This Day On The Street
Continue to site
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

Weekly Roundup

By Jim Cramer and Jack Mohr | 02/12/16 - 05:06 PM EST

Despite a rebound late in the week, markets again finished in the red as worries over global economies and negative interest rates across Europe and Japan sparked a renewed batch of investor concern that resulted in new lows for both the Dow and S&P on Thursday. Continued declines in oil offered no relief as record supply levels continue to push prices further on a declining trajectory. While rumors of a potential OPEC meeting and production cut have resurfaced (and helped boost prices on Friday), the trade largely provided only downward pressure for the week. Fed Chair Janet Yellen's testimony at the beginning of the week proved to be uninspiring as well, leaving investors perpetually wary of economic growth. We did finish the week on a positive note as the market rallied ahead of the long Presidents Day weekend.

Treasury yields were pushed lower this week as investors fled to bonds, the dollar was weaker against the euro, gold was higher and West Texas Intermediate (WTI) and Brent crude were both extremely volatile, with a huge rally on Friday proving too late to move the trade into the green for the week.

Fourth-quarter equivalent earnings have been relatively positive compared with expectations, with 71.6% of companies surprising to the upside. In the portfolio, Panera Bread, Cisco Systems, Twitter and WhiteWave all reported earnings.

Panera Bread (PNRA:Nasdaq) delivered convincing fourth- quarter results on Tuesday, highlighted by a big bottom- line earnings (EPS) beat and impressive comparable-store growth (a.k.a. "comps," or same-store sales -- SSS). The company also issued somewhat mixed initial guidance for 2016, with a better-than-expected forecast around comp growth tempered by a lower-than-expected forecast around earnings. Panera posted a monster bottom-line beat, with EPS of $1.88 coming in 10 cents ahead of consensus. More importantly, the retailer's most important metric -- comparable sales -- grew 3.6% year over year, well above consensus at 3% and prior guidance toward the "midpoint of 2% to 3.5%." Management also indicated that comps increased 6.4% year over year in the first 41 days of 2016, although they qualified the outsized growth by noting comps benefited from the company's decision to raise prices earlier than anticipated to better align with structural wage increases. Regardless, it is clear to us the company is increasingly differentiating itself from competitors and likely taking share amid industrywide weakness.

Cisco Systems (CSCO:Nasdaq) delivered a clean top- and bottom-line fiscal-second-quarter beat and issued strong third-quarter guidance. More importantly, the company announced a series of aggressive capital return moves. It raised its dividend by 24% to a quarterly rate of 26 cents a share from the previous 21 cents. It also increased its buyback authorization by a massive $15 billion. Cisco's January earnings of 57 cents a share came in 3 cents ahead of consensus, while revenues of $11.93 billion topped the consensus of $11.75 billion. As in prior quarters, EPS came in above CSCO's guidance as cost controls resulted in better-than-expected gross margins (64.3% vs. 63% consensus). Top-line strength was driven by routing and security, which grew 5% and 11% year over year, respectively; that was offset somewhat by weak data center performance. We are encouraged by deferred revenue growth of 8% year over year, which suggests revenue acceleration in the coming quarters.

Twitter (TWTR:NYSE) reported a beat on the top and bottom lines, with revenues of $710.5 million coming in roughly $500,000 ahead of consensus and EPS of $0.16 beating consensus expectations for $0.12. Fourth-quarter advertising revenue, which represented 86% of total revenue, was up 48% year over year to $641 million. Domestic revenue was up 47% and international revenue increased 51%. However, the headline beat is more misleading than anything else, as 4Q total monthly active users (MAUs) came in flat sequentially at 320 million (which was 9% growth year over year). More importantly, MAUs excluding SMS Fast Followers (those who can only use the service on a low-speed, text-messaging basis; this is considered the more telling metric) declined by 2 million users to 305 million (up 6% year over year) vs. consensus estimates for 309 million. As for guidance, the company expects first-quarter 2016 revenue to come between $595 million and $610 million, far below consensus estimates that call for roughly $630 million. The company's EBITDA outlook does see some upside, however, with expectations of roughly $155 million beating initial consensus of $149 million.

WhiteWave Foods (WWAV:NYSE) reported a bottom-line beat for its fourth-quarter results, with EPS of $0.36, up 27% year over year (excluding its China joint venture), coming in $0.02 ahead of consensus. Sales in the quarter were roughly $1.03 billion (up 13% year over year), which, while slightly lower than the $1.04 billion consensus estimate, is better than it seems on the surface: On an organic currency basis, revenues were actually around $1.05 billion, up 15% year over year. The company released its first outlook for the upcoming fiscal year, when it expects 10%-11% growth in net sales to between $4.25 billion to $4.29 billion vs. consensus of roughly $4.3 billion (but on a constant currency basis, it expects 11%-12% growth). On the bottom line, through the end of 2016, the company sees EPS of $1.33- $1.37 vs. consensus of $1.36 (ex-FX, however, management sees EPS coming in around $1.38 to $1.42). For the upcoming quarter, management sees EPS of $0.25-$0.26 ($0.26-$0.27 in constant currency) vs. consensus of $0.28 and expect an 11%-12% growth in revenues (12%-13% in ex-FX) to roughly $1.01 billion to $1.02 billion compared to the $1.02 billion consensus number.

From a macro standpoint, on Wednesday, Fed Chair Janet Yellen began her congressional testimony to address Federal Reserve policies and outlook. She re-emphasized the accumulation of risks in her remarks, noting financial market volatility, plummeting stock prices, uncertainty around China's economy, currency and market stability, broader recessionary pressures and sinking consumer prices. She indicated that the convergence of these risks could impede economic growth. Yellen did not rule out the possibility of negative interest rates, nor the possibility of a March rate hike, leaving market participants hapless, confused and rattled. If anything, the bleak outlook coupled with a perceived lack of conviction served to further obscure what is already an extremely complicated monetary policy backdrop.

