CRAMER WRAPUP
Friday, May 21, 2004 6:09 p.m. EDT
Dear Action Alerts PLUS Subscriber,
The market will be stuck in no-man's-land between now and
June 30, with uncertainty from the Federal Reserve meeting
and Iraq transition hanging over us. Unfortunately, the
closer we draw to this date, the murkier both of these
issues get.
It doesn't matter anymore how solid first-quarter earnings
were. This market needs either some time to pass to
discount the uncertainty or lower valuations. Stocks will
mark time until we get over these hurdles.
There is a propensity right about now by most to cut and
run because they can't take the pain. Me? I buy more. Get
used to it. You will see this with me a million times
because it's made me millions of dollars over the years.
This is how we're going to make money in a volatile market:
by loading up on good stocks when they go on sale and
selling shares into strength when they begin to recover.
ONES
Alcoa (AA:NYSE, $29.48, 8,000 shares, 7.11%): Metals
continue to be volatile, but demand continues to be strong -
- yes, even in China, where the latest word is that the
yuan will remain pegged and interest rates won't be raised.
I already have a full-sized position in Alcoa, but I
believe the stock remains attractive under $30.
Apple Computer (AAPL:Nasdaq, $27.11, 2,500 shares, 2.04%):
Bought 1,000 shares on Wednesday. I was forced to pay more
than my previous cost basis because I don't want to see
Apple run before we get a chance to build up a sizable
position. When you back out the company's cash, the stock
trades at a discount to its growth rate. I'll continue to
grow this position as the shares pull back below my cost
basis.
Charter Communications (CHTR:Nasdaq, $3.66, 65,000 shares,
7.17%): Attended a company presentation this week that
confirmed my bullish stance on the company. Even though
this remains a contrarian play, Paul Allen and Carl Vogel
are working together to turn Charter around. I don't mind
being early to the game with cable because I believe the
stocks will be appreciably higher a few quarters down the
road. Do I know when Charter will start going up? No. Do I
know that the company is doing everything right to make it
so it happens? Yes. Has the company fulfilled everything it
told me it would when we got in? Totally. If you don't like
Charter, you readers have the choice not to own this stock.
Cumulus Media (CMLS:Nasdaq, $18.85, 6,000 shares, 3.41%):
Added a total of 1,500 shares this week. The company has a
lot of operating and financial leverage, and the stock
could really start moving when Cumulus starts showing up on
more investors' radar screens. I'd consider taking my stake
up to 7,500 shares if the stock dropped below $18.
Forest Laboratories (FRX:NYSE, $59.20, 4,500 shares,
8.03%): Took in 300 shares Thursday and another 200 on
Friday, as the stock came under options selling pressure.
This is similar to what happened with Phelps Dodge a few
weeks ago, and that stock has bounced back since. Forest
has a couple of blockbuster drugs in its stable and looks
very attractive down 20% from its highs.
JDS Uniphase (JDSU:Nasdaq, $3.09, 47,500 shares, 4.43%):
Picked up a total of 7,500 shares this week as the stock
headed back toward $3. JDS Uniphase has a solid balance
sheet and a lot of operating leverage to be realized over
the next few quarters, with telecom companies starting to
ramp orders for optical equipment. I'm ready to take my
position up to an even 50,000 shares if JDSU trades below
$3.
Kerr-McGee (KMG:NYSE, $48.88, 2,000 shares, 2.95%): This is
a solid energy company that is minting money with energy
prices up here. The company pays a solid 3.7% dividend, and
we'll stand to qualify for the next payout at the close of
trading on June 1. With that in mind, I'll look to purchase
another 500 shares below $48 before then.
Kmart Holding (KMRT:Nasdaq, $49.11, 3,000 shares, 4.44%):
Initiated my position on Tuesday and bought another 500
shares on Friday. You readers, of course, were allowed to
pick up the stock last week, before the retailer reported a
blow-out quarter. Since Kmart re-emerged from bankruptcy
last year, management has been focused on profitability,
not just growing the top-line. The new Kmart has solid cash
flow and a lot of valuable real estate on the balance
sheet. I believe the turnaround has just begun, and will
look to keep building up my stake over time.
Nortel (NT:NYSE, $3.39, 60,000 shares, 6.13%): Picked up
2,500 shares on Wednesday and another 2,500 Thursday. This
company could not have done a worse job for its
shareholders than it did during the first four months of
2004. But remember, no matter how many more negative
headlines come out about Nortel's prior management, I
believe the worst news is already out there. The rush to
sell has made it so that we can't peg the bottom for the
selloff by time or by price, but we do know that Nortel has
$3.6 billion on its balance sheet and has kept selling its
equipment at a torrid pace. I'll look to make my next
purchase at or below $3.25.
