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Jim Cramer's Action Alerts PLUS

Weekly Roundup

By Jim Cramer and Jack Mohr | 07/22/16 - 06:41 PM EDT

Equities were relatively balanced for the week as a rally on Wednesday was ultimately offset by a broad pullback one day later. The market kicked off a sleepy start on the week as investors speculated on the upcoming earnings weighted to the back half of the week. Ultimately, some positive initial earnings in the heavy-weighted technology sector sent a spark across the board and helped overshadow a sluggish oil trade that has struggled to gain its footing on worries of recent product builds.

However, some weak earnings reports from the industrial sector, accompanied by less- than-inspiring guidance, to close out the week persuaded investors to take profits after an eight-day rally on the Dow Jones Industrial index. A strengthening dollar throughout the week helped add to the pressure, taking the legs out from under the recent rally.

Next week will be one of the busiest of the earnings season, highlighted by some high-profile tech companies, such as Apple and Facebook. With many still questioning the stability of the unexpected rally over the past month or so, the quality of upcoming earnings remains of utmost importance.

Treasury yields were volatile and finished the week roughly flat after, at points, breaking the 1.62% threshold. The dollar was largely stronger against the euro; gold was slightly lower, although it picked up steam after a selloff on Wednesday; and crude oil prices turned lower again as traders shifted their focus to the continued global oversupply.

Second-quarter equivalent earnings have been relatively mixed, but somewhat positive compared with expectations, as 67.1% of companies have surprised to the upside vs. estimates. Second-quarter equivalent earnings continued this week for AAP, with Lockheed Martin, Visa, PayPal, Schlumberger, Starbucks and General Electric all reporting earnings.

Lockheed Martin (LMT:NYSE) reported second-quarter sales of $12.9 billion (up 11% year over year), topping consensus of $12.55 billion, while earnings per share (EPS) of $3.32 (up 13% year over year) shattered consensus of $2.93. Strength within the company's aeronautics division anchored the top- and bottom-line beats, with successful early ramp of its F-35 fighter jet program -- the largest warplane project in the world and most sophisticated of its kind. It moved the needle, driving $400 million in sales compared to a year earlier on increased volume. Importantly, it appears the company has delivered on many of the program's previously discussed efficiencies as the prohibitively high fixed costs have rapidly transformed into operational leverage as it moves along the product life cycle. If the quarterly results failed to convince, management raised its full-year fiscal 2016 forecast for net sales, EPS, cash from operations and operating profits (both consolidated and by segment). The company now expects fiscal 2016 sales of $50 billion to $51.5 billion (up from $49.6 billion to $51.1 billion) and EPS of $12.15-$12.45 (up from $11.50- $11.80). We think guidance may prove conservative as the increase simply adjusts for better-than-expected second-quarter results rather than extrapolating the broad-based momentum into the back half of the year.

Visa (V:NYSE) reported a bottom-line beat for its fiscal-third-quarter results, with earnings per share (EPS) of $0.69 coming in 3 cents ahead of consensus expectations. On the top line, revenues of $3.63 billion were roughly in line with consensus. The earnings beat was mostly driven by lower-than-expected operating expenses and better- than-expected processed transactions (up 10% year over year). In terms of guidance, Visa management sees fiscal 2016 adjusted EPS up by low double digits in constant currency, roughly in line with consensus expectations. Importantly, guidance now reflects the acquisition of Visa Europe, which will contribute roughly four basis points of negative foreign currency impact. On revenues, management expects fiscal 2016 sales up 7%-8% on a constant dollar basis, excluding Europe, which is unchanged from prior guidance. That being said, the company sees an incremental three to four basis points from Visa Europe in the full fiscal year, with 13-14 basis points of tailwinds coming in the fourth quarter. Importantly, management expects Visa Europe to add 2%-3% EPS acceleration in fiscal 2017, a likely conservative estimate, in our opinion.

PayPal (PYPL:Nasdaq) reported a top-line beat for the second quarter, with revenues of $2.65 billion (up 15.4% year over year; 19% in constant currency) coming in ahead of consensus expectations of $2.6 billion. EPS of $0.36 in the quarter was in line with consensus. Specifically in the quarter, PayPal continued to gain market share and extended its leadership position, processing $86 billion in total processing volumes (TPV), representing astounding growth of 29% ex-FX. As has been the case since the company went public last year, this incredible TPV growth substantially outdoes the pace of e-commerce expansion. While the transaction take rate of 2.69% declined sequentially vs. 2.76% in the first quarter and on a year-over-year basis vs. 2.91% in 2Q, we do not view this as an issue as PYPL's larger merchant penetration (and associated larger volumes) inherently comes with declining margins. On the ever-growing and all-important mobile side of the business, the company processed $24 billion in total mobile payment volumes, up a shocking 56%, comprising 28% of total TPV for the quarter. Importantly, Venmo processed $3.9 billion of TPV, up 141%. The growth across the board truly speaks for itself.

Schlumberger (SLB:NYSE) reported solid second-quarter results, with earnings per share of $0.22 in line with consensus. The upside was driven by higher margins within the company's recently acquired Cameron International business, partially offset by slightly lower drilling profits. Importantly, the company explicitly stated in its press release that it is taking swift advantage of the recent rally in oil, shifting focus away from protecting margins and market share toward recovering prior price concessions and renegotiating contracts with weaker counterparties. North American revenues were down 20% quarter over quarter, Latin America down 26% q/q (mostly on Venezuela) and Eastern Hemisphere down 4% q/q. This isn't unexpected given the continued, depressed energy environment, but does highlight the company's ability to adjust to the current environment on the costs side of the business.

Starbucks (SBUX:Nasdaq) reported fiscal-third-quarter earnings per share (EPS) of $0.49, in line with consensus, and global same-store-sales (SSS) growth of 4% year over year, which fell below 5.5% consensus. Strength on the SSS side was seen in China, but weaknesses in the company's largest market -- the Americas -- dampened the initial reaction to the results. Management reiterated fiscal 2016 EPS growth guidance of 19%-20%, underpinned by continued expectations for 10% revenue growth and a slight operating margin expansion. The company's operating margin increased 30 basis points to 19.6% as lower commodity costs (notably coffee) helped offset a step- up in labor and technology investments. Starbucks also noted it now has over 12 million active loyalty members, up 18% from a year ago.

General Electric (GE:NYSE) reported a top- and bottom-line beat, with second-quarter revenue of $33.5 billion topping consensus of $31.75 billion and earnings per share of 51 cents topping consensus of 46 cents. Despite the strong results, the reaction was tempered by a mixed near-term outlook and the 20% run in shares over the past five months. Strength in segment margins was offset by weak cash flow and equipment orders. Positives from the quarter include better-than-expected industrial margins and lower restructuring costs. By segment, strength in digital orders (up 15%), health care (+6% year over year) and aviation service sales (+16% year over year) helped offset weak equipment orders (down 30% organically), driven by double-digit year-over-year declines in power, oil & gas, aviation and transportation. For the first half of the year, organic growth within core serves grew 5%, with strength in aviation (+17% year over year), health care (+6%), renewable energy (+27%) and power (+7%) offset by weakness in oil & gas and transportation.