On Thursday, the Department of Labor reported that initial jobless claims for the week ending Feb. 6 were 269,000, which was 16,000 claims lower than the prior week's figure and 12,000 lower than expectations. The figure is only 13,000 claims higher than the country's post-recession lows, indicating the job market remains a bright spot in the economy despite turmoil in other sectors. The four-week moving average for claims (used as a gauge to offset volatility in the weekly numbers) fell 3,500 claims to 281,250. Claims have remained below 300,000 -- the threshold typically used to categorize a healthy jobs market -- for 49 straight weeks, which is still the longest streak since the early 1970s.

On Friday, the Commerce Department reported a better- than-expected retail sales figure, with sales excluding autos, gasoline, building materials and food services increasing 0.6% vs. expectations for a 0.3% gain. This is an important metric to follow from an economic standpoint, given that it corresponds most closely with the consumer spending component of GDP. Consumer spending makes up more than two-thirds of our economic activity. Total retail sales increased by 0.2% in January, a similar increase to the revised December figure. Sales at service stations were again a drag on the figure as cheaper gasoline continued to weigh on prices. On the other hand, receipts at clothing stores gained 0.2% and jumped 1.6% at online retailers. All in, total retail sales in January were only up 1.4% year over year, the slowest rate in almost two years. It remains to be seen whether or not consumer spending will ever see a significant tailwind from the pent-up savings resulting from cheaper gasoline prices.

On the commodity front, it was yet another tough week for oil, as WTI sunk to a 13-year low on Thursday and settled under $27 per barrel despite some bullish news on Wednesday that showed oil inventories unexpectedly declined due to lower imports. However, we saw another increase in gasoline inventories, potentially shedding a negative connotation on demand. That being said, any positive was quickly forgotten as the broad market selloff resulted in investors fleeing risky assets (like oil) and heading toward safer ones like gold or the yen.

In addition, concerns over increasing stockpiles in Cushing, Okla. (the delivery point for crude in the U.S.), highlighted the lingering issue of growing stockpiles around the world. Late in Thursday's session, the oil trade was sent a white knight when news broke that the United Arab Emirates energy minister said OPEC was willing to talk with other exporters about a coordinated production cut. He also noted that cheap oil prices were already forcing some output reductions. The comments helped boost the trade on Friday (which was up by more than 11% at points), but many continue to be skeptical that any meeting or cut will actually occur (as these rumors have surfaced multiple times over the last couple of weeks). The jump in prices was also due in part to short covering and the unwinding of hedges.

What has another volatile week in the oil trade shown us? The fundamentals remain broken and investors remain panicked. The oversupply persists and has no strong case for turning around at this point. We will be watching closely.

With respect to the portfolio this week, we added to Eli Lilly (twice), Starbucks, Biogen, Jack-in-the-Box, Stanley Black & Decker and Lockheed Martin; we trimmed Dow Chemical and Occidental Petroleum; and closed out our position in Starwood Hotels.

On Lilly (LLY:NYSE) and Biogen (BIIB:Nasdaq), we took advantage of the market selloff to buy into these proven names that have been beaten down along with a broader biotech selloff. Both companies own fruitful pipelines and Lilly's dividend adds a cherry on top.

As for Starbucks (SBUX:Nasdaq), we never thought we would have a chance to build this position below our cost basis, but the volatile market offered us the gift earlier in the week. The company remains a leader in its space, operating way in front of its peers on its technology initiatives, and continues to boast one of the most positively recognizable brands in the world.

Similarly, we added to Jack-in-the-Box (JACK:Nasdaq) below our cost basis ahead of next week's results, which we think could act as a potential catalyst for shares (although we view it as a long-term holding and were not intending to trade into the quarter) given the success of its recent menu initiatives. In addition, we expect the continued buyback program to bring accretion to shares.

On Stanley Black & Decker (SWK:NYSE), we view the selloff as way overdone and we are incrementally more positive on the name given the encouraging commentary provided by some of its peers on recent earnings calls.

We also added to Lockheed (LMT:NYSE) as we view its strong dividend yield (and history of increases) as extremely attractive in this market. It doesn't hurt that the company remains a leader in the defense space.

While we remain confident in Dow Chemical (DOW:NYSE) given its high synergy potential and long-term value- creating opportunities -- i.e., merger with DuPont (DD) and subsequent breakup of the combined company into three separate entities -- we viewed the recent run-up in shares as an opportunity to trim the name above our cost basis -- something we could not take for granted in this volatile market.

As for Occidental (OXY:NYSE), the sad truth remains that, despite its leadership position, the E&P space remains irrevocably linked to the declining oil trade, and we took the opportunity to further de-risk our portfolio.

Lastly, we closed our position in Starwood (HOT) as the perpetual link to Marriott (MAR) given their impending merger has only clouded the outlook, which is grim enough to begin with due to macro pressures.

Fourth-quarter earnings continued this week and have been relatively mixed compared to estimates. Total fourth- quarter earnings growth is down 4.1%; of the 268 non- financials that have reported, earnings growth is down 5.5% vs. expectations thus far for a 4.6% decrease. Revenues are decreasing 4.3% vs. expectations throughout the season for a 3.26% decline; 71.6 % have beaten expectations, 17.3% have missed the mark and 11.1% were in line with consensus. On a year-over-year comparison basis, 55.1% have beaten the prior year's results, 41.4% have come up short, and 3.5% have been virtually in line. Materials, health care and info tech have led the strong performance vs. estimates, whereas energy, telecom and utilities have posted the worst results thus far in the S&P 500.

