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Jim Cramer's Action Alerts PLUS

Action Alerts PLUS

Weekly Roundup

By Jim Cramer and Jack Mohr | 02/27/15 - 05:14 PM EST

The market moved slightly higher this week, with strong earnings from many bellwether names offsetting mixed economic news and weak oil. West Texas Intermediate (WTI) oil moved lower again this week following reports showing a continued surge in oil inventory, with U.S. reserves hitting all-time highs. As a result of this U.S./rest-of- world bifurcation, WTI and Brent moved in opposite directions, with WTI down 3.1% and Brent up 4.1% for the week. Strong results from economically sensitive companies helped provide a boost, with Lowe’s (LOW:NYSE), Home Depot (HD: NYSE), Macy’s (M:NYSE), Target (TGT: NYSE) and Dollar Tree (DLTR:Nasdaq) all surprising to the upside and offering encouraging commentary as it relates to the state of the domestic consumer. U.S. economic news was soft, with downwardly revised GDP growth, weaker- than-expected jobless claims, and soft CPI numbers tempering our sentiment, albeit slightly. Also for the week, U.S. Treasury yields moved lower, gold traded flat, and the dollar strengthened against the euro.

Quarterly earnings were mixed this week, but trends still remain solid, with 68% of companies surprising to the upside in the fourth quarter, the highest percentage of beats since the first quarter of 2010. Notably, Action Alerts PLUS names Target and Lowe’s both reported stellar results, confirming our faith in the strength of the domestic consumer, with the retailers delivering 3.8% and 7.3% comparable sales, respectively (vs. 3.0% and 5.2% consensus estimates, respectively). Slightly softer-than- expected first-quarter outlooks for both companies kept shares in check, but we have strong reason to believe the respective management teams are simply being conservative in their guidance. We are excited for Target’s March 3 analyst day, in which newly minted CEO Brian Cornell is expected to provide full-year guidance and a long-term earnings algorithm, along with a neatly packaged overarching strategy.

Outside of our own names, Home Depot blew out estimates, with total comps of 7.9% coming in a full 240 basis points ahead of consensus (5.5%). As we mentioned in our earnings notes on Lowe’s, we believe there is more than enough room for two to grow in this market, and think Lowe’s has firmly moved beyond its history of relative underperformance to Home Depot.

Macy’s delivered stronger-than-expected results, while also providing encouraging FY 15 earnings (8% y/y growth at midpoint) and comp (2%) guidance. We believe the company’s guidance is more realistic than conservative with its beat and raise engine slowing over the last three years, but still think its commentary reflects a strong domestic consumer. Macy’s peer, J.C. Penney (JCP:NYSE), was not as fortunate, with results falling short of expectations mostly on highly disappointing gross margin numbers.

Dollar Tree reported strong results across the board on Wednesday, delivering fourth-quarter 2014 EPS of $1.16 vs. $1.14 consensus and comparable sales of 5.6% vs. 5.3% consensus. The results, along with management’s bullish commentary on the call, lead us to believe that the dollar store industry is stronger than ever, certainly a positive lateral for AAP-name Dollar General (DG:NYSE), which traded higher this week in sympathy.

Oh the tech side, Hewlett-Packard (HPQ:NYSE) reported first-quarter FY 15 results, with sales ($26.8 billion) falling well short of consensus ($27.4 billion), while the company’s second-quarter FY 15 and FY 15 EPS outlook also fell well below consensus. All businesses declined q/q and were well short of estimates -- sales in the Personal Systems Group (PSG) were down 4.5% q/q , while Software dropped 20% and the Enterprise Services business fell by 9% q/q. All regions disappointed as well, with both Americas and EMEA down 5% y/y and APJ down 3%. This is the primarily reason we decided to exit our Microsoft (MSFT:Nasdaq) position, as we are concerned the company is facing the same fundamental issues as Hewlett-Packard.

While HPQ shares dropped double digits following earnings, shares of (CRM:NYSE) rose double digits after the company delivered fourth-quarter results that met consensus sales estimates despite difficult FX headwinds, beat on margin and, most impressively, beat on deferred revenue growth (+35%), while also raising forward expectations. The market also reacted positively to CEO Marc Benioff indicating the company is well on its way to achieving a $10 billion annual revenue run rate.

Finally, on the homebuilding front, Toll Brothers’ (TOL:NYSE) strong results gave us a nice heat check on the housing market, with earnings coming in a full 50% ahead of consensus given outsized strength in its City Living business as well as the California and Florida markets. Toll Brothers’ results and commentary always provide a nice pulse on the economy and, coupled with Lowe’s and Home Depot’s stellar reports, we believe the housing market (both from a build and home improvement standpoint) is very strong.

WTI oil prices continued to fall in a volatile trading week, as surging U.S. crude reserves added to the global supply glut. Crude futures had dived Thursday as the market appeared to do a double-take on Wednesday's U.S. inventories report, which showed U.S. crude stockpiles hit a fresh record last week amid refining strikes, weather-related disruptions and ample production; a bigger-than-expected 9.4 million barrel increase in U.S. crude stocks drove reserves to a record 434.1 million barrels. The Brent price appears immune to the negative news, as the supply issues seem firmly seated in the U.S. Prices did win some support earlier this week on upbeat comments from Ali Al-Naimi, the oil minister of major oil producer Saudi Arabia. Al-Naimi indicated that oil demand is growing and the market had turned "calm." The comments were not enough to offset the pressures on WTI, however.

On the economic front, this morning we learned that the U.S. economy cooled in the final months of 2014, a return to moderate growth that has marked much of the recovery. According to the Commerce Department, GDP expanded at a 2.2% annual rate in the fourth quarter, weaker than an initial estimate of 2.6% reported last month, though above consensus of 2.0%. The latest figures indicate the breakout 5% pace in the third quarter and 4.6% in the second quarter were unsustainable. For 2014 as a whole, GDP expanded 2.4%, slightly better than the average 2.2% growth of 2010-13. By comparison, the economy grew an average 3.4% a year during the 1990s. Although we agree that the 2.2% pace is not impressive, we would note that it follows a booming 5.0% pace in the third quarter, meaning the trend is somewhere around 3.0%, a reasonable growth trajectory in our view.

U.S. consumer prices posted their biggest drop since 2008 in January as gasoline prices continued to tumble, with the CPI index falling 0.7% month/month. Core CPI, which strips out food and energy costs, rose 0.2% in January, however, after edging up 0.1% in December. While the headline figure was weak, the gain in the core CPI failed to support the view of a dovish Fed and discouraged traders from continuing to bid up Treasuries after Wednesday's gains.