Moving onto the economic information from the week, the Commerce Department reported on Tuesday that housing starts (i.e., groundbreaking on new homes) rose 4.8% in June to a seasonally adjusted annual rate of 1.189 million. Expectations had called for a meager 0.9% increase. The beat demonstrated increased construction activity across the board, but May's figure was revised down, somewhat dampening the sentiment. Regardless, housing starts overall were higher than average throughout the second quarter, helped by June's results, suggesting that the housing market continues to get a boost from a tightening labor market and low interest rates.

Digging deeper into the results, groundbreaking on single-family homes, which make up the large majority of the market, increased 4.4% in the month. Multifamily homes also saw an uptick in construction, rising 5.4% and showing continued demand for rental accommodations as potential homebuyers remain wary of the long-term commitment.

Overall, the key worry for the housing market remains around the question of demand and pricing, as increased interest and low supply have caused asking prices to skyrocket. For now, demand has remained strong, but economists are remaining cautious for the months moving forward. We will let the results do the talking.

On Thursday, the Department of Labor reported that initial jobless claims for the week ending July 16 were 253,000, which was 1,000 claims lower than last week's figure and 12,000 claims below expectations. The further decline brings claims to a three-month low, indicating continued strength in the jobs market and further cementing the belief that May's weak jobs report was a one-off rather than a trend. Claims have remained below 300,000 -- the threshold typically used to categorize a healthy jobs market -- for an astounding 72 straight weeks, which remains the longest streak since the early 1970s. The four-week moving average for claims (used as a gauge to offset volatility in the weekly numbers) fell 1,250 claims to 257,750. The data, for now at least, continue to point toward a healthy jobs market, one that can continue to support this economy.

Also on Thursday, the National Association of Realtors reported that existing home sales jumped 1.1% in June to an annual rate of 5.57 million, closing in on the strongest rate in almost a decade. Estimates had called for a 0.7% climb. The surge is very encouraging for the housing market given that existing home sales make up roughly 90% of total sales (new-home sales comprise the rest). We are especially encouraged by the increase considering that May's results marked the fastest pace since 2007. In addition, the report builds on the positive housing-starts data we received on Wednesday.

Importantly, many economists expect sales will continue to rise throughout this year. Demand is expected to remain strong by continued low mortgage rates and solid wage growth (as we noted above). To that point, however, the strong demand in the housing market -- which has provided a boost to the economy and helped offset slowdowns in other areas (e.g., the energy sector) -- has not been met by equal levels of supply. Total housing inventory at the end of June decreased 5.8% from a year ago to 2.12 million existing homes available for sale. As of now, it would take 4.6 months to exhaust the entire supply of homes on the market, down from the five-month time frame a year ago.

In the end, it seems to be a continued battle between supply and demand, as rising prices keep new buyers out of the market while near record-low mortgage rates entice new buyers to wet their feet. The uptick in housing starts last month (as per the report we highlighted above) is helping to address supply shortages, but we will have to see a steady increase month to month before we rise back to normal levels of inventory. We will continue to follow the numbers to see if the current conditions can persist.

On the commodity front, crude oil prices kicked off Monday on a down note and trended lower for the majority of the week. Rising crude and gasoline stockpiles have put a damper on the recent rally, causing traders to refocus their attention on the global oversupply. Expectations for strong summer driving demand had helped support the trade over the past couple of months (oil prices are up nearly 75% since hitting 12- year lows of around $27 for Brent and about $26 for West Texas Intermediate in the first quarter), but as the summer comes to a close, the belief that we are beyond peak demand has put pressure on prices. Increasing rig counts have also added to the skepticism of late.

As the week moved forward, prices touched two-month lows on Wednesday morning following a slightly positive advanced inventory report that failed to shift investor focus away from gasoline-build concerns. Prices recovered throughout the day, however, as the Energy Information Administration's inventory report indicated a slightly higher-than-expected drawdown, and most importantly, extremely active refiner activity. Refiners operated at nearly five times expectations, helping to assure investors that an oversupply of fuel products could dampen refiner demand for crude. For the time being, traders ignored the 900,000-barrel build in gasoline inventories that trounced expectations for a 500,000-barrel drawdown.

The rally didn't last long, however, as crude settled down more than 1% on Thursday, virtually erasing the gains from Wednesday. The gasoline build was at the top of mind, renewing anxieties of decreasing demand as the summer moves forward, especially with refinery maintenance season approaching.

All in, crude oil continues to face headwinds, with supplies remaining at all-time highs, despite the persistent drawdowns and demand prospects slowing. The recent breakout of the dollar has only added pressure on the trade. That being said, the relative stability of prices between the $40 and $50 levels has certainly helped sustain our recent market rally. We will continue to watch prices to see if we get a significant movement in either direction.

Within the portfolio this week, we added to our Panera (and upgraded it to One from Two), Starbucks and NXPI positions; trimmed our Facebook position; and exited our WhiteWave (WWAV) position. We also recommended that subscribers trim their PYPL positions heading into the quarter to lock in gains from the recent rally (although we were restricted).

On WWAV, we stayed true to our word and exited the position once our restrictions were lifted. We hadn't yet seen a higher bidder emerge and would point out that the sizable premium, $310 million breakup fee and $300 million in expected synergies make it difficult for bidders to trump Danone's all-cash offer in a deal unanimously approved by both companies' boards.

As for Panera (PNRA:Nasdaq), SBUX and NXP Semiconductors (NXPI:Nasdaq), we wanted to take advantage of the large influx of cash from the WWAV sale and bulk up our stakes in three of our favorite growth names. We consider each to be undervalued and underappreciated for their distinctive, differentiated business models and believe each has a long runway of growth ahead. We remain confident in the earnings power for PNRA driven by its 2.0 initiatives; we love SBUX's focus on mobile, international growth story and unparalleled same-store-sales growth; and we see significant upside in NXPI as the Internet of Things becomes more thoroughly appreciated and also after it is able to complete the divestiture of its Standard Products division, allowing it to focus on higher-margin businesses.

As for Facebook (FB:Nasdaq), with shares trading about 85% above our cost basis, we wanted to take some profits on our largest position in the portfolio. The move was nothing more than an attempt to take advantage of the opportunity to ring the register modestly on parabolic profits, rather than succumb to sheer greed. As we mentioned this week, it is important to lock in tangible profits sometimes, even in your highest-conviction names.