Next week, 62 companies in the S&P 500 report earnings. Within the AAP portfolio, Jack-in-the-Box (JACK) is the only company scheduled to report earnings.

Other key reports include: Baxalta (BXLT), Genuine Parts (GPC), Hormel Goods (HRL), Restaurant Brands International (QSR), Yandex (YNDX), Zoetis (ZTS), Acadia Healthcare (ACHC), Agilent (A), Cerner (CERN), Cheesecake Factory (CAKE), Devon Energy (DVN), Express Scripts (ESRX), Fossil (FOSL), Potbelly (PBPB), Rackspace (RAX), Radiant Logistics (RLGT), Analog Devices (ADI), Angie's List (ANGI), Dr Pepper Snapple (DPS), EnLink Midstream Partners (ENLK), Garmin (GRMN), Host Hotels (HST), Noble Energy (NBL), Pioneer Energy (PES), Priceline (PCLN), Shopify (SHOP), T-Mobile (TMUS), Barrick Gold (ABX), Denny's (DENN), GoDaddy (GDDY), La-Z Boy (LZB), Marathon Oil (MRO), Marriott (MAR), NetApp (NTAP), Newmont Mining (NEM), Williams (WMB), SunPower (SPWR), Cabela's (CAB), Choice Hotels (CHH), Discovery (DISCA), DISH Network (DISH), Duke Energy (DUK), Entergy (ETR), Hyatt Hotels (H), Laboratory Corp (LH), Leidos (LDOS), MGM Resorts (MGM), PG&E (PCG), Reliance Steel (RS), Six Flags (SIX), SodaStream (SODA), Starwood Hotels (HOT), Valspar (VAL), Virgin America (VA), Wal-Mart (WMT), Waste Management (WM), Applied Materials (AMAT), Arista Networks (ANET), Con Edison (ED), Fluor (FLR), Nordstrom (JWN), Trinity Industries (TRN), Ameren (AEE), Commscope (COMM), CST Brands (CST), Deere (DE) and VF Corp. (VFC).

Economic Data (*all times EST)


Monday (2/15) – President's Day

Tuesday (2/16)

Empire Manufacturing (8:30): -10 expected

Net Long Term TIC Flows ($:00):

Wednesday (2/17)

MBA Mortgage Applications (7:00):

PPI YoY (8:30): -0.6% expected

Core PPI YoY (8:30): 0.4% expected

PPI MoM (8:30): -0.2% expected

Core PPI MoM (8:30): 0.1% expected

Housing Starts (8:30): 1180k expected

Building Permits (8:30): 1203k expected

Industrial Production MoM (9:15): 0.3% expected

Capacity Utilization (9:15): 76.7% expected

FOMC Meeting Minutes (14:00):

Thursday (2/18)

Initial Jobless Claims (8:30):

Continuing Claims (8:30):

Bloomberg Consumer Comfort (9:45):

Leading Index (10:00): -0.2% expected

Friday (2/19)

CPI YoY (8:30): 1.3% expected

CPI MoM (8:30): -0.1% expected

Core CPI YoY (8:30): 2.1% expected

Core CPI MoM (8:30): 1.3% expected

International –

Monday (2/15)

Eurozone Balance of Trade (5:00):

Tuesday (2/16)

UK PPI MoM (4:30): -0.1% expected

UK Price Index YoY (4:30): 1.4% expected

UK Retail Price Index MoM (4:30): -0.6% expected

UK CPI YoY (4:30): 0.3% expected

UK CPI MoM (4:30): -0.7% expected

Germany ZEW Economic Sentiment (5:00):

Eurozone ZEW Economic Sentiment (5:00):

Japan Machine Orders MoM (18:50): 4.5% expected

Japan Machine Order YoY (18:50): -3.1% expected

Wednesday (2/17)

UK Claimant Count Change (4:30): 2.3% expected

UK Unemployment Rate (4:30): 5.0% expected

Eurozone Construction Output YoY (5:00):

Japan Balance of Trade (18:50):

Japan Exports YoY (18:50):

China CPI YoY (20:30): 1.9% expected

China PPI YoY (20:30): -5.4% expected

Thursday (2/18)

Japan All Industry Activity Index MoM (23:30): -0.3% expected

Friday (2/19)

Germany PPI MoM (2:00):

Germany PPI YoY (2:00):

UK Retail Sales MoM (4:30): 0.6% expected

UK Retail Sales YoY (4:30): 3.4% expected

UK Retail Sales ex Fuel MoM (4:30): 0.7% expected

Germany Retail Sales ex Fuel YoY (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, 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.


Apple (AAPL:Nasdaq; $93.99; 820 shares; 3.44%; Sector: Technology): After losing its title for the world's market-cap leader to Alphabet (GOOGL) last week - - following the search giant's strong results and guidance -- Apple quickly recaptured the crown, boasting a market cap valuation that exceeds $520 billion. In other (more important) news, Apple is rumored to be hosting a product event on March 15tto introduce new 4- inch iPhones (data from Mixpanel indicate that roughly one-third of active iPhone users still have 4-inch screens), iPads and Watch bands. Reports of a new smaller iPhone have been rumored for some time, with the Nikkei reporting earlier this month that manufacturing of the phone (iPhone 5se) had commenced. On the iPad side, reports indicate the company will unveil the iPad Air 3, its first significant upgrade in two years. Separately, CEO Tim Cook recently held a companywide town hall meeting (post-first-quarter earnings) in which the company's future was discussed in a fireside-chat format. In response to concerns around Apple's dependence on iPhone sales, Cook remarked that iPhones remain the "greatest business of the future" and believes the product has a path to sustainable growth over the next 10 years and beyond. Cook also reiterated that the company does not plan to lower its price on iPhones within emerging markets and expects consumer are willing to pay a premium for the enhanced user experience (and, we would argue, extremely high brand equity). We reiterate our long-term price target of $140.