The CPI data came after two days of testimony by Fed Chair Janet Yellen for the central bank's semiannual economic and monetary policy report to Congress. In her testimony to Congress this week, she said weak inflation is due to the “transitory effects of lower energy prices.” But, she cautioned, inflation outside of food and energy “has also slowed since last summer, in part reflecting declines in the prices of many imported items and perhaps also some pass-through of lower energy costs into core consumer prices.” Investors interpreted Yellen's remarks as indicating the central bank was giving itself more flexibility to hike rates later than June.

Initial jobless claims jumped by 31,000 to 313,000 in the seven days from Feb. 15 to Feb. 21, according to the Labor Department. Economists were expecting 290,000. Claims have ranged from a low as 267,000 to a high of 317,000 in the first two months of 2015, making the weekly report less reliable than usual. Bad weather and the recent holiday may have contributed to the fluctuations in claims. Still, new applications for unemployment benefits are running 11% below year-ago levels. What’s more, the fourth-week average of claims, seen as a more accurate measure of labor-market trends, remained below the key 300,000 mark for the fifth straight week. The monthly claims average rose a smaller 11,500 to 294,500.

Beyond the U.S., Japan retail sales fell 2.0% in January from a year earlier, marking the first decline in seven months as bad weather and a continued decline in real incomes kept workers from spending. The data, released by the Ministry of Economy, Trade and Industry, also looked weaker on year because sales had been inflated amid rushed demand ahead of an April sales tax increase. January's drop followed a 0.2% increase in December. Consumer appetites have been slow to rebound in the wake of the April sales tax increase. We believe that one of the reasons consumers aren't opening their wallets is because incomes have fallen when accounting for inflation. Sales at large-scale retailers were flat on year after rising 0.1% in December, after adjustment for the change in the number of stores.

With respect to our portfolio, this week we initiated a position in Halyard Health (HYH:NYSE), trimming our Unilever holdings in order to raise funds.

Halyard Health is a global hospital supplies and medical devices company that, since being spun out from Kimberly- Clark (KMB:NYSE) in November, has emerged as a cleaner, leaner, stronger and more focused entity. Prior to the spinoff, Halyard was hidden behind Kimberly-Clark's vastly bigger consumer goods business, contributing a mere 4% of sales. As a non-core asset, Halyard was starved of capital, limiting its ability to pursue its own distinct strategies and operational priorities, which had diverged over time from the rest of the business. As an independent entity, however, Halyard has access to capital, an enhanced focus, and much more flexibility as it relates to transforming its product portfolio. With this backdrop in place, we are confident that Halyard's management team of seasoned, former Kimberly-Clark executives has a number of levers at its disposal to chart its newly independent course toward a brighter future (and more importantly, share outperformance).

Earnings continued in earnest this week and 95% of the S&P 500 has now reported. Total fourth-quarter earnings growth is up 4.3%; excluding financials, that growth is 7.2% vs. the expectations at the beginning of the season for 2.5% growth. Revenues are rising modestly at 1.4%, a touch below the 1.5% expectation, although much of it has been negative currency translation. The results have been solid across the board, with 68% having beaten expectations, 21% missing the mark and 11% in line with consensus. Technology, materials, industrials and healthcare have led the strong performance. Telecom and utilities have posted the worst results so far in the S&P 500.

Next week, 2.6% of the S&P 500 is set to report earnings. Key reports are: Palo Alto Networks (PANW: NYSE), AutoZone (AZO:NYSE), Best Buy (BBY:NYSE), Dick’s Sporting Goods (DKS:NYSE), Kate Spade (KATE:NYSE), Bob Evans (BOBE:Nasdaq), Abercrombie & Fitch (ANF:NYSE), Halyard Health, Wayfair (W:NYSE), H&R Block (HRB:NYSE), Costco (COST:NYSE), Joy Global (JOY:NYSE), and Diamond Foods (DMND:Nasdaq).

As we’ve mentioned, Target is holding its analyst day on Tuesday, March 3, an event we will monitor closely. Also, Exxon Mobil (XOM:NYSE) and Honeywell (HON:NYSE) are holding their respective analyst meetings.

Highlighted conferences are the Morgan Stanley Tech, Media & Telecom Conference, Cowen Health Care conference, Bank of America Consumer & Retail Conference, JP Morgan Aviation, Transportation & Industrials Conference, and the UBS Global Consumer Conference.

The economic calendar for next week is below:


Monday (3/2)

Personal Income (08:30): +0.4% expected

Personal Spending (08:30): -0.1% expected

Markit US Manufacturing PMI (09:45): 54.2 expected

Construction Spending MoM (10:00): +0.4% expected

ISM Manufacturing (10:00): 53.2 expected

ISM Prices Paid (10:00): 36.0 expected

Tuesday (3/3)

IBD/TIPP Economic Optimism (10:00)

Wards Total Vehicle Sales: 16.70M expected

Wards Domestic Vehicle Sales: 13.55M expected

Wednesday (3/4)

MBA Mortgage Applications (07:00)

ADP Employment Change (08:15): 218K expected

Markit US Services PMI (09:45): 54.7 expected

Markit US Composite PMI (09:45)

ISM Non-Manufacturing Composite (10:00): 56.5 expected

Thursday (3/5)

Non-Farm Productivity (08:30): -2.4% expected

Unit Labor Costs (08:30): +3.3% expected

Initial Jobless Claims (08:30)

Continuing Jobless Claims (08:30)

Factory Orders (10:00): No Change Expected

Friday (3/6)

Change in Non-Farm Payrolls (08:30): 240K expected

Unemployment Rate (08:30): 5.6% expected

Average Hourly Earnings MoM (08:30): +0.2% expected

Average Hourly Earnings YoY (08:30): +2.2% expected

Average Weekly Hours – All Employees (08:30): 34.6 expected

Trade Balance (08:30): -$41.5B expected

Consumer Credit (15:00): $15.0B expected


Monday (3/2)

Japan Vehicle sales YoY (00:00)

UK Nationwide Housing Prices MoM (02:00): +0.4% expected

UK Nationwide Housing Prices NSA YoY (02:00): +6.2% expected

Germany Markit/BME Manufacturing PMI (03:55)

Eurozone markit Manufacturing PMI (04:00)

