekly Roundup

By Jim Cramer and Jack Mohr | 07/02/15 - 04:32 PM EDT

Please note that this is an abbreviated Action Alerts PLUS roundup due to the shortened week. Everyone have a great holiday!

The market ended the week down as both the major averages tried to weather the storm of events in Greece from last weekend and throughout this week. Treasury yields were volatile and finished lower, the dollar weakened slightly against the euro, gold dipped, and West Texas Intermediate (WTI) oil was sharply down, while Brent crude was volatile and finished roughly flat.

Second-quarter equivalent earnings continued this week and were strong, with 68.4% of companies surprising to the upside. We did not have any portfolio companies report quarterly earnings this week.

On the economic front, the National Association of Realtors reported on Monday that the Pending Home Sales Index rose 0.9% in May to 112.6, lower than estimates for a 1.2% increase but up from the final reading of 111.6 in April. The increase is the fifth straight for the index, which is a forward-looking indicator for home sales based on contract signings, and is the highest level since April 2006. The index has increased on an annual basis for nine consecutive months now, piggybacking off of last week’s existing home sales report that showed year-to- date sales rising 9.2% above last year. Pending home sales advanced 6.3% in the Northeast and 2.2% in the West but fell 0.6% in the Midwest and 0.8% in the South.

On Wednesday, ADP reported that the private sector added 237,000 jobs in June, higher than expectations of a 220,000 increase. More specifically, the ADP study noted that small businesses added 120,000 new jobs, mid-sized companies 86,000, and larger businesses 32,000. Importantly, the results demonstrated that the headwinds in manufacturing are perhaps easing as ADP noted that manufacturers added 7,000 new positions in June compared to May when the sector was forced to cut jobs. Moreover, the ADP report, which attempts to forecast the private- sector job results of the employment report conducted by the U.S. Department of Labor, is a good sign for the economy.

Also on Wednesday, the Institute of Supply Management (ISM) reported that the latest reading on its manufacturing index came in at 53.5, marking the highest level for the year and beating expectations of 53.2. The index was at 52.8 in May. Any index reading above 50 indicates economic expansion. Within the report, 11 out of the 18 industries surveyed experienced growth. On top of the 7,000 jobs reportedly added according to the ADP job report, the positive ISM survey definitely contributed toward an optimistic outlook heading into the Labor Department's jobs report released Thursday.

On Thursday, the Labor Department reported that initial jobless claims for the week ending June 27 were 281,000, a 10,000 increase from the prior week's revised number and above expectations of 270,000. The four-week moving average for claims (which is used as a gauge to offset volatility in the weekly numbers) rose 1,000 to 274,750 - - a good sign for an economy that is continuing to add jobs. Claims have now remained under 300,000 -- the psychologically important threshold typically used to determine whether an economy is experiencing robust expansion -- for 17 straight weeks. Initial claims had peaked in 2009 at 665,000 when unemployment reached nearly 10%, but we have not seen anything close to those levels in some time.

The Labor Department also reported that the economy added 223,000 jobs in June, slightly below consensus of a 228,000 increase. The nonfarm payroll employment additions were also revised downward for previous months, to 254,000 from 280,000 in May and to 187,000 from 221,000 for April. The unemployment rate ticked downward to 5.3% vs. 5.5% in May and compared to expectations of 5.4%, marking the lowest rate since April 2008. This is a deceiving figure, however, as the low rate is largely a reflection of the weak participation rate (down to 62.6% from 62.9% -- the lowest since 1977) as there were less Americans searching for jobs. This marks the first month since April 2014 where the labor force participation rate dropped below 62.7%.

Employment increased largely in services areas as retailers added 33,000 jobs, the health care sector added 40,000 and leisure and hospitality jobs increased by 22,000. Manufacturing jobs also grew a meager 4,000. Average hourly earnings of private-sector workers remained unchanged at $24.95 for June and are now up 2% year over year.

The jobs figure is critical for the markets as it plays a large role in the Federal Reserve's determination and timing for a rate hike. Despite the solid increase in jobs, the report delivered lackluster wage growth (which remained stagnant) and unemployment numbers (which, although low, were positively skewed due to the lower participation rate), leaving the Fed without any definitive direction forward. Along with the turmoil in Greece and the debt scenario in Puerto Rico, there is still uncertainty around when the Fed will feel comfortable enough to raise rates.

On the commodity front, the Energy Information Administration signaled this week that commercial crude oil inventories increased by 2.39 million barrels last week compared to the prior report where inventories fell 4.93 million barrels. The increase in crude inventories breaks the streak of eight straight weeks of declines. The overall number stands at 465.4 million barrels (as of last week), up from 463 million barrels from the prior report. Oil inventories are still at 80-year highs for this time of year.