Allergan (AGN:NYSE; $280.48; 480 shares; 6.01%; Sector: Health Care): Shares of Allergan traded roughly flat this week on little news. The company is expected to close the sale of its generics business to Teva Pharma (TEVA) in the first half of this year, which will provide a huge influx of cash into the business ahead of the big one -- the impending merger with Pfizer (PFE). We continue to like Allergan for its leadership position in cosmetic facial treatments as well as other growing branding businesses. We see incredible revenue potential following the merger with PFE and the subsequent breakup of the companies into one established and one growing business. We are confident in CEO Brent Saunders' ability to integrate and execute and this remains one of our favorite long-term stories. We reiterate our $400 target.

American Electric Power (AEP:NYSE; $60.60; 500 shares; 1.35%; Sector: Utilities): We continue to appreciate the company's solid growth profile (characterized by strong transmission growth, diversified regulatory footprint, 3.6% dividend and potential for stock buybacks) and view it as a safe investment in a volatile market. For these very reasons, the stock has outperformed the S&P 500 by roughly 10% since we initiated our position last month; as a result, near-term upside likely remains relatively capped. With shares approaching our $67 price target, we would recommend that any investor with a near-term trading horizon take some profits; the long-term investment thesis remains intact for those with a long-term horizon seeking a safe, stable and compelling stream of income. Our $67 target remains unchanged.

Bank of America (BAC:NYSE; $11.95; 6,700 shares; 3.58%; Sector: Financials): BAC shares continued to slide this week as interest rates sold off, the yield curve flattened and concerns around the bank's energy exposure mounted. While financials as a whole have been pummeled this year, BAC has been hit with the brunt of the selling pressure. As we have stated, while we are constructive on Bank of America long term and view the stock's extreme selloff as overdone and historically significant (shares are trading well below recessionary levels on a price to tangible book value, or TBV, basis despite the lack of a recession), we recognize the market is no longer trading the name on any specific metric, rendering any valuation floor argument irrelevant for the time being. We expect continued volatility (this is why we have refused to buy into the stock's recent bout of wholesale selling), but do see deep value in the long term. That said, we are reducing our price target to $16 from $18 to reflect the sectorwide re-rating driven by de minimis expectations for a Fed rate hike any time between now and the second half of 2017 and the market's low appetite for financials, especially one designated as a "show me" story.

Biogen (BIIB:Nasdaq; $247.22; 400 shares; 4.42%; Sector: Health Care): This week we conducted a deep-dive analysis around our investment thesis for Biogen, evaluating the risk/rewards amid a challenging political backdrop (our analysis was conducted in the context of our other two biotech holdings: Allergan and Eli Lilly). We emerged incrementally cautious on the name, and while we view the stock as extremely compelling from a relative value perspective, we also have greater appreciation for the elevated risks associated with the company. We believe the outcome for Biogen shares is somewhat binary: On one hand, its multiple sclerosis (MS) franchise appeared to stabilize in its fourth-quarter earnings and its early to mid-stage pipeline opportunities are quite novel and have blockbuster potential; on the other hand, the MS franchise faces pricing risk (it has little room to raise prices given the competitive landscape and regulatory backdrop) and the "blockbuster" pipeline bets are early stage, highly risky and impossible to value given the associated uncertainty. We believe shares have priced in the risk/reward quite fairly, but given lack of visibility into the several near- to intermediate-term catalysts on the horizon, we are downgrading shares to Two and lowering our price target to $350 from $375. BIIB is high risk/high reward, which means it offers tremendous upside at the risk of equally significant downside; as we look to de-risk our portfolio, we prefer safer biotech bets such as AGN and LLY.

Cisco Systems (CSCO:Nasdaq; $25.11; 2,650 shares; 2.97%; Sector: Technology): Cisco shares had a huge week following the company's quarterly report where it beat on both the top and bottom lines, and in conjunction, raised its dividend and announced a massive $15 billion buyback authorization. We remain confident as ever that Cisco offers investors the opportunity to rotate out of higher- risk "growth tech" investments toward more stable, "value tech" names. Cisco not only falls within this category -- trading under 8x 2016 EPS ex-cash -- but provides a nice mix of stable growth, diversified end-market exposure (which likely helped insulate it from the broader industry slowdown), high operational leverage and compelling income (approximately 4.4% dividend yield, based on pre-market levels). All in, while macro pressures will likely persist, Cisco's results and commentary on the conference call proved not only the resilience of its business model but that general demand and regional trends are far less perilous than most had feared. In fact, we would argue that Cisco's model provides relative stability even in the face of a "doomsday" macroeconomic scenario, as it is diversified (both geographically and by product end- market) and has the ability to aggressively manage costs and extract operational efficiencies (a luxury afforded by few, if any, of its direct peers). We maintain our long-term $30 target.