UK Mortgage Approvals (04:30): 61.0K expected

UK Markit Manufacturing PMI (04:30): 53.4 expected

Eurozone Unemployment Rate (05:00): +11.4% expected

Eurozone CPI Estimate YoY (05:00): -0.4% expected

Eurozone CPI Core YoY (05:00): +0.5% expected Japan Monetary Base (18:50) Japan Labor Cash Earnings YoY (20:30): +0.5% expected

Germany Retail Sales MoM: +0.4% expected

Germany Retail Sales YoY: +2.6% expected

Tuesday (3/3)

Germany Markit Services PMI (03:55)

Germany Markit/BME Composite PMI (03:55)

UK Markit/CIPS Construction PMI (04:30)

Eurozone PPI MoM (05:00): -0.7% expected

Eurozone PPI YoY (05:00): -3.1% expected

UK BRC Shop Price Index YoY (19:01)

Japan Markit Services PMI (20:35)

Japan Markit/JMMA Composite PMI (20:35)

China HSBC Services PMI (20:45)

China HSBC Composite PMI (20:45)

Wednesday (3/4)

Eurozone Markit Services PMI (04:00)

Eurozone Markit Composite PMI (04:00)

UK Markit/CIPS Services PMI (04:30): 57.4 expected

UK Markit/CIPS Composite PMI (04:30)

Eurozone Retail Sales MoM (05:00)

Eurozone Retail Sales YoY (05:00)

Thursday (3/5)

Germany Factory Orders MoM (02:00): -0.9% expected

Germany Factory Orders WDA YoY (02:00)

Germany Markit Construction PMI (03:30)

UK New Car Registrations (04:00)

Germany Markit Retail PMI (04:10)

Eurozone Markit Retail PMI (04:10)

UK BoE Asset Purchase Target (07:00)

UK BoE bank Rate (07:00):0.50% expected

Eurozone ECB Marginal Lending Facility Rate (07:45): 0.30% expected

Eurozone ECB Main Refinancing Rate (07:45): 0.05% expected

Eurozone ECB Deposit Facility Rate (07:45): -0.20% expected

UK Halifax Housing Prices MoM: -0.3% expected

UK Halifax Housing Prices 3 Months/3 Months: +8.5% expected

Friday (3/6)

Japan Coincident Index (00:00)

Japan Leading CI (00:00)

Germany Industrial Produvtion SA MoM (02:00): +0.5% expected

Germany Industrial Production WDA YoY (02:00)

UK BoE/GfK Inflation Estimate Next 12 Months (04:30)

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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.


Cisco Systems (CSCO:Nasdaq; $29.51; 2,750 shares; 2.86%; Sector: Technology): The shares traded higher this week. Wells Fargo (WFC) hosted Cisco’s CTO Brett Harman at its annual Cyber Security Forum on Wednesday, emerging incrementally positive on the company’s security prospects. During the event, Cisco highlighted a strong and comprehensive portfolio of security offerings, which along with recent go to market changes, should enable the company to capitalize on healthy end-market demand. Cisco suggested the SourceFire acquisition continues to proceed well and that the ability to integrate these assets with the company’s networking and security products is a competitive advantage that may benefit share. To this point, we believe Cisco’s platform approach and ability to deliver security in hardware, software or from the cloud is likely to resonate with customers and may help the company to deliver better growth in the security business over the next few quarters. Its second-quarter fiscal 2015 results -- reported two weeks ago -- reflect this, and the company has lucrative exposure to some of our favorite technology themes. We expect a multiple re- rating and upward earnings revisions to drive shares through our $33 price target over the coming quarters.

Dollar General (DG:NYSE; $72.62; 1,300 shares; 3.33%; Sector: Consumer Discretionary): The shares charged higher this week in sympathy with Dollar Tree’s (DLTR) strong results across the board, with that company delivering fourth-quarter 2014 EPS of $1.16 vs. $1.14 consensus and comparable sales of 5.6% vs. 5.3% consensus. Dollar Tree's results, along with its management’s bullish commentary on the call, lead us to believe that the dollar store industry is stronger than ever, certainly a positive lateral for Dollar General. While there is certainly differentiation among the dollar store names, Dollar Tree and Dollar General’s performance has a high historical correlation. The industry largely moves in lockstep on similar trends (low-income economics, consumer sentiment, consumer spending, etc.) and we believe the most powerful trend right now working in the lower-income consumer’s favor is low gas prices. While all consumers benefit from low gas prices, lower- income consumers benefit the most, as the subsequent $1,000 in estimated household savings has a much greater financial and psychological impact than it does on higher- or even middle-income consumers. With Dollar Tree reporting 5.6% comps in the fourth quarter, we would not be surprised to see Dollar General grow at a similar pace when the company reports fourth-quarter results in March. Now that the Family Dollar (FDO) saga is over, the focus will shift toward how the company responds to strategic questions. We suspect that it will move unit growth to a higher level, and while this will pressure profits/returns in the short run, it is a positive in the long-term given the strong unit economics. There are plenty of investors, including ourselves, that would like to see the business more levered and a subsequent increase in buybacks, but we do not need this to happen in order for the stock to work. Our target is up $2, to $76.

Halyard Health (HYH:NYSE; $46.04; 1,700 shares; 2.76%; Sector: Health Care): We initiated a new position in Halyard Health this week, picking up 1,700 shares at $44.60. Halyard Health is a global hospital supplies and medical devices company that, since being spun off from Kimberly-Clark (KMB) in November, has emerged a cleaner, leaner, stronger and more-focused entity. It boasts No. 1 or No. 2 positions in nearly all of its markets, which span from Surgical & Infection Prevention products (sterilization wraps, surgical drapes and gowns, facial protection) to Medical Devices (surgical pain management, respiratory and digestive health). Prior to the spinoff, Halyard was hidden behind Kimberly-Clark's vastly bigger consumer goods business, contributing a mere 4% of sales. As a non-core asset, Halyard was starved of capital, limiting its ability to pursue its own distinct strategies and operational priorities, which had diverged over time from the rest of the business. As an independent entity, however, Halyard has access to capital, an enhanced focus, and much more flexibility as it relates to transforming its product portfolio. Our bullish thesis is grounded in four key points. First, with what appears to be a significant decline in raw material prices looming on the horizon, we expect a near- term boost to operating margins to help offset stand-up costs. Second, Halyard has a $250 million revolver at its disposal to fund tuck-in acquisitions to jump-start the company's portfolio realignment in the near-to-medium term. Third, management has made a commitment to meaningfully ramp R&D to transform the organic growth profile of the business. Finally, healthcare spinoffs frequently outperform the market, a trend that is not coincidental. We also see ripe opportunities for cost cutting and geographic expansion, both of which we believe could further bolster results longer term. With this backdrop in place, we are confident that Halyard's management team of seasoned, former Kimberly-Clark executives has a number of levers at its disposal to chart its newly independent course toward a brighter future (and more importantly, share outperformance). We look forward to hearing more from the company in early March in its first official public earnings release. Our target is $60.

