Como se combate o populismo? "Com eleições", responde Fukuyama

[andraderui]

Friday, January 28, 2005 6:40 p.m. EST

Dear Action Alerts PLUS Subscriber,

Even though the market sell programs came in just about
every day this week, the major indices managed to
eke out small gains. The earnings outlook remains largely
positive and I think we'll continue to see a high level of
merger activity as 2005 progresses. The stocks that will
hold up best in the near term are the companies that reward
shareholders with large dividends and consistent stock
buybacks.

You will want to note that you won't see JDS Uniphase
(JDSU:Nasdaq), Nortel (NT:NYSE) or Charter Communications
(CHTR:Nasdaq) below. That's because I've marked them for
sale when my restrictions allow, as I told you earlier this
week. I will send out an email alert before I make those
trades, but there's no reason for any of you readers to
wait that long.

Those stocks account for just 4.4% of my overall portfolio,
and with them almost disposed of, I now can add some new
names to the portfolio without my conscience hounding me
about exceeding my self-imposed rule to never own more than
25 stocks.

For one, Eastman Chemical (EMN:NYSE) comes off my
restricted list Monday morning, and I plan to buy 1,000 or
1,500 shares at the open. I currently have 8% of my
portfolio in cash and will keep some of my powder dry in
case we get another market pullback.

Another stock that I've added to my watch list is American
Movil (AMX:NYSE ADR), after it was brought to my attention
by T. Rowe Price fund manager Robert Gensler. The company
is the largest wireless provider in Latin American, with
the bulk of its wireless operations in Mexico. Wireless is
the one area of telecom worth owning, and with the
valuations of the U.S. carriers inflated after a round of
consolidation, I believe American Movil is a very
attractive alternative.

(In my rating system, Ones are stocks I would buy right
now, Twos are stocks that I would buy on a pullback, Threes
are stocks I would sell on strength, and Fours are stocks I
want to unload as soon as my restrictions allow.)

ONES

Cabela's (CAB:NYSE, $21.25, 7,500 shares, 4.42% of total
portfolio): Would consider buying another 500 shares if the
retailer pulled back toward $20 before it reports fourth-
quarter earnings. I believe Cabela's is taking market share
away from its peers, and the stock should recover back to
the mid-$20s over time.

Cendant (CD:NYSE, $23.05, 6,000 shares, 3.83%): Bought
1,000 shares on Friday. The company could end up getting a
higher price for its Wright Express unit from a private
equity firm than if it were to spin the division out with
an IPO, which is the current plan. Either way, Cendant is
closing on a lot of deals in the near term, which I think
has kept some investors on the sidelines. The company
generates a ton of cash flow, pays a solid 1.75% dividend,
and trades at just 16 times expected full-year earnings. I
think Cendant has 5 points of upside potential over the
coming quarters, compared with a point or 2 on the downside.

Intel (INTC:Nasdaq, $22.24, 3,500 shares, 2.16%): Would
have seen more of a bump from the Microsoft (MSFT:Nasdaq)
number had the market not been pummeled Friday. Intel is
in the midst of a great quarter and should be accumulated
around these levels. There's still a lot of negative
sentiment around the company, but I believe the stock has
10% to 20% upside potential in the coming months.

J.P. Morgan (JPM:NYSE, $37.00, 4,500 shares, 4.61%):
Reports were circulating this week that the bank was
interested in buying a minority stake in Standard
Chartered. Based on the success of the Bank One deal, I
expect J.P. Morgan to continue growing through
acquisitions. The stock remains attractive to purchase at
these levels. This is the kind of high-dividend payer that
buys back its stock and can stand up against the
vicious institutional sell programs that have knocked down
the markets so far in 2005.

Kerr-McGee (KMG:NYSE, $60.59, 2,500 shares, 4.20%): The
initial reaction to the company's earnings report was to
sell the stock down below $59 Wednesday. This proved to be
premature, however, because Kerr-McGee rebounded 3% by the
end of the week. While some people are focused on the
company's lumpy production costs, Kerr McGee's fundamentals
have improved significantly in recent quarters. Management
no longer will tolerate the exploration mishaps it
experienced in the Gulf of Mexico, and the company is
expanding dramatically in China. I already have a 20% gain
in Kerr-McGee, but I think it would be attractive on a
decline around $58 for you readers who don't already own
some.

Lucent (LU:NYSE, $3.24, 55,000 shares, 4.94%): I
essentially have reduced my exposure in the telecom
equipment space down to Lucent and remain interested in
building up my stake on a decline toward $3. The stock has
come under pressure since the company distributed 200
million warrants, but I'm confident that the tide
eventually will turn.

Pentair (PNR:NYSE, $43.35, 3,500 shares, 4.20%): Will
report earnings on Wednesday. Any upside could depend on
realized cost savings from the Wicor purchase. Demand has
remained solid for water equipment, and management should
confirm its guidance for 50% earnings growth in 2005. I'd
be interested in buying more shares under $42.