Crude oil (WTI) dipped sharply on Wednesday following the report and broke through the bottom end of the $58-$62 range that it had been trading in for the past couple of weeks.

With respect to our portfolio, this week we initiated a position in Marathon Oil (MRO:NYSE) and added to the name later; increased our holdings in Schlumberger (SLB:NYSE), Energy Transfer Partners (ETP:NYSE) and Occidental Petroleum (OXY:NYSE); and trimmed our positions in MasterCard (MA:NYSE) and Twitter (TWTR:NYSE).

With respect to Marathon, we believe its attractive shale acreage and efficient drilling program should help drive outsized growth while generating ample cash flow over the coming years. The company's best-in-class management team has displayed a disciplined spending approach, successful cost-control, effective capital allocation and willingness to divest non-core assets for cash (thereby boosting its balance sheet). Lastly, Marathon appears well positioned to grow production this year and accelerate it if market conditions allow.

On ETP, the shares were down roughly 10% over the previous week at the time of our trade, despite little news, and we believe the elevated yield (about 7.8%) assigns essentially no credit to ETP turning the corner, delivering high-single-digit distribution growth and capturing highly attractive organic projects (Bakken Crude and Rover). In the current environment of uncertainty for energy companies, ETP's fee-based cash flow, visible growth and financial flexibility position the partnership for outperformance.

We also decided to add to our position in Occidental on Monday on extreme weakness, as the markets were down sharply in response to events in Greece. The company continues to build on its leading position in the Permian, with strong legacy enhanced oil recovery (EOR) cash flow generation coupled with an increasing focus on high-growth unconventional plays.

We bolstered our stake in Schlumberger on Tuesday as the stock had dipped over 5% since we last trimmed our position on June 11, providing a great opportunity to add back to our holdings. We have always remained bullish on the company's long-term prospects and believe that it is the best positioned among the international services names to navigate the current downturn.

Lastly, we trimmed our MasterCard and Twitter positions on Tuesday. For MasterCard, it was an opportune time to take some more profits off the table as the shares were roughly 10% above our cost basis and we see little catalysts in the near term. On Twitter, we pounced on the takeover chatter and sold half of our stake, as the stock was trading up 5% on the day.

Second-quarter earnings season is beginning to ramp up. For the completed first quarter, total earnings growth was 0.7%; excluding financials, growth was -0.9% vs. expectations at the beginning of the season for a 0.6% increase. Revenues declined 3.10% vs. expectations at the beginning of the season for a 3.30% decline. The results were solid across the board, with 62.7% beating expectations, 33.7% missing the mark and 3.6% in line with consensus. The health care, consumer staples, energy, and utilities sectors led the strong performance. Materials, financials, industrials and consumer discretionary names posted the worst first-quarter results in the S&P 500.

Next week, 0.8% of the S&P 500 is set to report earnings. Key reports are: A. Schulman (SHLM:Nasdaq), MSC Industrial (MSM:NYSE), The Container Store (TCS:NYSE), Alcoa (AA:NYSE), WD-40 (WDFC:Nasdaq), PepsiCo (PEP:NYSE), Synergy Resources (SYRG:NYSE), Walgreens Boots Alliance (WBA:Nasdaq) -- an Action Alerts PLUS holding, Barracuda Networks (CUDA:NYSE), and PriceSmart (PSMT:Nasdaq).

Economic Data (*all times EDT)

U.S.

Monday (7/6)

Markit US Composite PMI (9:45):

Markit US Services PMI (9:45):

ISM Non-Manf. Composite (10:00): 56.0 expected

Tuesday (7/7)

Trade Balance (8:30): -42.00bn expected

Wednesday (7/8)

MBA Mortgage Applications (07:00):

Thursday (7/9)

Initial Jobless Claims (8:30):

Continuing Claims (8:30):

Bloomberg Consumer Comfort (9:45):

Friday (7/10)

Wholesale Inventories MoM (10:00): 0.2% expected

International

Monday (7/6)

Germany Factory Orders MoM (2:00):

Germany Factory Orders YoY (2:00):

Tuesday (7/7)

Germany Industrial Production MoM (2:00):

Germany Industrial Production YoY (2:00):

UK Industrial Production MoM (4:30):

UK Industrial Production YoY (4:30):

UK Manufacturing Production MoM (4:30):

UK Manufacturing Production YoY (4:30):

Japan BoP Current Account Balance (19:50):

Japan Trade Balance BoP Basis (19:50):