Moving onto the broader market, second-quarter earnings have started off disappointing, but somewhat positive compared to estimates. Total second-quarter earnings growth is down 5.6%; of the 52 non-financials that reported, earnings growth is down 3.1%, vs. expectations for an overall 5% decrease throughout the season. Revenues have increased 1.4% vs. expectations throughout the season for a 0.57% decline; 67.1% of companies have beaten EPS expectations, 20.0% have missed the mark and 12.9% have been in line with consensus. On a year-over-year comparison basis, 64.3% have beaten the prior year's EPS results, 31.4% have come up short and 4.3% have come in virtually in line. Energy, health care and consumer staples have had the strongest performance thus far vs. estimates, whereas materials and information tech have posted the worst results in the S&P 500 to begin the earnings season.

Next week, 186 companies in the S&P 500 are set to report earnings. Within the portfolio, 10 will report:

Tuesday: Apple (AAPL:Nasdaq), Panera, Twitter (TWTR:NYSE)

Wednesday: Comcast (CMCSA:Nasdaq), NXP Semiconductors, Facebook

Thursday: Dow Chemical (DOW:NYSE), American Electric Power (AEP:NYSE), Thermo Fisher Scientific (TMO:NYSE), Google (GOOGL:Nasdaq)

Key reports for the broader market include: Danaher (DHR), Kimberly-Clark (KMB), Philips (PHG), Rockwell Collins (COL), Sprint (S), Celanese (CE), Express Scripts (ESRX), Gilead (GILD), Las Vega Sands (LVS), Texas Instruments (TXN), 3M (MMM), Ally Financial (ALLY), Baxter (BAX), BP (BP), Caterpillar (CAT), Centene (CNC), CNH Industrial (CNHI), DuPont (DD), Eli Lilly (LLY), Freeport-McMoRan (FCX), JetBlue (JBLU), McDonald's (MCD), Reynolds American (RAI), Sirius (SIRI), Starwood Hotels (HOT), United Tech (UTX), Valero Energy (VLO), Verizon (VZ), Anadarko Petroleum (APC), Chubb (CB), Citrix Systems (CTXS), Ethan Allen (ETH), Illumina (ILMN), Juniper (JNPR), U.S. Steel (X), Universal Health (UHS), Anthem (ANTM), Boeing (BA), Coca-Cola (KO), Corning (GLW), Dr Pepper Snapple (DPS), Fiat Chrysler (FCAU), Gannett (GCI), Garmin (GRMN), Hess (HES), Hilton Hotels (HLT), Mondelez (MDLZ), Ryder System (R), Northrop Grumman (NOC), Norfolk Southern (NOC), Six Flags (SIX), State Street (STT), Supervalu (SVU), Amgen (AMGN), Barrick Gold (ABX), GoPro (GPRO), Groupon (GRPN), Lax Research (LRCX), McKesson (MCK), Marriott (MAR), O'Reilly Auto (ORLY), Pioneer Resources (PXD), Shutterfly (SFLY), Suncor Energy (SU), Whole Foods (WFM), AstraZeneca (AZN), Baker Hughes (BHI), Boston Scientific (BSX), Bristol-Myers (BMY), Bunge (BG), Celgene (CELG), ConocoPhilips (COP), Credit Suisse (CS), Fifth Third (FITB), Ford (F), GrubHub (GRUB), Hershey (HSY), LendingTree (TREE), Marathon Petroleum (MPC), MasterCard (MA), Penske Auto (PAG), Pentair (PNR), PG&E (PCG), Pioneer Foods (PF), Potash (POT), Royal Dutch Shell (RDSA), AFLAC (AFL), Amazon (AMZN), (BIDU), CBS (CBS), Columbia Sportswear (COLM), Expedia (EXPE), Live Nation (LYV), AbbVie (ABBV), Anheuser-Busch InBev (BUD), Aon (AON), AutoNation (AN), Chevron (CVX), Exxon (XOM), LyondelBasell (LYB), Magellan Health (MGLN), Merck (MRK), Newell Brands (NWL), Phillips 66 (PSX), Spirit Airlines (SAVE), Tyco (TYC), UPS (UPS) and Xerox (XRX).

Economic Data (*all times EST)


Monday (7/25)

Dallas Fed Manf. Activity (10:30): -10.0 expected

Tuesday (7/26)

Markit US Services PMI (9:45):

Markit US Composite PMI (9:45):

Consumer Confidence Index (10:00): 95.5 expected

Richmond Fed Manufact. Index (10:00): -2 expected

New Home Sales (10:00): 560k expected

New Home Sales MoM (10:00): 1.6% expected

Wednesday (7/27)

MBA Mortgage Applications (7:00):

Durable Goods Orders (8:30): -0.9% expected

Durable Goods Ex Transportation (8:30): 0.0% expected

Pending Home Sales MoM (10:00): 1.2% expected

FOMC Rate Decision (Upper Bound) (14:00): 0.50% expected

Thursday (7/28)

Initial Jobless Claims (8:30):

Continuing Claims (8:30):

Bloomberg Consumer Comfort (9:45):

Friday (7/29)

Employment Cost Index (8:30): 0.6% expected

GDP Annualized QoQ (8:30): 2.6% expected

Personal Consumption (8:30):

GDP Price Index (8:30): 2.0% expected

Core PCE QoQ (8:30):

Chicago Purchasing Manager (9:45): 54.6 expected

U. of Mich. Sentiment (10:00):


Monday (7/25)

Germany IFO Business Climate (4:00):

Germany IFO Current Assessment (4:00):

Germany IFO Expectations (4:00):

Tuesday (7/26)

Wednesday (7/27)

Germany Gfk Consumer Confidence (2:00):

Eurozone M3 Money Supply YoY (4:00):

UK GDP QoQ (4:30):

UK GDP YoY (4:30):

Thursday (7/28)

UK Nationwide House PX MoM (2:00):

UK Nationwide House PX NSA YoY (2:00):

Germany Unemployment Changes (000's) (3:55):

Germany Unemployment Claims Rate SA (3:55):

Eurozone Consumer Confidence (5:00):

Germany CPI MoM (8:00):

Germany CPI YoY (8:00):

Germany CPI EU Harmonized MoM (8:00):

Germany CPI EU Harmonized YoY (8:00):

Japan Jobless Rate (19:30):

Japan Job-To-Applicant Ratio (19:30):

Japan Natl CPI YoY (19:30):

Japan Natl CPI Ex Fresh Food YoY (19:30):

Japan Natl CPI Ex Food, Energy YoY (19:30):

Tokyo CPI YoY (19:30):

Tokyo CPI Ex Fresh Food YoY (19:30):

Tokyo CPI Ex Food, Energy YoY (19:30):