Costco Wholesale (COST:Nasdaq; $148.65; 450 shares; 2.99%; Sector: Consumer Staples): Shares of COST traded higher after last week's disappointing January sales release in which comparable sales results ("comps" or same-store sales, SSS) missed consensus estimates, with solid international numbers offset by weakness in the U.S. (food deflation as well as several transitory items pressured growth). With a stock that trades on the consistency of its sales (particularly traffic) and regarded as the bellwether for retail, we have spent considerable time over the past week digging into the January report in an attempt to discern whether the weakness is transitory (given meaningful drags from weather, a Super Bowl calendar shift and food deflation) or representative of a structural shift in underlying trends. From a traffic perspective, the litmus test will be SSS growth post-February as the company laps easier year-over-year comparisons. On the positive side, we would point out that 1) January's core U.S. traffic growth -- which excludes the impacts from weather and the Super Bowl shift to late in the first week of February -- was a healthy 4% (vs. the 3% reported) and 2) traffic growth in Texas (one of COST's top markets) was stronger than expected and especially impressive in light of the state's outsized exposure to the energy markets. Overall, we have confidence in the company's traffic growth but are less constructive on its ticket growth (the average amount a consumer spends per trip to the store) as we expect food deflation (especially within food & sundries and fresh foods) to persist throughout the first half of the year, not just for COST for all grocers within the space. A higher-level concern in respect to average ticket is the impact on spending patterns (especially as it relates to higher-end items) amid a volatile stock market, which has an outsized impact on COST's high- quartile customer demographic (with average household income of its customer base as $96,000). This should not impact traffic -- in fact, COST offers tremendous value, which is why its traffic is defensible amid a volatile backdrop -- but could shift customer spending toward more value-centric items. We continue to view shares as attractive, especially with catalysts toward the middle and back half of the year. We view the risk/reward as balanced in the near term, with upside contained by risks around average ticket. We would consider adding to our position if shares fell to the low $140s, but are content with taking the long view and riding out the potential headwinds, which we expect will abate by the back half of the year. We reiterate our $170 long-term target.

Facebook (FB:Nasdaq; $102.01; 1,200 shares; 5.47%; Sector: Technology): Facebook shares slipped lower in a volatile week of trading. The fundamentals for Facebook are stronger than ever -- validated by its recent blowout results/guidance and driven by a powerful and visible long-term growth trajectory -- which leave us with little doubt that the post-earnings bout of selling has been illogical. When fundamentals diverge from logic to this extent, however, we recognize there are undercurrents precipitating the action that are beyond our control. We are also especially careful considering our position in FB is trading 60% above our cost basis of $63 and change. We reiterate our $130 long-term target.

Google (GOOGL:Nasdaq; $706.89; 150 shares; 4.74%; Sector: Technology): Shares of GOOGL recovered this week but are trading below levels achieved following the company's very strong fourth-quarter earnings report last week. The stock is a member of the widely talked about FANG group -- Facebook, Amazon (AMZN:Nasdaq), Netflix (NFLX:Nasdaq) and Google/Alphabet -- which in aggregate rose 75% last year, vs. just over 1% total return for the S&P 500. Investors piled into these names due to their industry leadership and distinct competitive advantages (given their status as disruptors), which in turn allow them to accelerate growth in a market plagued by decelerating growth and overall top-line stagnation. The moment the market took a turn for the worse this year (starting on the first day of trading), the group's legendary 2015 outperformance worked against it, placing a gorilla-sized target on the back of each respective stock. The same investors who had piled into the names in droves and made money hand over fist have sold out of their positions expeditiously as they actively look to take profits on the still-massive gains they had generated on the respective stocks. We have refused to trade around these names as we view both Alphabet and Facebook as long-term core holdings, not event- or technical-driven trading vehicles. As such, we reiterate our $900 long-term target.

Jack-in-the-Box (JACK:Nasdaq; $73.59; 1,200 shares; 3.95%; Sector: Consumer Staples): We added to our position in JACK this week as the market selloff provided the opportunity to further lower our cost basis. We continue to like JACK for its diverse business model -- with its name-brand restaurants but also its Qdoba storefronts (which post unparalleled same-store-sales growth figures). In addition, the company has been rolling out new menu items to attract new customers while it also focuses on its core offerings, which management understands will help maintain a loyal customer base. The company is set to report earnings next week and we expect the report could be a catalyst for shares, which are down around 5% for the year. Channel checks at both Qdoba and JACK restaurants have indicated strong sales numbers and customer satisfaction remains high. That being said, we are in JACK for the long term and see value being created from their menu innovations, remodeling efforts and powerful share repurchase program (where we expect the company could buy back roughly 1 million shares per quarter). Our target remains $90.

Panera (PNRA:Nasdaq; $199.36; 550 shares; 4.90%; Sector: Consumer Discretionary): Despite trading lower to kick off the week, shares of Panera rebounded strongly following the company's solid earnings report, where it posted a big bottom-line beat and beat on same-store- sales expectations. As a reminder, we selected Panera as our top pick for 2016 (click here to read) and added to the position three weeks back at roughly $180 a share (click here to read the Alert), with shares up nearly 9% since the purchase. We reiterate our continued bullish view and consider the stock a core long-term holding as it continues to move through its Panera 2.0 initiative. Consistent with prior results, 2.0 stores initially perform in line with pre-2.0 stores for the first few quarters following the conversion as the market's awareness around the store's recent revamp takes time to build. However, comps see a significant step up in the fourth quarter following a 2.0 conversion, with outperformance accelerating further in the second year (to over 500 basis points year-over-year comp growth relative to growth at the regular stores). We are also very excited about the company's efforts in the delivery business, where it sees a mass-market opportunity, which is a different view than their peers (who view it as a modest play). Importantly, the company is already past breaking even in its test markets and noted that startup costs are minimal. All in, we are in Panera for the long term and believe its results and commentary validate its ability to deliver sustainable 20%+ annualized EPS growth in the long term. We reiterate our $225 price target.