Univision (UVN:NYSE, $32.14, 5,000 shares, 4.85%): Added a
total of 1,000 shares this week. I believe that Univision
will do particularly well during the upfront ad sales
season, posting growth in the midteens, and the stock
should be able to return to the mid-$30s over the coming
months.
TWOS
Comcast (CMCSA:Nasdaq, $28.60, 6,500 shares, 5.61%): The
deal with Microsoft (MSFT:Nasdaq) will accelerate the
company's launch of set-top boxes, which will enable more
subscribers to convert to digital cable. Comcast is leading
the cable revolution, and while I ultimately see higher
valuations across the board, the Robertses' company will be
the big winner. I'd add to my stake if the shares fell a
dollar from current levels.
EMC (EMC:NYSE, $10.18, 12,500 shares, 3.84%): Received a
positive verdict in a patent infringement suit against
Hewlett-Packard (HPQ:NYSE) this week, and also extended a
software reselling agreement with IBM (IBM:NYSE). Even so,
the stock is trending down toward the single digits, as I
predicted. If EMC breaks through $10, I'll be ready to step
in and make a statement purchase of 2,500 shares.
Halliburton (HAL:NYSE, $28.46, 4,500 shares, 3.86%): Bought
500 shares Thursday, with the stock near its lows of the
year. The company's core oil services business is doing
very well, and I believe the asbestos and Iraq issues
already are priced in. As a reminder, investors at the
close of trading on May 28 will qualify for Halliburton's
next 12.5-cent dividend.
Ingersoll-Rand (IR:NYSE, $62.12, 3,000 shares, 5.62%): We
had to endure some pain to hold on to these cyclicals the
past few weeks, but I believe that Ingersoll, unlike
DuPont, has the leverage to really snap back when the
market realizes that a couple of gradual interest-rate
hikes from the Fed won't squelch business here. I've
already paid less than $60 for Ingersoll, and would wait
for the shares to drop a few points from here before adding
to my stake.
Intel (INTC:Nasdaq, $27.55, 3,000 shares, 2.49%):
Midquarter update coming up on June 3. The second quarter
is never a strong one for the company, but I expect
management will be upbeat about the second half of the
year. With Intel trading at the high end of its recent
range, I'd remain patient and wait for a pullback below $26
before buying more shares.
InterActiveCorp (IACI:Nasdaq, $30.06, 6,200 shares, 5.62%):
Biggest near-term opportunity for online travel may be
Europe, where the company is gaining market share. I don't
expect a lot of volatility with IACI until management shows
whether its marketing strategy is working to gain market
share. I'd be a buyer at or below $28, and I'd consider
paring back my stake if the shares moved over $32.
Phelps Dodge (PD:NYSE, $64.43, 4,700 shares, 9.13%): I know
I may have confused some of you readers with my comments on
the company this week. Understand that Phelps at $67 isn't
nearly as attractive to me as Phelps at $60 is. What I was
trying to say was that if you bought the stock on May 7,
when it was trading below $61, it would make sense to take
some quick profits when the shares rose 6 or 7 points in
less than 48 hours. If you first bought Phelps in the $70s
and haven't been averaging in along the way down, remember
that this isn't a sign that I've lost trust in the company.
UnitedHealth Group (UNH:NYSE, $63.20, 1,200 shares, 2.29%):
Cheap stock that grows its earnings better than 20% a year.
That works in just about any kind of market, and I'll add
300 shares if UNH falls another two dollars, below my cost
basis.
Zimmer Holdings (ZMH:NYSE, $83.55, 1,200 shares, 3.02%):
Would love to pick up another 300 shares before the stock
moves into the high-$80s, but don't want to violate my cost
basis to do so.
THREES
DuPont (DD:NYSE, $41.99, 3,000 shares, 3.80%): Pared back a
total of 2,500 shares this week. My fear is that this
company is too large and that energy prices are just too
high for DuPont to realize its full operating potential. I
have too many other stocks in the portfolio that I believe
can outperform over the near term, and want to have the
cash available to take advantage of any market pullbacks.
Time Warner (TWX:NYSE, $16.64, 2,500 shares, 2.04%): Sold a
total of 5,500 shares Monday. The company has so many
moving parts to fix that I believe the stock will have
difficulty sustaining any near-term rallies. At these
levels, I'd much rather concentrate my cable exposure in
Comcast and Charter.
Regards,
James J. Cramer
DISCLOSURE: At the time of publication, Cramer was long
Alcoa, Apple Computer, Charter Communications, Comcast,
Cumulus Media, DuPont, EMC, Forest Laboratories,
Halliburton, Ingersoll-Rand, Intel, InterActiveCorp, JDS
Uniphase, Kerr-McGee, Kmart Holding, Nortel, Phelps Dodge,
Time Warner, UnitedHealth Group, Univision, Zimmer Holdings.
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