Japan Industrial Production MoM (19:50):

Japan Industrial Production YoY (19:50):

Japan Retail Trade YoY (19:50):

Japan Retail Trade MoM (19:50):

Friday (7/29)

Japan Housing Starts YoY (1:00):

UK Mortgage Approvals (4:30):

Eurozone Unemployment Rate (5:00):

Eurozone CPI Estimate YoY (5:00):

Eurozone CPI Core YoY (5:00):

Eurozone GDP SA QoQ (5:00):

Eurozone GDP SA YoY (5:00):

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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; $98.66; 820 shares; 3.23%; Sector: Technology): Shares were roughly flat this week as the stock pulled back following a break above the $100 threshold. A couple of weeks ago, we wrote about some positive news in India, one of Apple's largest growth markets. In short, India announced its government would ease a raft of measures that were previously prohibitive to international companies due to the intense local sourcing requirements. The move by India is intended to boost foreign direct investment into the world's second-most-populous country and is a step in the right direction for Apple, which has been keenly eyeing the ability to open stores in India. The new rules are key for Apple as India is one of the main catalysts that we believe can drive long-term growth for the smartphone giant, and having the ability to operate its own stores will only help Apple market its brand to a consumer base primed for technological advances. This week, the prime minister of India approved the three-year exemption on local sourcing requirements for single- brand retail companies with "cutting-edge technology" (Apple fits this bill), paving the way for Apple to open its first store. Importantly, the government will also make it easier for companies like Apple to meet the strict criteria to operate in the country. On a separate note, Apple reports earnings next week, and it seems as if the entire world will be watching. We want to reiterate our belief that this quarter will reveal a challenging environment for Apple, but we note that this has long been expected by analysts and investors. Many are also worried that the company's new iPhone SE may have pressured margins (given the lower selling price). Investors will likely be looking more toward the forward outlook as expectations for this quarter are understandably muted. That being said, we remain in Apple for the long term and view the iPhone 7 as a catalyst, with the iPhone 8 providing another level of boost. We remain excited about the Services business and believe that its long-term value is underappreciated by the market. We reiterate our long-term $130 price target, but we recognize the near-term pressures that will weigh on the stock for the time being.

Allergan (AGN:NYSE; $249.98; 500 shares; 4.97%; Sector: Health Care): Shares charged higher this week as investor expectations around the impending closure of the company's generics sale to Teva Pharmaceuticals (TEVA) appeared to mount. We view this as justified considering Teva's string of completed portfolio divestments of its own (in compliance with FTC regulators who want to avoid any competitive risk) but more importantly by news that Teva had raised debt, the proceeds of which it will use toward the purchase of Allergan's generics portfolio. With respect to AGN, we expect second-quarter results to highlight top-tier branded pharma growth; upcoming generics divestiture/balance sheet optionality is a catalyst for shares. We see visibility into double-digit growth across key products and see the recent launches of Viberzi and Vraylar tracking well. From a valuation standpoint, with shares trading at only about 14x 2017 consensus EPS, we believe AGN growth metrics compare favorably to peers'. Further, with the generics divestiture closing in the coming weeks, we expect AGN to initiate its approximately $10 billion shares repo and see the remaining capacity ($20 billion-plus) focusing on M&A and "steppingstone" type deals, which we believe will reinforce investor confidence in the sustainability of longer-term growth (high-single-digit topline/double-digit EPS). Our price target remains $270, although we believe there is room for further upside once the generics sale overhang is out of the way and Allergan receives an influx of cash it can put toward strategic acquisitions and buybacks.

Cisco Systems (CSCO:Nasdaq; $30.71; 3,900 shares; 4.78%; Sector: Technology): Shares traded sharply higher this week in a continued re-rating to the upside. We recently responded to a Forum question raised by a member who asked, "I've had a little over a 10% gain in CSCO since my first purchase in May and it makes up about 5% of my portfolio. Do you believe it would be wise to take a little off the table or let it run?" In our view, a 10% gain in a traditionally range-bound name like Cisco is hard to come by. Assuming Thursday's close price of $30.60, that means your cost basis was around $27.80, which would imply a 3.75% dividend yield ($1.04-per-share annualized divided by $27.80). It really depends on one's horizon: If you are willing and able to hold onto shares through at least next May, collect the juicy dividend and withstand an inevitable near-term correction at some point in between, then holding for over a year, picking up dividends and then ringing the register for proceeds taxed at a lower level (long-term capital gains, which applies a lower tax rate on gains derived from a security held for over a year) would make sense. In fact, we view Cisco through a 12-16-24-month lens at minimum, with several catalysts in between along with the industry-high dividend yield serving as reasons why we consider it a core holding and would be buyers on a pullback, not sellers into strength. It is a classic buy-and-hold for us. However, the 10% run is uncharacteristic for a low-beta stock like Cisco, so if you would prefer to place your cash somewhere else and could use some cash on the sidelines, then perhaps it's worth ringing the register for a nice profit. If you do not feel comfortable with the possibility of seeing a portion of those "unrealized gains" vanish on any sectorwide or marketwide downward reversal, and would prefer to hold dry powder for a pullback, then it may be worth locking in those gains. Cisco exemplifies a great value, growth and income stock, though the market may discount it in the near term on any weakness in its legacy switching/routing/networking business as it builds out its high-growth, high-margin, highly stable software/cloud/connectivity business. We reiterate our $33 price target.

Citigroup (C:NYSE; $44.30; 2,250 shares; 3.98%; Sector: Financials): Shares took a breather this week on the heels of an epic rally last week, driven largely by the company's clean top- and bottom-line beat. The broad-based beat was driven by lower-than-expected provisions for loan losses, higher net interest income (from a higher interest-earning asset balance), higher non-interest income (from better investment banking fees and trading revenues), and lower (recurring) operating expenses. On valuation, Citi increased its tangible book value (TBV) to $63.53 per share. To recall, TBV is the value of an organization's liquid assets, or what the company would be worth in the open market if it was forced to liquidate today. With shares of Citi trading at a discount of more than 30% to TBV, and in light of Friday morning's strong results, we view the stock as undervalued yet would await a pullback below $42 before adding to the position as we expect a better entry point to emerge. We reiterate our $55 price target.