Kinder Morgan (KMI:NYSE; $41.01; 2,400 shares; 3.47%; Sector: Energy): Recently, the company announced an opportunistic M&A in which it once again took advantage of the low valuations seen in the energy space to acquire assets that will be beneficial in the long term. The acquisition was three terminals and one undeveloped property; in total, the acquisition will increase KMI’s liquids storage capacity by more than 2.2 million barrels and 115 tanks, while adding significant dock capacity. It is scheduled to close in the first quarter and will be immediately accretive. We continue to support strategic acquisitions like this one, and expect that there will be much more to come on this front. Separately, Barclays initiated coverage on KMI with a buy rating and $50 price target, reasoning its dividend visibility (10% annual growth through 2020) is one of the best and most extended in the space. The shares are flat year to date in what has been a volatile period for energy prices. Our target is $50.

Lowe’s (LOW:NYSE; $74.09; 1,200 shares; 3.14%; Sector: Consumer Discretionary): The company delivered a clean fourth-quarter FY 14 earnings beat this week, posting EPS of $0.46 vs. $0.43 consensus (reflecting 49% y/y growth), sales of $12.5 billion vs. $12.3 billion consensus and, most importantly, comp sales of 7.3% vs. 5.2% consensus . Guidance was also encouraging, with management forecasting FY 15 EPS of $3.29 (vs $3.26 consensus) on comp sales of 4.0% to 4.5% (slightly above the 4.0% consensus). We believe expectations were elevated heading into the quarter following Home Depot’s (HD) stellar results (in which comps came in 240 basis points ahead of consensus), yet even in the face of this Lowe’s managed to deliver results above and beyond even the most bullish analyst forecast. The Lowe’s story is overpowered by an overarching theme: the reality that there is clearly room for two companies (the other being Home Depot) to outperform within a scorching hot sector. We are very impressed by Lowe’s results and believe the company has firmly moved beyond its history of underperformance relative to Home Depot. Lowe’s is not only riding a dominant theme (growth in home improvement) but it is executing at the highest of levels. We are encouraged by the accelerating trends and consistency of execution, both from a product (all products delivered positive comps) and geographic (all 14 regions posted 5%+ comps) standpoint. We are excited for what lies ahead and would be buyers on any weakness. Our target is $80.

MasterCard (MA:NYSE, $90.13, 1,100 shares; 3.50%; Sector: Financials): The shares inched higher this week on little news. Recently, American Express (AXP) confirmed that its co-brand deals with both Costco (COST) and JetBlue (JBLU) were being terminated, with both businesses reportedly going to MasterCard. These are huge wins for a company that seems to be accumulating a rolling thunder of positive news. Last Thursday, a U.S. judge ruled that American Express’ rules for merchants violate antitrust law, a decision that would further entrench the dominant card players -- MasterCard and Visa (V). There are several other key storylines for the payments space, the biggest being Apple Pay, where MasterCard continues to be well positioned, as the relationship between the two companies will lead to an increased number of locations where MasterCard is accepted, without any cannibalization of its revenue. Tokenization, in general, is on the priority list for many companies and here again MA is well positioned given its first-mover advantage and strong network. We see the company partnering with the big banks, vs. competing against them, given the costs associated with building out big networks and securing them. Overall, we still like the company, the fourth-quarter was strong, and it sits neatly within powerful long-term payment themes (notably the conversion from cash to plastic). In our view, the world is MasterCard’s oyster. Our target is up $2, to $95.

Morgan Stanley (MS:NYSE, $35.79, 3,200 shares; 4.04%; Sector: Financials): On Wednesday, Morgan Stanley announced it reached an agreement to settle mortgage related matters with the U.S. Department of Justice and would record a $2.6 billion pre-tax charge to fourth- quarter 2014 earnings as a result ($3.15/share). We view the settlement as a positive and believe it has largely lifted the financial crisis-related litigation overhang. Although a large amount, the charge is less than what we were expecting (about $3.0 billion), and likely represents the largest remaining piece of financial crisis litigation. We believe Morgan Stanley’s major remaining litigation charges relate to mortgages ($1.0 billion potential settlement), FX trading ($580 million potential settlement) and CDS antitrust matters, which we have yet to estimate but will likely be a fraction of the other charges. Mortgage-related litigation is split among multiple cases and the company has some legal reserves for these matters. Ultimately we’re encouraged by the news. Morgan Stanley has firmly put its largest piece of financial crisis litigation behind it and for less than we had estimated. The only negative we would point to is the likely 4.6% decline in tangible book value (TBV), which could potentially offset the good news. Going forward, we have a sizable position ahead of March’s Comprehensive Capital Analysis and Review (CCAR), which we believe will be a positive catalyst for the stock, as the company is currently above the minimum risk-weighted assets ratios and will be one of the leaders in shareholder returns. Our target is $44.

Red Hat (RHT:NYSE, $69.12, 1,500 shares; 3.66%; Sector: Technology): We continue to like this position as a play on increased IT spending this year and a beneficiary of the secular trend of the increasing popularity of the Linux operating system. Recently, we saw strong results from FireEye (FEYE) and Cisco (CSCO) (particularly within its security division), which only further solidifies our thesis that the demand for enterprise security solutions is only growing. We believe RHT’s consistent market outperformance is deserved, as the company fits neatly within this theme and offers an attractive suite of products that serve some of the more popular trends in the IT space right now -- mobile, cloud and data security -- and has become a leader in the space of Linux operating-system support. The systems that RHT supports are often mission-critical enterprise projects for clients, so the subscription-based business is very sticky, and it has recently switched the sales approach to a more consultant-like model, allowing it to further penetrate existing clients' wallets. The stock is not cheap, at 37x forward estimates, but is in line with historical levels, and we are willing to pay a premium for the impressive growth that the company has demonstrated as of late. Our target is $78.

