This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Jim Cramer's Action Alerts PLUS

Action Alerts PLUS

Adding to Two Financial Positions

BY Jim Cramer and Stephanie Link | 08/21/14 - 11:18 AM EDT
Actions Taken:
Symbol Action # Shares Traded Recent Price Shares Owned After Trade % of Portfolio After Trade
AXP Buy 100 $89.07 1200 3.80%
STI Buy 200 $38.15 3100 4.20%

We are going to add 200 shares to SunTrust (STI:NYSE) at about $38.15 and 100 shares of American Express (AXP:NYSE) at about $89.07.

STI is below our cost basis and we’ll continue to build out the position. STI is down 10% from highs, even though the company posted a solid 2Q and among the highest in loan growth at 7.7%. Core earnings beat consensus by 3 cents a share and increased 19% y/y, core revenues rose 3% y/y and fee revenues rose faster than expected, which shows the expansion diversification strategy is leading to market share gains. Within loan growth, the components were strong. Commercial and industrial grew 10%, commercial real estate rose 42% and consumer posted 8% growth.

The company continued to improve its efficiency ratio and at 63.5% it was 150 bps better than 1Q and 200 bps better than last year. Credit quality improved with NPAs down 3% y/y and stand at just 0.35% of total loans. Capital levels remain strong and the balance sheet and cash flow solid. The issue is interest rates and the negative implications to NIM (profitability), which is plaguing the entire industry and is not company specific. We think the concerns are overdone, especially with the share price correction, and we will continue to add to improve our cost basis, staying patient for the long term given the above-average loan growth results and significant expense management yet to come.

On AXP, shares are down 9% from recent highs, even after the company posted a strong 2Q as well. The positives to the quarter were that earnings rose 13% y/y, revenues gained 5% and return on tangible equity accelerated to 35.8% (vs. the 35% level seen in the March quarter). Total loans rose 5.1%, with 6% in the U.S. (87% of total) and 2% international (12 % of total), and accelerated from the 4Q average loan growth of 3%. Card spending was impressive, up 9% y/y, driven by a 3% acceleration in both the U.S. and internationally. Both regions posted 9% card-spend growth. In the U.S., U.S. small business channel volumes rose 10% and corporate increased 8% and both saw a q/q acceleration. Spending per average card rose 2.8% vs. 1.4% in 1Q. Card receivable growth rose 4.1%, which was broad-based and not because they loosened credit standards. Credit trends were solid with charge-offs down to 1.6% and 40 bps below year-ago levels and delinquencies fell to 1% and are close to record levels. Shares are down because marketing and promotional/rewards spending rose more than expected in the quarter, up 25% y/y and 11% y/y respectively.

The company has had a history of heavy investment spending and really wanted more operating leverage to the bottom line. We believe these efforts will bear fruit and lead to both top- and bottom-line acceleration in the back half of the year. Plus, total expenses in the quarter were tame at up 2%. With strong capital ratios and a strong balance sheet, the company will buy back $2.3 billion worth of stock in 2014 and has authorization to do another $1 billion in 1Q 2015, a 90% payout ratio vs. the typical historical average of 50%. We expect a catch up in the stock price of this high-quality financial story and will further increase our exposure here.

Regards,

Jim Cramer, Stephanie Link, and TheStreet Research Team

DISCLOSURE: At the time of publication, Action Alerts PLUS was long AXP and STI.

The Vale News That's Under the Radar
Stocks in Focus: VALE

Vale took a step towards extending the world's largest iron ore mine.

08/21/14 - 10:30 AM EDT
Building Up a Pair of Positions
Stocks in Focus: BAC, ETN

We're adding to Eaton and Bank of America below our cost basis.

08/20/14 - 03:24 PM EDT
Weekly Roundup

Given the geopolitical news and the market's day-to-day swings, we are holding more cash than usual.

08/15/14 - 06:19 PM EDT

Special Subscription Bundles

Want more than one service?
Sign up to one of our packaged services and take advantage of amazing savings!