Dow Chemical (DOW:NYSE; $53.12; 1,475 shares; 3.13%; Sector: Chemicals): Shares continued to rally this week, driven partially by news that the company's merger with DuPont (DD) had been unanimously approved. The stock remains among our Core Holdings and a favorite (behind Cisco) within our Income Index; we view the stock's 3.5% yield, powerful buyback program and synergy realization from internal operations as reasons to hold for the long term. Although we prefer Dow Chemical as a stand-alone, we are comfortable with the DuPont merger as the second-best alternative given the potential for tremendous value creation. With the deal, we see significant opportunity for synergy capture (both on the cost and growth sides) and trust that the eventual separation into three individual spincos will unlock incredible value for each segment. To put the icing on the cake, we believe Dow is getting DuPont at a very reasonable price. That being said, we recognize that any merger of this size comes with regulatory risk, so we cannot rule out the possibility that the deal could be blocked. But we believe Dow is set up for a large capital deployment program should the deal have to be called off. In addition, we believe the consistent flight to quality makes Dow's 3.5% yield highly attractive. Ultimately, with or without the merger, we believe Dow is well positioned to benefit from growth in key end markets, including auto, construction and industrial verticals and, increasingly, seeds and crop protection. In addition, we view the company's announcement this week, raising its cost savings targets to $400 million from $300 million on the Dow Corning restructuring, as an incremental positive. We believe the company is working diligently to scrub its various units to best position itself to capture synergies in the DD merger. We reiterate our $60 price target.

Facebook (FB:Nasdaq; $121.00; 1,000 shares; 4.83%; Sector: Technology): Shares pushed higher this week, touching all-time highs, as investors attempted to get into the name ahead of next week's earnings report. We trimmed our position toward the beginning of the week in order to lock in some profits on this incredible growth name. The move was driven not by any change in our fundamental thesis, but rather to right-size our exposure and avoid the temptation of succumbing to greed following a parabolic run. It is easy to become attached to an investment adorned in green that shows a handsome profit on paper. These investments are often the hardest to trim, even by a modest amount, as they serve as constant reminders of wealth creation within a portfolio. Unfortunately, unrealized wealth creation is virtual; until shares of a security are sold, the gain/loss column is simply theoretical. When it comes to shares of Facebook, our sale of 200 shares marginally reduced our exposure from our largest to second-largest holding and served to lock in some gains, converting paper profits (unrealized gains) into tangible profits (realized gains) and virtual gains into hard cash. Since investing roughly $75,000 in Facebook two years back (1,200 shares at an average price of $63.75) we had watched the position grow to more than $142,000 in value, a $65,000 unrealized gain. We want to make it clear that Facebook remains a core holding and among our favorite long-term investments. The company knows how to execute, understands what its consumers want and has proven adept at growing consistently, rapidly and profitably. The stock's tremendous rally reflects much of these capabilities, however, with expectations already rising steadily ahead of the print as prominent sell-side analysts raise their estimates ahead of next Wednesday's earnings release. We expect the name to emerge as more of a battleground in the near term -- with some analysts touting the continued growth and others questioning the ability for any further rally -- and prefer the certainty of some tangible profits near term over the risk of event-driven volatility. We leave our $145 price target unchanged.

General Electric (GE:NYSE; $32.06; 2,350; 3.01%; Sector: Industrials): Shares traded lower this week, dragged down by what was perceived as a disappointing earnings release Friday morning. The company reported a top- and bottom-line beat, with second-quarter 2016 revenue of $33.5 billion topping consensus estimates for $31.75 billion and earnings per share of $0.51 besting consensus for $0.46. Despite the strong results, shares of GE -- which rallied to seven-year highs this week -- traded lower Friday in the face of high expectations, likely tempered by a mixed near-term outlook and the 20% run in the stock over the past five months. Strength in segment margins was offset by weak cash flow and equipment orders. In our earnings preview, we discussed the need to exercise patience ahead of the quarter, suggesting "second quarter results may be lumpy, with weak demand across equipment orders … balanced by strength in GE Digital, Healthcare and Renewable Energy. We view this quarter as more of a placeholder than tangible catalyst" while also noting we believe "it will take time for traditional multi-industrial investors to appreciate the power of the company's transformation." Our caution proved warranted, as weak equipment orders overrode strength in GE Digital, Healthcare and Renewable Energy. Positives from the quarter include better-than-expected industrial margins and lower restructuring costs. By segment, strength in Digital Orders (+15%), Healthcare (+6% year/year) and Aviation service sales (+16% year over year) helped offset weak equipment orders (down 30% organically), driven by double-digit year-over-year declines in Power, Oil & Gas, Aviation and Transportation. In terms of guidance, management reiterated its forecasts across the board. Management backed its 2016 forecast for operating EPS of $1.45-$1.55 and organic growth target of 2%-4%, which is a high bar as it requires a significant growth acceleration (to 5%) through the back half of the year. GE is still targeting $0.05 of accretion this year from Alstom -- the European renewable energy company it acquired last year -- and continues to expect $1.1 billion in synergies for 2016. The company also backed its capital return guidance for 2016 of $26 billion, via $8 billion in dividends and $18 billion in buybacks. We temper our long-term conviction with discipline and do not intend to add into weakness. We reiterate our $35 long-term price target.

Alphabet (GOOGL:Nasdaq; $759.28; 150 shares; 4.55%; Sector: Technology): Shares continued their rally this week ahead of the highly anticipated earnings report next week. The stock has rallied over 11% in the last month following a selloff that was caused by several lowered estimate revisions from the analyst community along with Brexit concerns. That being said, we believe expectations heading into the quarter could still be somewhat mixed given the difficult comps and evolving competitive landscape that has spooked some investors. The rally over the last couple of weeks, however, is a testament to the company's quality management and long-term growth story in that investors clearly took advantage of the selloff to add to their positions or to initiate new positions. We remain confident in Google for the long term given its adaptive capabilities under CFO Ruth Porat along with its continued dominance in Search. Other growth assets, such as YouTube and now Google Cloud have brightened the outlook even further for the future. We reiterate our $900 long-term price target.

NXP Semiconductors (NXPI:Nasdaq; $84.40; 1,000 shares; 3.37%; Sector: Information Technology): Shares ripped higher this week, largely driven by reduction in private equity overhang but more potently by speculation that the company could be a takeover target, with Qualcomm specifically highlighted. We prefer to avoid the temptation that is takeover speculation, and instead are in the name for the fundamental story, which we consider compelling across all levels. From a value perspective, it is trading at 12x earnings -- a discount to its commoditized, cyclical chipmaker peers -- despite outsized growth, end-market diversification and category leadership. A major overhang has been the presence of private equity ownership, which continues to flood the market with block trade sales priced at a discount to the prior closing price in order to elicit demand. We learned this week that the last of the private equity washout has occurred, with only 2% of remaining shares held by private equity players (the presence of which creates uncertainty). We added to our position this week while the company sat atop our value index for the second straight month. We are bullish around shares both in the medium and long terms and would be buyers on incremental weakness. We reiterate our $110 price target.