Royal Dutch Shell (RDS.A: NYSE; $65.37; 1,650 shares; 3.81%; Sector: Energy): The stock had another volatile week along with the rest of the energy sector as investors grapple with cheap valuations and the underlying stability in the price of oil. Plus, a new refinery strike at the company is something we are watching -- it’s too early to tell if there is an EPS implication. But overall, we like the long-term story and real value at 6x EBITDA, strong cash, the 5.8% dividend yield and the restructuring story with asset sales and profitability a focus under its new CEO. We’re buyers in the low $60s. Our target is $80.

SunTrust Banks (STI:NYSE; $41.00; 2,200 shares; 3.18%; Sector: Financials): The shares recovered some ground this week after having sold off last week following the release of dovish Fed minutes and subsequent sell-off in rates. We remain impressed with this story, especially after the company delivered a strong fourth-quarter earnings report that turned out to be one of the few bright spots in the banking sector, led by strong loan growth, diverse revenue streams and impressive cost control. Management is well on its well to achieving its stated goal of a 60% efficiency ratio, and an uptick in mortgage originations should help to offset net interest margin (NIM) compression in the current and upcoming quarters. The company's Comprehensive Capital Analysis and Review (CCAR) result should also be a positive catalyst ahead. Our target is $43.

Target (TGT:NYSE; $76.83; 1,700 shares; 4.61%; Sector: Consumer Discretionary): Not to be outdone by Lowe’s (LOW), Target also delivered a clean beat this week, reporting fourth-quarter 2014 EPS of $1.50 vs. $1.46 consensus, sales of $21.75 billion vs. $21.63 billion consensus, and, most importantly, comparable sales growth of 3.8% vs. 3.0% consensus. The company also issued first-quarter2015 guidance for EPS of $0.95 to $1.05 and comparable sales growth of roughly 2%, both of which fall a tad short of consensus. We believe management is being overly conservative in this first- quarter guidance, similar to the conservative nature of its fourth-quarter 2014 guidance (issued in January) in which the company forecasted 3.0% comps (vs. 3.8% actual) and EPS of $1.43 to $1.47 (vs. $1.50 actual). We are very excited about the progress Target has made on the omni- channel front, with digital sales contributing nearly a full 100 basis points to the comp number. We’ve seen a rapidly accelerating trend of digital contribution, from almost zero just a year ago to 70 basis points in the third quarter to 100 basis points in the fourth quarter. We expect this uptrend to continue, especially in light of the company’s recent decision to reduce the order threshold for free shipping to $25 from $50. This new minimum is among the most compelling offers in digital retail, putting Target well ahead of its key competitors (including Kohl’s (KSS), which revealed on its own 4Q call that it did not intend to match the offering). The move is also clearly aimed at combatting Amazon (AMZN), and we believe Target is starting to emerge as a real competitive threat to the online retailer. Plus, with new merchandise and marketing initiatives ahead, we are enthusiastic about the potential return of Target as a consistent comp performer while also clawing back profit margins lost during the credit card breach. This is a new company through and through, and CEO Brian Cornell is not only a steward of execution but a master of expectations management. He is setting the bar low, yet his ambition is high and he is diligently charting a new, reinvigorated path for the company. We are his biggest fans and have complete confidence that he will deliver above expectations. The company's March 3 analyst day will be a blockbuster event, presenting Cornell with the opportunity to package a core long-term investment story on strategic clarity, and how the company plans to recover from missteps over the prior four years. Our target is $90.

Unilever (UN:NYSE; $43.47; 1,700 shares; 2.61%; Sector: Consumer Staples): We trimmed our position this week, selling 1,000 shares. The shares traded higher into our sale and lower in the days following, but Unilever has still been one of our best performers of the year, with the stock up over 8% to date. We believed it was prudent to take some gains off the table, while still making sure to keep a sizable position. This is a defensive play with exposure to the consumer, a key theme for our portfolio, but it stands to benefit from the decline of the euro, a nice offset to our U.S.-domiciled multinationals holdings. Unilever also benefits from lower oil prices, which accounts for 25% of its total input costs. It has a strong product portfolio of brands and a superior distribution network, and with 60% of its regional exposure coming from rapidly growing markets, it has the potential to show strong top-line growth in the near term. The company trades at a discount to its primary competitor Procter & Gamble (PG), and we believe it can see multiple expansion as the year progresses. Our target is $49.

Wells Fargo (WFC:NYSE; $54.79; 2,400 shares; 4.64%; Sector: Financials): The shares regained some ground after trading modestly lower last week in sympathy with the dovish Fed minutes. Wells remains our top position, as the bank offers a rare combination of scale, diversity, quality leadership and execution, as well as a strong balance sheet and capital ratios. We believe the low interest rate environment will help reignite mortgage refinancing, which in turn will help offset net interest margin (NIM) pressure. The company has waded through the low-interest-rate environment with remarkable dexterity, and as interest rates rise, the operating leverage is significant. While JPMorgan Chase (JPM), Bank of America (BAC) and Citigroup (C) racked up a cumulative $5.7 billion worth of legal charges in the fourth quarter of 2014 alone, and our own name, Morgan Stanley, just settled DoJ litigation for $2.6 billion, Wells Fargo faces no such overhang. And since it is largely a commercial bank, it is not subject to the same trading volatility that has troubled the investment banking patch. In a sector known for its complexity, we appreciate the company's simplicity. We also view analyst estimates as far too low, and with improving earnings quality, we believe the stock should trade at 13.5x our 2016 EPS estimate of $4.65. As such, we are raising our price target to $63, from $60.


Apple (AAPL:Nasdaq; $128.46; 820 shares; 3.72%; Sector: Technology): After having blown through our $125 price target and with shares are currently trading at all-time highs, we raised our price target this week on Apple to $150. We predicate our bullish thesis on several points. For starters, Apple is well positioned to capture the benefits of an accelerating smartphone upgrade cycle. Wireless-carrier behavior has recently been changing to allow consumers to upgrade their cell phones before the expiration of standard contracts. This change in behavior is a promotional tool used to help keep customers from switching carriers by making it easier for them to upgrade their iPhone to the newest version, rather than waiting the typical 2 years or more. Second, we have extensively discussed why we believe Apple Pay and Passbook have tremendous upside potential as consumers both domestically and internationally (see: China) are rapidly latching onto the product. We expect this momentum to continue and believe it will become increasingly embedded within the payment ecosystem in coming years. Apple Pay has already been such a huge success, but we still think we're in the early innings of its growth story. We also see gross margin upside and believe the increased usage of apps coupled with higher- quality camera resolution will spur consumers to shift their preference permanently to higher memory in their smartphones, despite the higher costs. The final, and arguably most important, point we'd like to make is on valuation. Apple, simply, is still cheap, trading at 15x forward earnings and 12x excluding cash -- well below the S&P 500 at 17.7x and its peer group at 16x. We believe Apple deserves a market multiple, and we would be happy to pay 17.5x 2015 EPS of $8.60, which gets us to a $150 price target (up $25 from our previous target). We are buyers on any sharp pullback.