PayPal Holdings (PYPL:Nasdaq; $34.30; 2,150 shares; 3.29%; Sector: Technology): Shares of PYPL took a slight hit this week and have been on a downward trend following the initial bounce after reporting very solid earnings and announcing a powerful buyback program. We view the selloff as overdone and, in fact, recommended buying shares earlier this week (although we were restricted). This week, a research note from Piper Jaffray that highlighted a convergence and increasing competition in the digital payments industry was one of the main downward forces on the stock. We are not concerned, however, as we view this issue as widely known and largely debunked by PayPal's continued ability to deliver results and grow transaction volumes. The management team, led by CEO Dan Schulman, has a clear vision and has proven its prowess in taking their various products to new levels. While we do not doubt an increasing number of entrants into the market, we believe A) that PYPL's value proposition to its loyal customers remains intact, and B) the overall market will continue to broaden as the world moves away from cash. Even so, we remain very high on PYPL's subsidiaries (Braintree, Venmo, Xoom, etc.) and love this story in the long term. We reiterate our $42 target.

Stanley Black & Decker (SWK:NYSE; $91.76; 975 shares; 4.00%; Sector: Industrials): We became incrementally more positive on SWK this week (as we had been disappointed by the company's guidance on its recent earnings report) when we heard some encouraging comments from some of its key peers. First off, we do believe expectations have been washed out and the upside potential remains strong and the risk/reward compelling. Masco (MAS), a manufacturer of home improvement and construction products, recently reported strong quarterly results and issued encouraging guidance, with management striking a convincing, optimistic tone around consumer behaviors amid what many believe to be a difficult macro backdrop. This incrementally positive commentary around the macro backdrop was echoed by management teams of several other building product companies -- Beacon Roofing Supply (BECN), Owens Corning (OC), USG Corp. (USG), all of which reported results earlier this month. We maintain a relatively constructive long-term view around the homebuilding/building product sector based on our outlook for the housing recovery to continue, though at a modest pace. We believe this bodes well for SWK's business moving forward, and lends credibility to the idea that initial 2016 guidance will prove conservative. That being said, we are only taking a small bite into the name as we remain cautious on the continued volatility plaguing global markets. We keep our $105 price target.

Target (TGT:NYSE; $69.95; 1,200 shares; 3.75%; Sector: Consumer Discretionary): We believe the sell side's fiscal-first-quarter 2016 consensus estimates for TGT are aggressive given the difficult year-over-year comparison and negative read-throughs from Costco's disappointing January sales report. We reiterate that the impact will be near term, and not reflective of deteriorating underlying trends at the retail chain (unlike Mondelez, where we believe the underlying story has cracked). Therefore, while we have reduced our position in TGT ahead of the quarter, we would also look to build back on any post-results weakness. Our $80 price target -- which we lowered last week to reflect downside to EPS estimates in the near term -- remains unchanged.

Walgreens Boots Alliance (WBA:Nasdaq; $77.08; 1,250 shares; 4.30%; Sector: Health Care): Earlier this week, analysts from Deutsche Bank met with Walgreens management at their headquarters. Importantly, the meeting reinforced confidence in management's ability to handle both the opportunities and challenges facing all the business segments. As for the deal with Rite Aid (RAD), management confirmed that it is expected to close in the latter half of this year and remains confident in the $1 billion synergy figure. A key driver of synergies will be store rationalization, where the company believes it will generate several hundred million dollars in benefits over the coming years. Importantly, from a Walgreens standpoint, the operating margin expansion opportunities remain on track despite some concerns regarding GM pressures. On the front-end opportunity, the strategy remains a crucial part of the profit mix moving forward and management noted that they are making meaningful progress. Our target remains $90.

Wells Fargo (WFC:NYSE; $47.31; 1,900 shares; 4.02%; Sector: Financials): Wells Fargo's strong fourth- quarter earnings results last month reflect strong returns, solid loan/deposit growth and quality assets. We expect Wells to outperform peers in an environment of economic uncertainty and volatility. Upside -- while relatively contained given the stable nature of its business -- should be driven by its attractive dividend (3.2%), proven track record of growth, profitability and risk management, and a diversified business model that offers pockets of growth. To top it all off, the company's sizable share buyback program should at the very least help provide a floor on shares, with the potential to drive upside to earnings estimates.

WhiteWave Foods (WWAV:NYSE; $36.09; 2,900 shares; 4.68%; Sector: Consumer Staples): WWAV shares had a huge rebound this week after the company reported convincing quarterly results that outpaced some very low expectations. The company's Americas foods and beverages segment sales were up 18% (10% from acquisitions and 9% organic, minus 1% from a negative FX impact). The underlying growth is very solid, especially as it comes on the heels of solid volume increases. In addition, we are very encouraged by Vega's contribution (which WWAV acquired late last year) to the plant-based beverage division, as its net sales grew over 50% ex-FX. Similarly, Wallaby's (also acquired last year) net sales grew 30% year over year, helping to boost the premium dairy division. Both of these divisions outperformed the broader segment as a whole. We continue to appreciate WWAV's consistent growth in this segment and see momentum headed into the coming year, as the acquisitions continue to add to the value proposition. While the Americas fresh-foods segment was a bit of a drag, this was due largely to previously planned implementation programs. In addition, while the European segment was admittedly hampered by currency headwinds, constant currency growth of 17% was extremely encouraging, especially considering the results were mostly boosted by volume growth. Although the market initially misinterpreted the results, the stock soon bounced back in a big way -- deservedly so. We would press investors to find another company with high teens to low 20s percentage growth in operating income (which is still mid- to high teens, including negative FX impacts) that does business in a consistently growing category and has a history of making accretive, strategic acquisitions. Our target remains $45.