Panera Bread (PNRA:Nasdaq; $215.54; 500 shares; 4.30%; Sector: Consumer Discretionary): We upgraded shares to One from Two this week as we believe the pullback over the last couple of months has made the risk/reward more compelling. To refresh, we never lost faith in the earnings growth story at PNRA, but rather we had been wary of the extreme run-up in shares over such a short period of time. The company's Panera 2.0 initiative is starting to bear fruit and we believe the company is poised for long-term growth as a leader in the quick-service restaurant space with its focus on healthy ingredients and advancements in technology. The stock received an extra boost this week when analysts from RBC initiated on the name with an Outperform and a $250 price target. They agree that Panera is investing in the areas that matter the most (technology, healthy ingredients and customer satisfaction) and believe in the rapid, high-return and sustainable growth that validate the stock's relative premium. We reiterate our $235 price target.

Starbucks (SBUX:Nasdaq; $57.90; 1,200 shares; 2.78%; Sector: Consumer Discretionary): Shares traded slightly higher this week and continued higher after the earnings report on Thursday evening. The initial reaction to the quarter was somewhat dim, but CEO Howard Schultz's comments on CNBC Friday morning helped reassure investors that relative weakness in the Americas was just an anomaly, pointing to a slight execution error on the rollout of the updated loyalty program. He noted that it will be uphill from here, with the program already seeing millions around the world engaging and signing up. Back to the quarter, China's remarkable 7% same-store-sales (SSS) growth at record margins was immediately tempered by weakness in the Americas segment, where 4% growth fell sharply below consensus expectations for a 6% increase. Although the company has targeted China as the next great growth opportunity -- with management laying out plans to open 2,500 new stores in five years -- the reality is that sales growth is tethered to performance within the company's Americas segment, which comprises 70% of total company sales, for the time being. That being said, the growth in China is certainly encouraging as the company expects it to be one of its largest markets in the coming years. Beyond the quarterly results, management reiterated fiscal 2016 EPS guidance of $1.88 to $1.99, which implies 19% to 20% year-over-year growth, 10% revenue growth and a slight operating margin expansion. A modest tax benefit offset the incremental reduction in SSS guidance (to mid-single-digits from "somewhat above" mid-single- digit). We reiterate our $68 target and believe the company is set up well for growth over the long term.

Schlumberger (SLB:NYSE; $81.61; 1,000 shares; 3.26%; Sector: Energy): Shares traded higher this week, despite the relative weakness shown across the oil trade. The stock was helped on Friday after investors reacted positively to the company's earnings report Thursday evening. What did we take away from the quarter? Schlumberger is back on the offensive, unwilling to settle for less. For the average company, such an aggressive strategic shift would be unfathomable. Yet Schlumberger is anything but average. It is quite literally the undisputed titan in the oilfield services industry, boasting tremendous competitive advantages. By continuously investing in innovation (its R&D budget is larger than the entire market cap of most of its peers), the company is able to develop best-in-class products that save costs for customers while often increasing oil recovery rates. As such, it is able to price its products and services higher and earn superior margins. Whenever it takes a seat at the negotiating table, it has the upper hand. Its bargaining power is unmistakable and is a testament to the company's vigilant management team that has worked to keep the company ahead of the curve. While we still believe that near-term sentiment is largely driven by oil price movements and the broader health of the energy sector, we are confident that SLB is a winner above its peers. We reiterate our $85 target.

Visa (V:NYSE; $79.91; 1,075 shares; 3.43%; Sector: Information Technology): Shares showed some strength this week and the company followed up with a solid earnings report that left the door open for an exciting fiscal 2017. The highlight of the quarterly report was undoubtedly the announcement of a newly authorized $5 billion repurchase program. The company now has a total of $7.3 billion in authorized funds for buybacks, setting nice support for shares and offering upside to earnings moving forward. The announced partnership with PayPal also removes an unnecessary overhang on the stock as investors can rest assured the two companies are working together for mutual benefit. As for the state of the business moving forward, management specifically pointed out that the U.S. consumer has remained "remarkably steadfast" throughout this period of slow growth that has been caused by lower oil prices and the strong dollar. In general, domestic consumer spend (not just in the U.S.) has remained strong while cross-border commerce has been pressured. Importantly, the company expects the second half of the year to remain steady on the back of its core underlying business trends, propelling the company into a strong 2017 as it laps several hindering items from the past year. Importantly, management expects Visa Europe to add 2%-3% EPS acceleration in fiscal 2017, likely a conservative estimate in our opinion. We reiterate our $84 target, although we could see additional upside once we are given more results on the Visa Europe integration.

Walgreens Boots Alliance (WBA:Nasdaq; $81.35; 1,150 shares; 3.74%; Sector: Health Care): Walgreens reported a solid beat with its fiscal-third-quarter results a couple of weeks back and the stock has rallied back above the $80 threshold. Management raised fiscal 2016 EPS guidance to $4.45-$4.55 from $4.35-$4.55 while simultaneously noting that it continues to expect the Rite Aid transaction to close in the second half of the year (click here to read last week's roundup for an additional outlook on the RAD deal). The company delivered strong domestic retail pharmacy results in the quarter, with comparable store sales increasing 3.9% year over year to $21.2 billion. Global pharmacy sales increased 6% on a comparable store basis. Finally, WBA grew front-end store sales by a mere 0.1% year on year, with higher sales in health and wellness and photo categories partially offset by declines in "certain convenience categories." On a profitability level, the company grew operating income by over 13% on a GAAP basis and just over 4% on an adjusted basis (including FX headwinds), with cost efficiencies (particularly in terms of lower generic drug costs) managing to offset sharp reimbursement pressure. Impressively, the company announced that it achieved its $1 billion fiscal 2016 synergy (both cost and revenue) goal in June, well before the end of its fiscal year (August). We reiterate our $90 target.


American Electric Power (AEP:NYSE; $70.06; 500 shares; 1.40%; Sector: Utilities): Shares traded higher this week on little news. We would point to July 29 as an upcoming catalyst for shares of AEP as we expect a progress report or announcement from the company on the sale of its unregulated merchant assets. As we have discussed, we expect net proceeds to be in the range of $1.3 billion, half of which will be deployed via buybacks with the other half invested in optimizing the company's transmission portfolio. We believe AEP is a strong story and would not recommend exiting the position, especially in light of its 3.2% dividend yield, but would await a pullback before considering adding to what has been an outright winner for our portfolio (20%+ above our cost basis). We reiterate our $70 price target.

Comcast (CMCSA:Nasdaq; $67.46; 600 shares; 1.62%; Sector: Consumer Discretionary): Shares continued to trade higher this week. The second quarter has always been seasonally weak for cable/satellite providers, yet expectations across the board appear lower than usual given considerable noise (including the Verizon strike, the closing of the Charter/Time Warner deal, continued fee fights between Dish and Tribune Co.). We believe Comcast stands out amid the rubble, and in fact believe the company likely benefited from some of this disruption, which, combined with its proven ability to execute consistently, should bode well for its results. Since we initiated on the name, shares have climbed rapidly and directly, and while our instincts compel us to chase shares into the rally given our fundamental appreciation of the underlying story, we recognize the importance of remaining disciplined and would welcome any pullback with open arms as an opportunity to add to a holding we consider well-run, well-constructed and reasonably priced. We reiterate our $70 target.