AbbVie (ABBV:NYSE; $60.50; 1,100 shares; 2.35%; Sector: Healthcare): The stock nudged lower this week on little news. Shares appear to be stabilizing following last month's disappointing news over hepatitis C pricing dynamics. While certainly important, we still contend that the modest decline in market share and sales estimates for it hepatitis C drug sales does not warrant the selloff of more than 20% seen in about two months. At the recently guided $2 billion sales estimate for Viekira Pak (the hepatitis C drug), it would account for just 8.7% of the FY 2015 revenue estimate. By contrast, Humira, the company's flagship drug -- which accounted for more than 60% of 4Q 2014 sales and is projected to be 58% of 2015 sales -- continues to grow by double digits. Additionally, the company has a promising pipeline, with a dozen drugs due in the coming years, five of which are late-stage and likely to be announced in 2015. Within the last month, the management has increased its gross and operating margins for 2015, even after factoring in currency headwinds, something very few others have been able to do in this sector. We expect ABBV will be aggressive toward reinvesting in the business, both internally as well as through business development. The company has a much stronger case for the durability of Humira than most investors realize, and we expect management to lay this out in more detail soon. At 13x forward estimates, the stock trades at almost a 13% discount to its own historical average, and offers a more than 25% discount to peers. It currently yields 3.4%, one of the best in the industry. While we are bullish on valuation, but we are more cautious on pricing dynamics and, as a result, would want a better entry point before considering adding to the position. Our target is $70.

Facebook (FB:Nasdaq; $78.97; 1,300 shares; 3.62%; Sector: Technology): Shares continued to move higher this week, hovering around all-time highs. Two recent media articles about Facebook's Oculus division (acquired for $2 billion in March 2014) shows that the company has an opportunity to enable court-side and rink-side virtual seats for NBA and NHL games through its relationship with Samsung and content creator NextVR. We believe this is a meaningful step for Oculus and the value proposition for Oculus and Samsung Gear VR users. From the NBA and NHL perspectives', this would create an "infinite seat," which is a seat they could sell an infinite number of times. Oculus Rift is a huge long-term (five years or more) opportunity for Facebook. We both have tried it and can confirm that virtual reality is a breathtaking -- and awesome -- experience. In the world of tech, you can never have too many shots on goal. Our target is $90.

General Motors (GM:NYSE; $37.31; 3,100 shares; 4.08%; Sector: Consumer Discretionary): Shares traded sideways this week on little news. The company announced Thursday that it will shutter its Indonesia assembly plant and cut 500 jobs, one of its boldest moves yet to revamp its struggling international operation. The closure comes as higher material costs and limited access to local parts suppliers continues to raise costs. The plant produced the seven-seat Chevrolet Spin, which never generated the type of sustainable sales GM needed to operate the plant, which had sat idle from 2005 to 2013. GM will maintain its presence in the region by selling Chevrolet vehicles through its dealer network. This is yet another example of GM's shrewd operational focus. While disappointing from a social perspective, it's a necessary move from a financial perspective. As a reminder, the company was recently in the spotlight following a group of hedge funds' decision to nominate restructuring expert Harry Wilson as a candidate for GM's board, urging the company to commit to repurchasing $8 billion worth of stock over the next 12 months. We expect GM to experience additional pressure to continue returning cash to shareholders (or at least articulate the parameters that they will use). The company has already recently introduced plans to boost its cash distribution efforts, including a 20% dividend increase last week, on top of the 20% increase in capex that the company committed to for 2015. However, with $37 billion in liquidity (including $25 billion in cash), some shareholders clearly feel the company could do more. Whether they prove successful or not, we are more interested in the fundamentals: the improving health of the domestic consumer, lower gas prices that allow consumers to purchase higher-margins vehicles, the removal of the overhang from the ignition-switch related recalls, and the product cycle story, which is in the sweet spot in mix, margins and share. The stock took a breather after gaining more than 5% last week and is still at an attractive 8.2x multiple. Our target is $45.

Google (GOOGL:Nasdaq; $562.63; 150 shares, 2.98%; Sector; Technology): The stock gained ground this week on little to no news. Two weeks ago it announced a new product, and rumors emerged that it was testing a product designed to compete with Apple Pay. The new product is for medical search, which will produce streamlined responses to medical-related Google searches (which currently make up 5% of total queries). The relevant medical facts that will be returned include typical symptoms and treatments, the commonality and/or urgency of the condition, how contagious it is, and more. The other report that emerged was that Google was testing a new service dubbed "Plaso" that allows Android phone users to make a touch-free payment at various retailers. The move is clearly an attempt to keep pace with the fast-moving Apple Pay system, and we will likely receive more information on it in coming weeks and months. We also look to this year's Mobile World Congress in early March can be a potential catalyst; we will look for the company to elaborate on creating its own wireless network and advances it has made with host-card emulation (HCE) in partnership with Visa (V). We continue to see great value in Google shares at 18.5x forward estimates (slightly below the historical number) with it double- digit earnings, revenue growth and industry dominance. We now look for any news about the cash hoard and whether it will announces a distribution of some sort -- something hinted at in the recent conference call. Our target is $600.

lululemon athletica (LULU:Nasdaq; $68.44; 1,000 shares; 2.42%; Sector: Consumer Discretionary): The stock's seemingly nonstop rally finally took a breather this week, though shares are still nearly 50% above our cost basis. There have been a few analysts out in recent weeks supporting the shares, including an upgrade at JPM, estimate increases from Oppenheimer and several positive notes/commentary about the recent trends, which have shown improvement. We remain bullish on this name, and would be incremental buyers on any pullback. The next significant catalyst will likely be Lululemon's earnings report in early- to mid-March. This will be a key moment for the stock -- as it represents the first reporting period for the company's newest products. Our target is $80.

