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Jim Cramer's Action Alerts PLUS

This Is Why We've Raised Cash

By Jim Cramer and the AAP Team | 2017-08-17 11:38:37.0
Stocks in Focus: WFC

The markets are trading lower this morning due to weaker-than-expected earnings in retail and technology. Adding to the slide are yesterday's minutes from the Federal Reserve's July meeting, suggesting a mixed outlook of when the next interest rate hike will occur. 

In June, the Fed suggested the possibility that it would raise interest rates for the third time this year, but soft inflation numbers are creating an internal debate on the appropriateness of another hike. The decision remains split as some officials believe another hike should not occur until there is confirmed data indicating inflation is on track to meet the Fed's 2% target, while others think the strong labor market could push inflation above 2%, with difficulty to control. 

Like the Fed, this split decision is being carried into the market as investors are seeing a 50% probability that rates will remain the same through the end of the year. Our outlook is that while we believe the Fed should raise rates in September, we view the uncertainty as a signal that it most likely will not. The sputtering of the financial rally is most likely factoring in the deferred rate increase, too, which is another reason why we believed it was best to exit Wells Fargo (WFC) earlier this week (read here). 

Back to today's trading, the volatility we have experienced over the last two weeks is the exact reason why we were so keen on raising cash heading into the month. As we explained during our monthly member call, which you can watch here, August is typically a difficult period to navigate, which is why we steadily built up our cash through profit-taking before the unpredictability set in. 

By building a strong cash balance in the portfolio in advance of this market uncertainty, we put ourselves in the correct position to take advantage of any weakness in the market by increasing our investments at a discount. In addition, although this outlook has already been validated by the swings in the market since last Thursday (with multiple days of plus or minus 1% swings in the S&P 500), we still anticipate the increasing volatility is not out of the woods yet. For this reason, while we are buyers on the down days, we are being very strategic in allocating our cash to leave us plenty of room for future opportunities. 

We remind club members that on Friday we detailed our game plan on how we viewed market selloffs, providing tips and tools on financial discipline. We encourage members to read that post for additional information in our approach. 

This all said, we believe our strong cash position makes us well prepared for any twists and turns in the market, and we plan to capitalize on these openings as we are long-term investors in high-quality companies.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.

Scaling Further Into Illinois Tool Works
Stocks in Focus: ITW

The company's business model will help it perform during any period of cyclical weakness.

08/17/17 - 10:33 AM EDT
Money We Made on Cisco Was Well Spent
Stocks in Focus: CSCO, AVGO, ATVI, NVDA

We're glad we got out of CSCO and into Activision, Nvidia and Broadcom.

08/16/17 - 03:46 PM EDT
Weekly Roundup
Stocks in Focus: DXC, XEC, ATVI, LLY, ITW, WDC, WFC, ABT, AGN, AVGO, CMCSA, DHR, EZU, FB, GE, GOOGL, KEY, MMP, NUE, SLB, TJX, AAPL, ARNC, C, DOW, LUV, NWL, NXPI, PEP, APA, SBUX

Markets see volatility as geopolitical tensions rise. We closed out one tech position and initiated another.

08/11/17 - 05:55 PM EDT

Markets

Chart of I:DJI
DOW 21,913.36 -111.51 -0.51%
S&P 500 2,455.58 -12.53 -0.51%
NASDAQ 6,298.6907 -46.4184 -0.73%

Action Alerts PLUS Holdings

Holdings 1

Stocks we would buy right now

Symbol % Portfolio
Weighting
Industry
ABT 0.00918787763009798 Health Services
AGN 0.04620160814247074 Drugs
ATVI 0.03233762819948362 Computer Software & Services
AVGO 0.023339799921371755 Electronics
CMCSA 0.030230245511637582 Media
DHR 0.0346243271697781 Health Services
DXC 0.03157372973307789 Computer Software & Services
EZU 0.015420460078873406
FB 0.06251087741081768 Internet
GE 0.0217872058968698 Industrial
GOOGL 0.052148838983882395 Internet
ITW 0.02554100444121094 Industrial
KEY 0.013346016811332654 Banking
LLY 0.040648725080107195 Drugs
MMP 0.03373144681599717 Energy
NUE 0.04103733621854034 Metals & Mining
NVDA 0.012134290271113488 Electronics
SLB 0.03277805415637452 Energy
TJX 0.04952645401115091 Retail
XEC 0.0323801903717882 Energy
Holdings 2

Stocks we would buy on a pullback

Symbol % Portfolio
Weighting
Industry
AAPL 0.041254958456062904 Consumer Durables
ARNC 0.020156334485912027 Industrial
C 0.0311120226900347 Banking
DOW 0.0324064678868632 Chemicals
LUV 0.018130375084213887 Transport
NXPI 0.022914548304172052 Electronics
PEP 0.026445543129144853 Food & Beverage
Holdings 3

Stocks we would sell on strength

Symbol % Portfolio
Weighting
Industry
APA 0.03361763926831318 Energy
NWL 0.011216427772719008 Consumer Durables
SBUX 0.02373858897057339 Leisure