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

Initiating a New Position

By Jim Cramer and the AAP Team | 2017-07-28 14:32:38.0
Actions Taken:
Symbol Action # Shares Traded Recent Price % of Portfolio* Shares Owned*
ITW Buy 200 $140.05 0.0101 200

* Indicates results after trade.

After you receive this Alert, we be purchasing 200 shares of Illinois Tool Works (ITW) at roughly $140.05. Following the trade, ITW will represent 1.01% of the company.

We refreshed the name in the Bullpen less than two weeks ago (see here) indicating that we would be buyers during a pullback. As a result, we are calling ITW in from the Bullpen, initiating a position.

The stock has been trending lower since the company reported earnings Monday, and we believe that the decline represents a great opportunity to add shares. We will use proceeds from our profitable Western Digital WDC trade earlier today (see here), as well as those from exited positions over the last few weeks, to get into ITW now.

Our thesis in the name is related to:

  • ITW's ability to implement its enterprise strategy within the company to improve returns
    • The company's 80/20 strategy (more details here) keeps its focus on its most profitable products
  • Organic revenue continues to grow 2-4% year over year
    • Including a turnaround in sluggish top-line growth
  • Diverse product base with high operating margins
    • Automotive OEM, Food Equipment, and Test and Measurement and Electronics represent three largest segments by revenue
    • Growth expected as Welding looks to recover
    • Accelerating trends in Polymer & Fluids and Construction
  • Easing price-cost pressures that could be a tailwind going forward
  • Over half of revenue overseas
  • Strong commitment to returning shareholder value through share repurchases and growing annual dividend

With our initiation, ITW will have a One rating, and we will be setting a $170 price target, which is roughly 15x 2018 EV/EBITDA. This valuation is within ITW's historical range, and its industry-leading margins will help the company produce returns going forward.

The stock declined following its earnings release due to concerns over the automotive and restaurants industries. ITW's segments within these two markets represents approximately 40% of the company's sales. However, despite slowing sales last quarter, management re-affirmed that they expect base growth over the second half of the year. With this in mind, we believe that the selloff is overdone. Additionally, we see the company's 80/20 strategy continuing to be successful for the company, increasing margins incrementally. That being said, the expanding margins plus steady growth should move the stock higher from this level going forward.

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

We Are Downgrading Starbucks, But We Are not Selling -- Yet

We will be holding our position, looking for pockets where the stock is trading higher.

07/28/17 - 01:26 PM EDT
Adding to Nucor on Today's Weakness
Stocks in Focus: NUE, WDC

We are improving our cost basis on NUE.

07/28/17 - 10:30 AM EDT
Weekly Roundup
Stocks in Focus: ABT, NUE, STJ, DHR, KEY, SNA, GE, SLB, PEP, EZU, AVGO, LLY, SWKS, WBA, RAD, ARNC, GOOGL, FB, CMCSA, DOW, LUV, SBUX, WDC, ALR, APA, XEC, DXC, VGK, MMP, AMZN, TJX, M, JCP, JWN, WFC, AAPL, ADBE, C, CSCO, DD, NWL, NXPI, QCOM, KO

Earnings help boost markets as D.C. isn't counted on for much of anything. Portfolio action (it was a busy week) includes a new position and a downgrade.

07/21/17 - 05:58 PM EDT

Markets

Chart of I:DJI
DOW 21,813.37 +16.82 0.08%
S&P 500 2,470.26 -5.16 -0.21%
NASDAQ 6,377.6378 -4.5483 -0.07%

Action Alerts PLUS Holdings

Holdings 1

Stocks we would buy right now

Symbol % Portfolio
Weighting
Industry
ABT 0.009009939281289236 Health Services
AGN 0.050621259826580785 Drugs
APA 0.04079802917002161 Energy
CMCSA 0.028627711146474426 Media
DHR 0.034066177317653254 Health Services
DXC 0.028471553391901498 Computer Software & Services
EZU 0.015114618012384442
FB 0.06274273315712782 Internet
GE 0.021749416004497864 Industrial
GOOGL 0.052205353141574075 Internet
KEY 0.013059146173122167 Banking
MMP 0.03516745264496119 Energy
SLB 0.03484206346333946 Energy
TJX 0.04539179083623153 Retail
WFC 0.02322755809880127 Banking
XEC 0.03216450270876688 Energy
Holdings 2

Stocks we would buy on a pullback

Symbol % Portfolio
Weighting
Industry
AAPL 0.04461477890208213 Consumer Durables
ADBE 0.016004354055881364 Computer Software & Services
ARNC 0.019965676816070924 Industrial
C 0.030691354031034124 Banking
CSCO 0.022900716286904443 Computer Hardware
DOW 0.03274183245372575 Chemicals
LUV 0.018492709717122552 Transport
NWL 0.02272204276306751 Consumer Durables
NXPI 0.022020967076548815 Electronics
PEP 0.02536946143943182 Food & Beverage
Holdings 3

Stocks we would sell on strength

Symbol % Portfolio
Weighting
Industry
SBUX 0.02336483165979794 Leisure
WDC 0.006137362912284889 Computer Hardware