Lear (LEA: NYSE; $108.92; 900 shares; 3.46%; Sector: Industrials): Shares traded lower this week on little news. Last week Lear announced that it is increasing its share repurchase authorization to $1 billion and raising its dividend by 25% (to $0.25 from $0.20). At the end of 2014, Lear had $339 million remaining on its share repurchase authorization, so the $661 million increase to $1 billion should delight shareholders, especially considering that the new authorization represents roughly 12% of the company's market capitalization. The move comes on the heels of activist intervention; earlier this month, Marcato Capital (Lear's fifth largest shareholder) sent a letter to the company recommending a separation of Lear's Seating and Electrical businesses into two independent public companies. Marcato's rationale is that shareholder value would be maximized if the two businesses were separated, allowing the market to assign a cyclical auto supplier multiple to LEA's Seating business and a higher, secular auto supplier multiple to LEA's Electrical business. In this scenario, Marcato believes the combined value of the two independent companies would be $145 per share (a 33% increase from current levels). We welcome Lear's aggressive capital return strategy and see this as an appropriate response to activist pressure. While we agree with certain aspects of activists' call (Lear should continue to maintain an aggressive posture with respect to returning cash to shareholders), we are not convinced that a breakup would create significant upside from current levels. Instead, we continue to view Lear as a hidden mega-trends company with a stable seating business and an attractive electrical business that has further growth and margin improvement potential driven by connected car and increasing power train electrification. We believe Lear can achieve a higher blended multiple over time, as investors come to fully appreciate the powerful growth embedded within electrical and, given the many levers it can pull on, we do not believe a strategic breakup is necessary at this point in time. Our target is $115.

Merck (MRK:NYSE; $58.54; 1,550 shares; 3.20%; Sector: Healthcare): Shares traded up this week on little news. The company did announce a multi-year collaboration with NGM Biopharmaceuticals to research, discover, develop and commercialize novel biologic therapies spanning from treatment of diabetes to obesity and nonalcoholic steatohepatitis. Last week, we picked up more shares on weakness. In light of the deadly "superbug" outbreak in California, where over 160 patients have been exposed to a drug-resistant bacterium, we would remind investors that Merck bought the premier superbug antibiotic company, Cubist, in December. Cubist carries the leading superbug antibiotic, Cubicin, and is expected to add more than $1 billion to revenue in 2015. The superbug outbreak in California is not an isolated event; rather, it is just the latest example of a dangerous emerging trend -- the spread of superbugs that evade even the most powerful antibiotics. The U.S. Center for Disease Control and Prevention estimated last year that more than two million people in the United States alone get sick every year with superbug infections, with at least 23,000 dying as a result. Merck knows how to identify and acquire valuable assets, and we expect the market to appreciate the latest acquisition of the year. We reiterate our $65 target.

Starbucks (SBUX:NYSE; $93.49; 500 shares; 1.65%; Sector: Consumer Discretionary): Shares hit another new all-time high this week and continue to be on a tear, following its strong fiscal 1Q 2015 earnings report. Several analysts bumped their price targets on Starbucks this week (to $108 at Jeffries and to $107 at Piper Jaffrey), fueling the momentum. We continue to view this as a core holding, with its aggressive international growth agenda and its plan to grow ticket size domestically via new product offerings and differentiated storefronts. The company has simply been firing on all cylinders for ages. The U.S.-based stores have been on a major roll, but not as strong as the Chinese stores; that market is on fire and on its way to becoming the company's major growth engine. Starbuck's European business turned a year ago, ahead of the continent's nascent comeback, and it's now accelerating. The tea initiatives, through Teavana, are just starting to kick in. Meanwhile, the changes in the menu are working, the consumer packaged goods business continues to be among the fastest growing in the supermarket aisle, and the Roastery is brilliant because it shows that Starbucks understands craft coffee. We believe the double-digit earnings and revenue growth goals are attainable and believe its five-year plan could lead to a market cap of $100 billion+ (which implies a doubling of shares) by 2020. Given the outperformance and our continued confidence in the growth prospects of the business, we raise our own target to $100, from $94.

United Parcel Service (UPS:NYSE; $101.73; 1,000 shares; 3.59%; Sector: Industrials): Shares traded flat this week on little news. Its recent dividend raise -- 9% to 73 cents a share -- highlights the strength of its balance sheet and cash position. Recall it is also buying back $15 billion worth of stock over the coming three years. The new annual dividend of $2.92 a share represents a 2.9% yield, compared with the 2% yield for the S&P 500. Impressively, UPS has either increased or maintained its dividend for more than four decades. Beyond the capital allocation story, we see several positive tailwinds working for the company this year: lower oil, price increases and continued momentum in e- commerce trends. Our target is $115.

United Technologies (UTX:NYSE; $121.91; 800; 3.44%; Sector: Industrials): Shares traded lower this week after we trimmed our position last week in order to take some profits. On Wednesday, the company was awarded a $407 million government contract for the engine component improvement program, in which UTX will provide design improvement, life management/analysis, repair development and test engines produced by Pratt & Whitney. Beyond this positive news, we continue to like the stock and the new CEO and CFO, who have already redirected the company's strategy, focusing on M&A organization, streamlining reporting lines in the aerospace company and being committed to shareholder capital return. Plus, the underlying business remains strong, with its latest quarter earnings meeting expectations, led by strong results from the aerospace and non-residential construction segments and 120 bps of margin improvement. We like the setup into 2015, which is why it is still one of our largest positions. Our target is $125.


American Express (AXP:NYSE; $81.59; 1,200 shares; 3.45%; Sector: Financials): The stock bounced this week - - up nearly 5% -- after getting hit hard in recent weeks following the termination of both the Costco and JetBlue co-branded contracts as well as the disappointing Justice Department ruling on exclusivity. We were relieved to finally see some positive news trickle in following the seeming constant gnawing of negative news in the preceding weeks. For one, on Wednesday we learned the company is increasing annual rates on more than 1 million credit cards. We view this news favorably, and are glad the company is taking action to recover the impending lost revenue from the Costco deal, which is set to expire next spring. We are interested in seeing what other initiatives the company has up its sleeve, and do not expect management to be complacent. On Thursday, the company received an important vote of confidence -- in the form of an upgrade -- from Deutsche Bank. The Deutsche analyst's upgrade was predicated on the belief that the company will be able to restore its earnings power sooner than expected, pointing to three drivers: 1) minimizing the EPS drag from Costco existing cardholders, 2) managing expenses, and 3) deploying excess capital into new partnerships/growth channels. Trading at under 14x forward estimates, we do agree that the network is undervalued, and are intrigued by the potential "cost mitigation" opportunities. We are careful not to get too excited too fast, but do believe the stock is regaining some much-needed momentum.