Costco Wholesale (COST:Nasdaq; $167.47; 400 shares; 2.68%; Sector: Consumer Staples): Shares inched higher this week on little news. Going forward, we believe disruptions from the credit card transition from legacy AmEx to Visa Citi co-brand (officially rolled out on June 20) will diminish as shoppers recognize the enhanced benefits of the new card, which should help lift both traffic and ticket size and thereby sales. In addition, we would note that year-over-year comparisons should ease in the back half of the year as headwinds diminish (particularly currency, interchange fees and food deflation) and catalysts such as higher spending and an increase in members kick in. Longer term, we expect management to implement a membership fee increase, which also should boost earnings. We reiterate our long-term price target of $175.

Kraft Heinz (KHC:Nasdaq; $88.16; 500 shares; 1.76%; Sector: Consumer Staples): Shares were roughly flat this week on little news. We trimmed the position last week as the stock approached our $90 target, and while we remain confident in the long- term vision of the company, driven by our conviction in Warren Buffett and 3G Capital, we continue to pick our spot to take profits in what has seemed like a floppy rally across the board. We appreciate KHC for its stable dividend and visibility into concrete cost savings that should help drive long-term earnings power. In a market like this, similar to PepsiCo, investors appreciate predictability, which KHC has. We look forward to the company's earnings report in August where we can get more information on the progress of the integration. We reiterate our $90 target.

Lockheed Martin (LMT:NYSE; $257.31; 150 shares; 1.54%; Sector: Industrial): Earlier this week, Lockheed Martin posted stellar second-quarter results, with broad- based strength across its business segments and convincing results from its core F-35 jetfighter program. While the stock initially took off after the report, shares did come back down to Earth after investors took profits. Who can blame them? The stock has run somewhere near 25% in the last couple of months. Some confusion around the Information Systems & Global Solutions (IS&GS) transaction with Leidos (LDOS, more below) and a pension headwind in 2017 due to lower rates also contributed to the pullback after the immediate pop. Before we dive into the tender offer that many subscribers have inquired about, we want to first address the pension comments from management's conference call that had some investors spooked. With the year-to-date decline in interest rates seeming like a relatively lasting phenomenon, LMT noted that pension income could be lower than expected throughout 2017. That being said, we believe investors are prepared for this moving forward, especially since the lower rates are not expected to impact LMT's cash balance and the company is not required to make cash contributions into the pension account until 2018. As for the recent tender offer, for the purposes of our own portfolio, we will not be participating and instead will hold onto shares of LMT (a.k.a. "do nothing"). We appreciate the strength of Lockheed's underlying business and want to avoid exposing ourselves to any transaction-related risk. There are a couple of considerations when making this decision. First, subscribers should be aware of the fee your broker will charge for participating in the exchange offer. Depending on the amount of shares of LMT you individually own, a $25 fee, for example, could be significant. In addition, there is the possibility that the tender offer reaches its upper limit, effectively creating less value than the anticipated (per the terms) 10% discount for each shareholder. That being said, we would not disapprove of those who decide to tender a portion of their shares in order to capture some of the potential upside. Our approach may reduce upside yet protects against downside; participating offers higher upside along with higher downside. We are raising our target on LMT to $260 given its better-than- expected earnings report and increased outlook for the balance of the year.

Occidental Petroleum (OXY:NYSE; $75.38; 675 shares; 2.03%; Sector: Energy): Shares were pressured this week as crude oil prices dipped lower. The stock continues to be tethered to the direction of the energy sector, despite the company's superior operations to its peer group. We continue to appreciate the 4%-plus dividend, especially in this market, and believe the company's earnings report could be an opportunity to remind investors that it is deserving of a premium. That being said, we remain on the sidelines until we see a noticeable turn in the oil cycle. We reiterate our $75 target.

PepsiCo (PEP:NYSE; $109.19; 900 shares; 3.93%; Sector: Consumer Staples): Shares of PEP were roughly flat this week, pulling back slightly from last week's closing levels. Recall that we downgraded the name to Two last week (click here to read our Alert) as the stock was trading at all-time highs following its solid earnings report. We also recommended that subscribers trim their position (although we were restricted) to lock in some gains over our $110 price target. The stock has pulled back since, but has remained strong as investors continue to appreciate its brand power, steady dividend and growth initiatives. Analysts from BMO Capital met with Pepsi management this week and highlighted the company's predictable operating model as one of the key reasons the company has been able to position itself to meet and even exceed its long-term sales and earnings growth targets. The market truly appreciates a company, like Pepsi, that it can count on, and that has become ever more apparent during these uncertain economic times. We reiterate our $110 price target.

Procter & Gamble (PG:NYSE; $85.72; 1,000 shares; 3.42%; Sector: Consumer Staples): Unilever (UL) announced its intent to acquire direct-to-consumer shaving service Dollar Shave Club this week in a direct attack against PG's Gillette brand. While the deal had a slight, initial impact on PG stock, shares rebounded to close out the week as investors couldn't resist the brand dominance, stability and consistent dividend offered by PG stock. We have long touted our appreciation for PG as an equity-bond type of investment and believe, even though the market has rallied, that these opportunities remain valued by investors who are aware of the lingering risks that could thwart any further rally. We reiterate our $85 price target on PG and keep our Two rating as we would await a pullback into the low $80s before adding back to the position.

PayPal Holdings (PYPL:Nasdaq; $37.42; 1,200 shares; 1.79%; Sector: Technology): PYPL shares traded lower for the week after the stock plummeted on Friday following the company's strong earnings report. While the numbers were solid in the quarter, the bears came out clawing and pointing at declining margins and the prospect for further margin pressure due to the partnership with Visa. All of that on top of the profit taking that occurred after the stock closed in on all-time highs was too much for the stock to withstand. Moving onto the announced partnership with Visa, the two companies have agreed to work together to create an improved and more seamless payment experience for consumers. Essentially, PayPal has made a promise to end steering of Visa cardholders toward ACH transactions on PayPal (which essentially pushes users to employ their bank accounts for transactions as opposed to their Visa credit/debit cards). In response, Visa has agreed to send PayPal an economic incentive for the additional payments volumes received through PayPal. While the specific economic terms were undisclosed, it is expected to be meaningful for PayPal considering the amount of cardholders using its services. In addition, the terms further remove the threat of any fees or Visa network rules being targeted solely at PayPal. Perhaps more importantly, the new agreement will allow PayPal to gain access to Visa tokenization services, beginning in the United States. This means PayPal customers will be able to use the product for in-store transactions, effectively expanding acceptance for the PayPal digital wallet to all physical retail locations where Visa contactless transactions are enabled. This will be an essential contributor to PayPal's growth strategy, allowing the company to gain a foothold on millions of points of sale in bricks-and-mortar stores (something that had previously had strong barriers of entry). All in, we recognize PYPL as the clear leader in the digital payments space, but we cannot forget the potential regulatory hurdles it faces as well as the ongoing bull/bear argument that often weighs on the stock. We maintain our Two rating and reiterate our $45 target.

