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Jim Cramer's Action Alerts PLUS

Adding to American Electric Power on Weakness

By Jim Cramer and Jack Mohr | 2016-12-08 10:33:09.0
Actions Taken:
Symbol Action # Shares Traded Recent Price % of Portfolio* Shares Owned*
AEP Buy 200 $59.7 0.0232 1000

* Indicates results after trade.

After you receive this Alert, we will be purchasing 200 shares of American Electric Power (AEP:NYSE) at around $59.70. Following the trade, AEP will represent roughly 2.32% of the portfolio.

We are adding again to our AEP positon after bulking up on the name earlier this week for the first time since January. While we do not claim to perfectly time a bottom, we believe the selloff in utilities has become overdone due to the swift rise in rates, leaving investors with opportunities in names like AEP, which has been dragged lower with the group. AEP not only offers steady income via its 4%-plus dividend, but is also on track to accelerate earnings in the coming years.

Even better, with the appointment of Scott Pruitt to head the Environmental Protection Agency (EPA), we suspect there will be a lesser focus on eliminating coal as an energy source, meaning that AEP can repurpose funds that had been allocated toward retrofitting coal plants for more environmentally friendly uses (as mandated by policy). AEP noted back in 2011 that costs for their EPA compliance plan could range from $6 billion to $8 billion in capital investment (or higher, depending on demand for labor and materials) through the end of the decade. By freeing up this cash flow, AEP has even greater potential to boost the dividend and invest in growth projects.

We are upgrading our rating to a One from a Two as we raise our price target back to $68 to reflect improving sentiment, enhanced growth outlook in 2017 and beyond, and the potential for higher-than- previously- expected dividend boosts moving forward.

Regards,

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

DISCLOSURE: At the time of publication, Action Alerts PLUS was long AEP.

Costco's Report/Call Fuels Optimism
Stocks in Focus: COST

We now see many reasons for our cautious optimism to become less cautious.

12/08/16 - 10:24 AM EST
How We Will Play a Magellan Block Trade
Stocks in Focus: MMP

MMP has filed a block trade registration with the SEC; we would look to buy on any weakness should the company announce the commencement of such a move.

12/08/16 - 09:26 AM EST
Weekly Roundup

OPEC deal is among the highlights as markets finish off an explosive November. In the portfolio, we adjust the size of some of our positions.

12/02/16 - 05:59 PM EST

Markets

Chart of I:DJI
DOW 19,614.81 +65.19 0.33%
S&P 500 2,246.19 +4.84 0.22%
NASDAQ 5,417.3560 +23.5940 0.44%

Action Alerts PLUS Holdings

Holdings 1

Stocks we would buy right now

Symbol % Portfolio
Weighting
Industry
AAPL 0.03576702667297162 Consumer Durables
ADBE 0.030204036525417442 Computer Software & Services
AEP 0.023416153534294645 Utilities
AGN 0.040333721354846815 Drugs
ARNC 0.03579893303039622 Metals & Mining
FB 0.04628756438085229 Internet
GE 0.02883070129944049 Industrial
GOOGL 0.04641032603655302 Internet
HPE 0.009587471304171154 Telecomm
KHC 0.025621583215789858 Food & Beverage
MMP 0.008270361305607056 Energy
NWL 0.029891976785728105 Consumer Durables
NXPI 0.024823729729215066 Electronics
PEP 0.0397467611088102 Food & Beverage
TJX 0.04703035994577367 Retail
Holdings 2

Stocks we would buy on a pullback

Symbol % Portfolio
Weighting
Industry
C 0.05266008107257563 Banking
CMCSA 0.02693752590859452 Media
COST 0.024527428617278118 Retail
CSCO 0.038521090061401954 Computer Hardware
DOW 0.032960531800846606 Chemicals
PNRA 0.02516010833889266 Leisure
SBUX 0.03993644829471862 Leisure
SLB 0.03286743916653155 Energy
V 0.014652800096285605 Financial Services
WBA 0.037712536272032325 Retail
WFC 0.042354133073471356 Banking
Holdings 3

Stocks we would sell on strength

Symbol % Portfolio
Weighting
Industry
OXY 0.018880781556964325 Energy