Dow Chemical (DOW:NYSE; $49.24; 2,550 shares; 4.43%; Sector: Materials): Shares traded slightly lower this week on little news after having gained double digits in the last month alone, driven by an impressive 4Q earnings report, the completion of multiple divestitures (as well as CEO Andrew Liveris' confirmation that the company was on track to achieve its $7 billion to $8.5 billion divestiture target), and the stabilization of energy prices. We believe shares are undervalued at 8.2x EV/EBITDA and the 3.4% yield allows us to be patient. Having said that, we might right-size the position once shares approach our cost basis in the low $50s given that it is a very big position and trades heavily with the underlying oil price, which remains volatile.

Eaton (ETN:NYSE; $71.01; 900 shares; 2.26%; Sector: Industrials): The shares traded slightly lower this week despite a piece of positive news and updates on the company’s capital allocation priorities at its analyst day. On Wednesday, Eaton’s board of directors declared a 12.2% increase in the quarterly dividend, to 55 cents from 49 cents per share. This takes the company’s implied annual yield to 3.1% from 2.75%. We are encouraged by this sizable increase, and appreciate the company’s focus on capital returns. Eaton held its analyst day today in New York, and while it articulated its 2015 strategy, it did not announce any material incremental news. The company did indicate that it expects to have increased cash optionality starting in the middle of 2015; of its expected $4 billion cash flow from the second half of 2015 through 2016, management intends to distribute a little over one-third in dividend payments, less than a quarter in debt repayment, with the remaining one-third left to its discretion, whether it be in the form of elevated dividend payments or opportunistic acquisitions. We are confident in management’s ability to determine what the best use of cash will be from a value creation standpoint. We continue to view the shares positively given its favorable revenue mix exposure, strong cash flow that supports continued de-leveraging and potential valuation improvement, and cash redeployment optionality beginning in mid-2015. We believe the company has favorable revenue mix exposure based on an expectation that approximately 60% of ETN’s revenues will realize positive end-market demand momentum for the next few years (majority of its Vehicle business, U.S. construction and Aerospace), 30% flat with potential future growth (datacenter, utility and portions of industrial electrical exposure) and 10% exposure to declining markets in Hydraulics.

Twitter (TWTR:NYSE; $48.08; 900 shares; 1.53%; Sector: Technology): Shares traded flat this week on little news. As a reminder, we trimmed our position recently, selling 600 shares, after the stock rallied 15% since the company delivered its better-than-expected earnings report and guidance. Fourth-quarter beat on earnings on strong operating margins (EBITDA margins were 30% vs 18% y/y) and the operating leverage was exactly what we expected would happen (just took longer). Monthly active users (MAUs) were disappointing, with just 4 million net, below the 6 million to 10 million expectation, which had to do with the rollout of iOS 8 integration -- a one-time issue, but importantly the guide back to the 12 million to 15 million quarterly sub growth figures was key. We still like the name and believe it has a number of catalysts working in its favor, but believe incremental upside in the near term will be difficult to achieve. Our target is $60.

Walgreens Boots Alliance (WBA:Nasdaq; $83.08; 750 shares; 2.20%; Sector: Healthcare): Shares had quite a strong week, trading up nearly 5% toward new all-time highs. Last week, CVS reported strong earnings results with its same-store-sales and script growth handily beating analyst forecasts. We view Walgreens as a catch- up trade to CVS and do not believe the company has reached its true potential. We were encouraged two weeks ago to hear the company introduce more former Alliance Boots executives into the fold, with its recent appointment of George Fairweather as executive vice president and global CFO; he was the former group finance director for Alliance Boots. Alliance Boots was a significantly superior operator than the formerly independent Walgreen, as evidenced by the 300 to 600 basis-point margins disparity, so having more of its former executives with the combined company is certainly a positive. We are still committed to the position, especially given its newly expanded European exposure (from the Boots Alliance merger) and would be buyers on any weakness.


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

DISCLOSURE: At the time of publication, Action Alerts PLUS was long AAPL, ABBV, AXP, CSCO, DG, DOW, ETN, FB, GM, GOOGL, HYH, KMI, LEA, LOW, LULU, MA, MRK, MS, RDS.A, RHT, SBUX, STI, TGT, TWTR, UN, UPS, UTX, WBA and WFC.

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Focus on Consumer Products, Retail, Restaurants
Stocks in Focus: UN, TGT

Jim Cramer emphasizes consumer-product companies like Unilever, and says watch for news from Target.

02/27/15 - 04:15 PM EST
Exiting This Big Tech Name
Stocks in Focus: MSFT

We're closing our Microsoft position on Hewlett-Packard risk.

02/27/15 - 09:56 AM EST
New Target CEO Returns Retailer to Roots
Stocks in Focus: TGT

Jim Cramer says CEO Brian Cornell will win America back.

02/27/15 - 08:26 AM EST
Weekly Roundup

This week, we initiated a position in a healthcare name and exited a high tech portfolio holding, as the market moved slightly higher.

02/27/15 - 05:14 PM EST

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DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
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Action Alerts PLUS Holdings

Stocks we would buy right now

Symbol % Portfolio
Industry Trade Now
CSCO 2.86% Computer Hardware
DG 3.33% Retail
HYH 2.76% Health Services
KMI 3.47% Energy
LOW 3.14% Retail
MA 3.50% Financial Services
MS 4.04% Financial Services
RDS.A 3.81% Energy
RHT 3.66% Computer Software & Services
STI 3.18% Banking
TGT 4.61% Retail
UN 2.61% Consumer Non- Durables
UPS 3.59% Transport
WFC 4.64% Banking

Stocks we would buy on a pullback

Symbol % Portfolio
Industry Trade Now
AAPL 3.72% Consumer Durables
ABBV 2.35% Drugs
DOW 4.43% Chemicals
FB 3.62% Internet
GM 4.08% Automotive
GOOGL 2.98% Internet
LEA 3.46% Automotive
LULU 2.42% Consumer Non- Durables
MRK 3.20% Drugs
SBUX 1.65% Leisure
UTX 3.44% Aerospace/ Defense

Stocks we would sell on strength

Symbol % Portfolio
Industry Trade Now
AXP 3.45% Financial Services
ETN 2.26% Industrial
TWTR 1.53% Internet
WBA 2.20% Retail

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