Dow Chemical (DOW:NYSE; $46.01; 1,400 shares; 2.88%; Sector: Chemicals): We trimmed our position in DOW this week into considerable strength on the heels of a strong quarter. While we remain confident in the company's powerful synergy potential from its impending merger (and subsequent breakups) with DuPont (DD:NYSE), we wanted to take advantage of the stock's recent outperformance (click here to read our analysis of its quarterly report) to capture some gains above our cost basis. As a reminder, we recommended adding to the position ahead of the company's quarterly report (click here to read our Alert) as we anticipated better-than-expected results and a solid outlook. We are downgrading our rating to Two from One and would await incremental weakness before considering adding to our position. We reiterate our $55 long-term target.

Energy Transfer Partners (ETP:NYSE; $23.66; 1,700 shares; 1.80%; Sector: Energy): Earlier this week, ETP announced that Tom Long will replace Jamie Welch as group CFO of its general partner, Energy Transfer Equity (ETE). In a follow-up filing, the partnership clarified that the decision to replace Welch "was not based on any disagreements with respect to any accounting or financial matter(s)." While Welch's distinctive personality attracted a new investor base -- largely hedge funds with an event-driven trading mandate -- we believe he simultaneously drove away the fundamental, income- oriented investors who had been hallmarks of the former shareholder base and favor consistency, security and stability. Welch's role as the open-ended voice for the entire complex appeared to provide fuel for the speculation, uncertainty and rumor-mongering that has fomented since the Williams Companies (WMB) merger announcement and subsequent collapse in commodity prices (not to say this was his intention, but rather a byproduct of his disposition). Moving forward, we believe CEO Kelcy Warren must become the new face of the company and its upcoming earnings call will be a good opportunity to do so. We have long held that no one should own ETP with a short-term horizon. To quote from our Jan. 13 bulletin (click here to read), "For investors who view ETP as a short-term investment, get out." For those willing to take a 12- month view and beyond, you are getting paid a nice amount (over 20%) to wait. This is where value is created. We maintain our long-term $35 target and Two rating.

Eli Lilly (LLY:NYSE; $71.27; 900 shares; 2.87%; Sector: Health care): We added to LLY again this week as we view the upside potential as compelling given the recent selloff and the company's strong pipeline, headlined by promising Alzheimer's research. We continue to believe the pipeline-driven story will lead to top- line growth and operating leverage that will drive share gains. In addition, the company is set up well throughout the year as it has rebalanced expectations (with its guidance issued earlier this year). Overall, we view the shares as undervalued due to the broader market's concern over regulatory and campaign-driven headlines, and believe investors will quickly warm up to the name as we get closer to the Alzheimer's data read-outs later this year. Our $90 price target remains unchanged.

Kraft Heinz (KHC:Nasdaq; $71.92; 850 shares; 2.73%; Sector: Consumer Staples): We believe KHC has more levers to pull from a cost perspective given the low- hanging fruit within Kraft's business in particular, but also recognize it will take several quarters for the newly combined entity to communicate the magnitude of these synergies. Given the lack of near-term catalysts and concerns around fourth-quarter results, we are glad we decided to steadily trim the position over the past several weeks and believe it helps de-risk the portfolio in the short term. We will consider adding back to our position on any post-earnings selloff. Our long-term target remains $80.

Lockheed Martin (LMT:NYSE; $206.08; 450 shares; 4.14%; Sector: Industrial): We added to our LMT position this week as shares were seemingly being dragged down in relation to an investigation into Boeing's (BA) accounting methods (which we don't think affects LMT in any way as BA follows program accounting while LMT generally follows contract accounting, and the issue is dealing in aerospace). Moving forward, we continue to view LMT as the leader in the defense space and view its lucrative dividend and aggressive share repurchase program as extremely attractive in this current market. In addition, as we have mentioned many times, we also expect LMT to be a major beneficiary of the increasing Defense Department budget. This week even, it was reported the company was in talks with the Pentagon for a $15 billion deal for its next two F-35 fighter jet batches, which is very encouraging given that it is the company's main program (and is only expected to become more profitable moving forward). We reiterate our $225 target.

Occidental Petroleum (OXY:NYSE; $67.06; 650 shares; 1.95%; Sector: Energy): On Thursday, we further trimmed our position in OXY and redeployed the funds into Lockheed Martin. Occidental's best-of-breed status is, unfortunately, irrelevant amid the current commodity environment; as a producer, the company is irrevocably linked to the volatile oil trade. We have been persistent in our efforts to de-risk our portfolio with the continued volatility and reallocate that capital into quality. Overall, we are not looking to fight the excruciating macro backdrop facing E&P companies at the moment, and while OXY's 4.5% dividend yield appears safe, it is merely the best house in a horrible neighborhood, but OXY remains ahead of its peers and continues to boast a strong balance sheet. Our $70 target remains unchanged.

Starbucks (SBUX:Nasdaq; $55.86; 600 shares; 1.50%; Sector: Consumer Discretionary): We were given the unlikely opportunity this week to add to Starbucks below our cost basis, something that, candidly, we never thought we would have a chance to do. Bottom line: We viewed the 14% selloff (at the time) in shares of SBUX since last Monday as overdone. Starbucks' numerous sales drivers (continued market-share gains off existing category leadership, food/beverage innovation, store growth and pricing power), along with cost drivers (lower input prices, mix shift toward higher margin categories - - e.g., K-Cups -- and regions -- e.g., China, Asia Pacific and Europe, Middle East, Africa) help drive visible 15% to 20%-plus earnings growth long term. The scarcity value in and of itself is compelling; the consistency and visibility offer yet another layer on top of an already-compelling investment thesis. The company continues to leverage its leadership position in technology and has become one of the most recognizable brands in the world. With CEO Howard Schultz at the helm, the long-term story remains bright. Our target is $68.