Thermo Fisher Scientific (TMO:NYSE; $156.89; 350 shares; 2.19%; Sector: Health Care): Shares stalled out this week, trading flat in what was an uneventful week across all fronts (volume, news, data, read-throughs, etc.). Last week, we made it clear we would not be buyers at current levels and would prefer a pullback. To refresh, we raised our price target twice in the last couple of months, first to $155 from $150 and then again to $170 from $155. In each of these cases, we kept our expectations around a fair-value multiple the same (around 19x), but adjusted our estimates to reflect the acquisition of Affymetrix (AFFX) and more favorable end markets. At this point, we see additional upside in the name, making levels above our cost basis more attractive, especially given the low multiple that is being attributed to the stock. So we believe the name becomes very interesting below $140, where it would be trading just slightly over 15x 2017 earnings. We have been looking for an opportunity to add back to the position for months, yet in an attempt to remain disciplined around our cost basis, we will stay put for now and reiterate our $170 long-term target.

Wells Fargo (WFC:NYSE; $48.32, 1,900 shares; 3.67%; Sector: Financials): Wells rallied this week in concert with financials on the heels of last Friday's less-than- inspiring quarterly results, which many have branded as among the more disappointing across the large-cap-banking universe. As a commercial bank operating almost entirely domestically, Wells lacks the trading and investment banking exposure that drove broad-based earnings beats across all the major investment banks with large trading operations. On the flip side of the coin, however, is the reality that investment banking and moreso trading revenue is inherently volatile and nearly impossible to predict, subject to the whims of the broader macro backdrop. In fact, the biggest driver of revenue for the investment banks was concentrated within their respective fixed income, commodity and currency divisions (FICC), which benefited from the pre- and post-Brexit spike in volatility and hence trading volume. We like Wells for its simplicity, its lucrative dividend, regulatory clarity and visibility into earnings, even if that means the company doesn't capture upside during periods when trading ticks up. We are comforted by the reality that the same upside Wells loses out on it gains back in the downside protection built into its steady business model. Our target remains $56.


Target (TGT:NYSE; $74.92; 500 shares; 1.50%; Sector: Consumer Discretionary): Shares traded higher this week on little news. While the stock's near-3.3% dividend yield makes it compelling from an income perspective, we couldn't be less confident in the long-term fundamentals after the disaster of its first-quarter results. We recommend members exit the position outright following the 10 point post-earnings swing, which we view as unsustainable and not properly discounting the risk around execution and management growth targets (which have proven unreliable). We reiterate our $75 price target and plan to exit once our restriction on trading the name is lifted.

Twitter (TWTR:NYSE; $18.37; 700 shares; 0.51%; Sector: Technology): Shares were roughly flat this week as a pullback on Friday stole away some of the positive sentiment that had been building around the name in previous weeks. Earlier this week, TWTR announced it will partner with the NBA for exclusive live programming. In addition to bringing all of the highlights and clips to the platform, the partnership will be different from some of Twitter's other recent deals (with the NFL and Bloomberg, for example) in that the NBA will deliver a free live stream of a new weekly NBA pregame show created specifically for integration with Twitter conversations. This move is consistent with Twitter's strategy of late, focusing specifically on bringing video content to the platform to increase user engagement. We like this move, particularly, as it brings a truly unique aspect to the Twitter experience. That being said, our expectations remain tempered given the company's history of disappointments. On that note, the company lost more high-level talent this week (a product manager and VP of media), suggesting continued lack of conviction internally at the company. It reports earnings next week and we will be looking for signs of a turnaround. Expectations have clearly risen in recent weeks with the stock rallying above the $18 level, so the company will have to deliver to keep investors intrigued.


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

DISCLOSURE: At the time of publication, Action Alerts PLUS was long AAPL, AGN, CSCO, C, DOW, FB, GE, GOOGL, NXPI, PNRA, SBUX, SLB, V, WBA, AEP, CMCSA, COST, KHC, LMT, OXY, PEP, PG, PYPL, TMO, WFC, TGT and TWTR.

A Lesson in Managing Expectations
Stocks in Focus: PYPL, SBUX

Starbucks and PayPal are prime examples.

07/22/16 - 12:28 PM EDT
GE Tops Consensus, Maintains Guidance
Stocks in Focus: GE

Despite the top- and bottom-line beat, strength in segment margins was offset by weak cash flow and equipment orders.

07/22/16 - 09:08 AM EDT
Be Patient With General Electric
Stocks in Focus: GE

While it is clear GE’s strategic shift has the potential to be radically transformative, the initiative remains in the early innings, set to significantly accelerate in 2017 and beyond.

07/22/16 - 06:00 AM EDT
Weekly Roundup

Stocks have an up-and-down week as the earnings floodgates open. Portfolio moves include cutting one position.

07/22/16 - 06:41 PM EDT

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Chart of I:DJI
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Action Alerts PLUS Holdings

Holdings 1

Stocks we would buy right now

Symbol % Portfolio
Industry Trade Now
AAPL 3.24% Consumer Durables
AGN 4.99% Drugs
C 3.99% Banking
CSCO 4.80% Computer Hardware
DOW 3.14% Chemicals
FB 4.85% Internet
GE 3.02% Industrial
GOOGL 4.56% Internet
NXPI 3.38% Electronics
PNRA 4.32% Leisure
SBUX 2.78% Leisure
SLB 3.27% Energy
V 3.44% Financial Services
WBA 3.75% Retail
Holdings 2

Stocks we would buy on a pullback

Symbol % Portfolio
Industry Trade Now
AEP 1.40% Utilities
CMCSA 1.62% Media
COST 2.68% Retail
KHC 1.77% Food & Beverage
LMT 1.55% Aerospace/ Defense
OXY 2.04% Energy
PEP 3.94% Food & Beverage
PG 3.43% Consumer Non- Durables
PYPL 1.80% Financial Services
TMO 2.20% Health Services
WFC 3.68% Banking
Holdings 3

Stocks we would sell on strength

Symbol % Portfolio
Industry Trade Now
TGT 1.50% Retail
TWTR 0.52% Internet