Portfolio Plus Real Money Pro
Portfolio
Chairman's Club
Action Alerts PLUS checkmark | Portfolio Plus checkmark | Real Money Pro Portfolio checkmark | Chairman's Club
Stocks Under $10 checkmark | Portfolio Plus checkmark | Real Money Pro Portfolio checkmark | Chairman's Club
Breakout Stocks checkmark | Portfolio Plus checkmark | Real Money Pro Portfolio checkmark | Chairman's Club
Dividend Stock
Advisor
checkmark | Portfolio Plus checkmark | Real Money Pro Portfolio checkmark | Chairman's Club
TheStreet
Quant Ratings
checkmark | Portfolio Plus checkmark | Real Money Pro Portfolio checkmark | Chairman's Club
Real Money checkmark | Real Money Pro Portfolio checkmark | Chairman's Club
Real Money Pro checkmark | Real Money Pro Portfolio checkmark | Chairman's Club
Trifecta Stocks checkmark | Chairman's Club
Reality Check checkmark | Chairman's Club
Action Alerts
OPTIONS
checkmark | Chairman's Club
Options Profits checkmark | Chairman's Club
Daily Swing Trade checkmark | Chairman's Club
Top Stocks checkmark | Chairman's Club
TheStreet
Big Gold
checkmark | Chairman's Club
Quarterly Call
with Jim Cramer
and Stephanie Link
checkmark | Chairman's Club
Started Now Started Now Started Now
DOW 17,039.49 +60.36 0.36%
S&P 500 1,992.38 +5.87 0.30%
NASDAQ 4,532.1040 +5.6220 0.12%

Action Alerts PLUS Holdings

Stocks we would buy right now

Symbol % Portfolio
Weighting
Current
Price
Avg.Cost
Basis
% Gain/
Loss
BA 4.10% $127.50 $129.13 -1.26%
BWP 3.28% $20.36 $19.25 5.74%
CI 3.36% $93.97 $87.58 7.29%
DOW 4.27% $53.07 $52.60 0.90%
ESV 3.43% $50.49 $51.53 -2.01%
ETN 3.76% $70.05 $75.75 -7.52%
FB 3.73% $74.57 $64.23 16.10%
FCX 3.21% $36.68 $38.36 -4.37%
GOOGL 4.77% $592.42 $574.35 3.15%
KMI 0.74% $41.25 $41.47 -0.53%
LEA 3.34% $98.25 $96.39 1.93%
MMM 1.81% $144.50 $141.54 2.09%
MSFT 1.46% $45.22 $43.53 3.88%
ORCL 3.12% $41.58 $41.77 -0.47%
PVH 2.04% $114.04 $112.61 1.27%
SBUX 2.91% $77.47 $78.50 -1.31%
UPS 1.76% $98.41 $96.89 1.57%
VALE 1.74% $13.93 $14.60 -4.61%
WAG 1.53% $61.07 $61.97 -1.45%

Stocks we would buy on a pullback

Symbol % Portfolio
Weighting
Current
Price
Avg.Cost
Basis
% Gain/
Loss
AAPL 2.95% $100.58 $79.05 27.23%
BAC 3.76% $16.16 $15.61 3.54%
GM 4.21% $34.60 $37.69 -8.20%
GS 3.45% $175.15 $164.68 6.36%
JNJ 2.31% $104.19 $91.83 13.46%
OXY 2.01% $102.27 $92.47 10.59%
SWK 2.78% $91.56 $84.55 8.29%
UTX 4.04% $110.06 $116.08 -5.19%

Stocks we would sell on strength

Symbol % Portfolio
Weighting
Current
Price
Avg.Cost
Basis
% Gain/
Loss
GE 3.11% $26.43 $26.54 -0.43%
XLNX 2.82% $42.67 $47.42 -10.01%

Brokerage Partners

Hewlett-Packard Feels the Love
08/21/14 - 02:44 PM EDT
Bank of America Pays Its Dues
08/21/14 - 11:28 AM EDT
Cramer: Hain Can Defy the Shorts
08/21/14 - 07:52 AM EDT
Freight Cars Don't Lie
08/20/14 - 02:52 PM EDT