Wednesday (7/8)

Japan Eco Watchers Survey Current (1:00):

UK RICS House Price Balance (19:01):

Japan Machine Orders MoM (19:50):

Japan Machine Orders YoY (19:50):

Japan Money Stock M2 YoY (19:50):

Japan Money Stock M3 YoY (19:50):

China CPI YoY (21:30): 1.4% expected

China PPI YoY (21:30): -4.6% expected

Thursday (7/9)

Germany Trade Balance (2:00):

Germany Exports MoM (2:00):

Japan Machine Tool Orders YoY (2:00):

UK BOE Asset Purchase Target (7:00): 375bn expected

UK BOE Bank Rate (7:00): 0.5% expected

Japan PPI YoY (19:50):

Friday (7/10)

UK Trade Balance (4:30):

New folks, welcome aboard! You're reading the Weekly Roundup of the "charitable trust" that Jim talks about regularly on "Mad Money" and in his new bestseller Get Rich Carefully. Jim put $3 million of his own money into this charitable trust so that you, the subscriber, can learn how he and Jack Mohr make decisions about a diversified portfolio and make money. You'll see every position in every stock, and we'll send you alerts BEFORE every trade. And best of all, all profits go to charity - - we've donated $1.8 million to date.

To learn more about how we construct and trade the portfolio, click on the "Getting Started" link directly above the "Weekly Roundup" headline. You can also get your alerts faster by following us on Twitter @CramerAndMohr.

We also want to be sure you're not confused about the terminology that Jim uses on his "Mad Money" television show: When you hear Jim refer to the "charitable trust" on "Mad Money", he is talking about the trust that holds the Action Alerts PLUS portfolio. The winnings from Action Alerts PLUS go to charity after the close of each trading year.

Here's the quick guide to the rating system, too: Ones are stocks we would buy right now, Twos are stocks that we'd buy on a pullback, Threes are stocks we would sell on strength and Fours are stocks we want to unload as soon as our trading restrictions allow.

Regards,

Jim Cramer, Portfolio Manager & Jack Mohr, Director of Research - Action Alerts PLUS

DISCLOSURE: At the time of publication, Action Alerts PLUS was long AGN, AAPL, CSCO, DOW, EOG, ETN, ETP, ESRX, FB, GM, GOOGL, HON, HOT, HYH, JNJ, MA, MMM, MRO, MS, OXY, SBUX, SLB, TGT, TMO, TWTR, WBA, WFC and WWAV.

Refilling Our Schlumberger Holdings
Stocks in Focus: SLB

We'll add back some shares of the oil services firm after a recent sale.

06/30/15 - 03:34 PM EDT
Trimming Twitter on Strength
Stocks in Focus: TWTR

Today's rumor-driven rally provides an opportunity to protect ourselves from further downside.

06/30/15 - 01:58 PM EDT
Taking Some Profits on MasterCard
Stocks in Focus: MA

Stock has exceeded our cost basis.

06/30/15 - 11:32 AM EDT
Weekly Roundup

This week, we bolstered our energy sector positions as the market reacted to fluid events in Greece.

07/02/15 - 04:32 PM EDT

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Markets

DOW 17,730.11 -27.80 -0.16%
S&P 500 2,076.78 -0.64 -0.03%
NASDAQ 5,009.2140 -3.9090 -0.08%

Action Alerts PLUS Holdings

Stocks we would buy right now

Symbol % Portfolio
Weighting
Industry Trade Now
AGN 4.47% Drugs
CSCO 2.91% Computer Hardware
EOG 4.65% Energy
ESRX 1.04% Health Services
ETP 3.92% Energy
GOOGL 3.18% Internet
HON 4.37% Industrial
HOT 4.78% Leisure
JNJ 3.44% Drugs
MMM 3.61% Industrial
MRO 1.70% Energy
OXY 4.40% Energy
TGT 5.42% Retail
TMO 4.82% Health Services
WBA 3.33% Retail
WFC 6.60% Banking
WWAV 4.95% Food & Beverage

Stocks we would buy on a pullback

Symbol % Portfolio
Weighting
Industry Trade Now
AAPL 4.02% Consumer Durables
DOW 1.99% Chemicals
FB 4.40% Internet
HYH 4.72% Health Services
MA 1.46% Financial Services
MS 1.89% Financial Services
SBUX 1.47% Leisure
SLB 2.28% Energy

Stocks we would sell on strength

Symbol % Portfolio
Weighting
Industry Trade Now
ETN 1.57% Industrial
GM 1.42% Automotive
TWTR 0.97% Internet