Thermo Fisher Scientific (TMO:NYSE; $126.48; 475 shares; 2.68%; Sector: Health Care): The company recently reported strong fourth-quarter results, which were unfortunately overshadowed by severely disappointing guidance for 2016. While we believe the disappointing guidance may prove conservative, and view core/organic trends within its key categories as intact, we expect shares to experience volatility over the next two quarters and test levels below $120. The back half of the year remains compelling with low expectations, strong underlying trends (which -- following deep analysis -- suggest upside to the company's own estimates), powerful capital deployment opportunities (we model over $2 billion in incremental buyback activity this year) and enhanced visibility following the Affymetrix (AFFX) deal's closure. In short, for subscribers with at least a longer-term investment horizon, we remain bullish long term on TMO. Anyone owning shares for a rally between now and 2Q 2016 result should temper their expectations. We reiterate our $150 target long term.


Mondelez International (MDLZ:Nasdaq; $38.10; 1,500 shares; 2.55%; Sector: Consumer Staples): Earlier this week, we identified a handful of "losing" stocks within our portfolio that we would be willing to sacrifice (i.e., at the very least, trim our position) on any bounce or relative outperformance, in the hope of redeploying that cash toward higher-quality names. Mondelez and Starwood Resorts (HOT) were the two names at the very top of our list; we exited the latter (HOT) earlier this week, which means MDLZ is next up on the potential chopping block following the company's recent disappointing 2016 guidance. We will look to trim a good portion of our position next week into any meaningful strength but likely would not exit outright given the presence of powerful activist investors (most notably, Nelson Peltz).

Twitter (TWTR:NYSE; $15.88; 700 shares; 0.50%; Sector: Technology): Shares of Twitter were dragged down following the company's earnings report that was highlighted by a decline in monthly active users on a sequential basis. Understandably, this was extremely disappointing given that the main critique of the platform (among many) is the lack of user engagement and the inability of the management team to embed Twitter as an essential service for users (both for those who actively tweet and those who really only use the timeline as a news feature). That being said, management did note that user levels have already rebounded back to 3Q levels. While that is slightly encouraging, it doesn't discount the decline experienced in 4Q and could be a sign of volatility in the metric for quarters to come, which, unfortunately, is a reflection of the company's execution. The company's latest platform update is the algorithmic timeline, whereby users can essentially choose whether they want to view the "best, most relevant" tweets first, or if they want to continue using the reverse chronological timeline. We like the change, in theory (as we have with many of the other recent updates), but it all will continue to come down to execution. Twitter has to execute on its plan and turn the platform into an essential one for users -- it has to strongly communicate the idea that the product is the best way to view live, breaking news/events. Until we see concrete results, we remain on the sidelines and continue to be skeptical of Jack Dorsey's dual-CEO role (as he leads Square as well).


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


Costco Faces Food Deflation
Stocks in Focus: COST

Are customers spending less per trip?

02/12/16 - 12:47 PM EST
Trimming Occidental to Buy More Lockheed
Stocks in Focus: OXY, LMT

We believe LMT has been unfairly dragged lower in today’s trading.

02/11/16 - 02:02 PM EST
Selling Pressure Continues, but There Are Bright Spots
Stocks in Focus: BAC, WFC, CSCO, WWAV

As Janet Yellen's testimony has increased confusion, markets continue to sell off.

02/11/16 - 11:47 AM EST
Weekly Roundup

This week, the market showed signs of revival, but many hurdles remain. Portfolio moves included checking out of one position.

02/12/16 - 05:06 PM EST

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free

Special Subscription Bundles

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

Real Money Pro
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
Growth Seeker checkmark | Portfolio Plus checkmark | Real Money Pro Portfolio checkmark | Chairman's Club
Dividend Stock
checkmark | Portfolio Plus checkmark | Real Money Pro Portfolio checkmark | Chairman's Club
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
checkmark | Chairman's Club
Daily Swing Trade checkmark | Chairman's Club
Top Stocks checkmark | Chairman's Club
Quarterly Call
with Jim Cramer and
Jack Mohr
checkmark | Chairman's Club
Started Now Started Now Started Now


Chart of I:DJI
DOW 15,973.84 +313.66 2.00%
S&P 500 1,864.78 +35.70 1.95%
NASDAQ 4,337.5120 +70.6750 1.66%

Action Alerts PLUS Holdings

Holdings 1

Stocks we would buy right now

Symbol % Portfolio
Industry Trade Now
AAPL 3.44% Consumer Durables
AEP 1.35% Utilities
AGN 6.01% Drugs
BAC 3.58% Banking
BIIB 4.42% Drugs
COST 2.99% Retail
CSCO 2.97% Computer Hardware
DOW 2.88% Chemicals
FB 5.47% Internet
GOOGL 4.74% Internet
JACK 3.95% Leisure
PNRA 4.90% Leisure
PYPL 3.29% Financial Services
SWK 4.00% Industrial
TGT 3.75% Retail
WBA 4.30% Retail
WFC 4.02% Banking
WWAV 4.68% Food & Beverage
Holdings 2

Stocks we would buy on a pullback

Symbol % Portfolio
Industry Trade Now
ETP 1.80% Energy
KHC 2.73% Food & Beverage
LLY 2.87% Drugs
LMT 4.14% Aerospace/ Defense
OXY 1.95% Energy
SBUX 1.50% Leisure
TMO 2.68% Health Services
Holdings 3

Stocks we would sell on strength

Symbol % Portfolio
Industry Trade Now
MDLZ 2.55% Food & Beverage
TWTR 0.50% Internet