PNC Financial (PNC:NYSE, $52.82, 5,500 shares, 8.05%):
Could back away from the Riggs National (RIGS:Nasdaq)
purchase, now that a subsidiary of the bank has pleaded
guilty to criminal violations. Even if the deal does go
through, PNC now may be able to negotiate for a lower
price. The bank remains my top pick at current levels, and
this is another good, high-dividend payer that buys back a
lot of its stock.

Tyco (TYC:NYSE, $36.00, 3,500 shares, 3.49%): Added 500
shares Thursday ahead of the Feb. 1 earnings release. Given
the company's organic growth initiatives and the numbers
we've already seen this quarter, I believe Tyco will exceed
the consensus estimate of 42 cents a share on revenue of
$10.2 billion. Ed Breen has the company on the right track,
and the stock could trade over $40 in the coming months.

Yahoo! (YHOO:Nasdaq, $34.62, 1,500 shares, 1.44%): Fell a
dollar this week, despite catching a pair of analyst
upgrades. I maintain that the stock is attractive to
purchase at or below $35. Yahoo! remains the least
expensive of the Internet giants, and I think it can earn
at least 75 cents a share next year. The company will not
see the same kind of guidance cut that recently came out of
eBay (EBAY:Nasdaq). What's not priced into the stock
already? Try the fact that Yahoo! and Google (GOOG:Nasdaq)
soon will take over the directory listing and classified ad
businesses.

TWOS

American Physicians Capital (ACAP:Nasdaq, $34.18, 2,500
shares, 2.44%): Look for medical liability reform to be a
key topic in the president's State of the Union address.
The company is a pure-play on this area, and remains below
many investors' radar screens. Although I'm already up 18%
here, I'd consider buying more APC on a pullback to the low
$30s.

Comcast (CMCSA:Nasdaq, $32.26, 5,500 shares, 4.92%):
Scheduled to report earnings Thursday morning. I expect
solid numbers because the company continues to attract new
subscribers with its promotions. As the Adelphia bids start
rolling in, I think Comcast will be a big winner. This
auction should help unlock some value in the industry, and
I'd expect to see Comcast move higher in the near term.

Commerce Bancorp (CBH:NYSE, $57.31, 2,000 shares, 3.18%):
Bought 500 shares Wednesday, about 3% lower than current
levels. The bank had pulled back 10% from its highs, and I
think the company will not be affected materially by the
trials about the political contributions of former
executives. Commerce still has the best growth profile in
the banking industry, and I'd buy more shares around $55.

EnCana (ECA:NYSE, $59.03, 3,500 shares, 5.73%): My second-
largest position, and I'm already looking at a 20% gain.
With that in mind, I'm personally more interested in taking
some profits off the table over $60 than in buying more
EnCana at these levels.

St. Joe (JOE:NYSE, $68.30, 3,000 shares, 5.68%): Scheduled
to report earnings on Wednesday morning. I already have a
double-digit gain on my position, but continue to believe
the stock looks attractive on an earnings growth and net
asset value basis.

Symbol Technologies (SBL:NYSE, $17.73, 8,000 shares,
3.93%): As much as I wish I owned more shares, I already
have a 25% profit on my stake. The company is growing its
mobile data and bar code sales, and I think Symbol can
trade over $20 in the coming months.

Toyota Motor (TM:NYSE ADR, $77.05, 2,500 shares, 5.34%):
Could stand to gain further market share in the U.S.,
following the new truck recall out of Ford Motor (F:NYSE).
Toyota already has many of the most popular cars in the
market, and plans to launch a dozen new vehicles in the
next 15 months. I believe the stock is attractive to
purchase below $75. As a reminder, the company reports
December quarter results on Thursday.

UnitedHealth Group (UNH:NYSE, $88.15, 1,000 shares, 2.44%):
Not everyone knows about the company's flexible health care
spending management business, but I think this tax savings
is going to receive more support from the government in
2005. UnitedHealth built up this division through
acquisitions last year, and it's just one area in which the
company will continue to post above-average organic growth
this year.

Urban Outfitters (URBN:Nasdaq, $40.19, 3,000 shares,
3.34%): Started buying the stock 16% ago, but the company
received an upgrade this week and I'd look to add to my
position under $40. Urban should report great fourth-
quarter numbers, and I think you'll struggle to find better
growth potential in the retail sector.

THREES

Fortune Brands (FO:NYSE, $82.47, 1,000 shares, 2.29%): Sold
500 shares Wednesday, and would look to take another 500
shares off the table if Fortune traded to more than $84.
The company reported solid fourth-quarter earnings earlier
this month, but the stock set a new 52-week high Friday and
I don't want to see my double-digit gains melt away in this
volatile environment. Want to know one reason to hang onto
some Fortune? We'll qualify for the company's next 33-cent
quarterly dividend on Feb. 4.

Halliburton (HAL:NYSE, $40.84, 1,500 shares, 1.70%): Sold a
total of 1,000 shares this week, about $2 or $3 higher than
current levels. I had a 30% gain with Halliburton ahead of
Friday's earnings report and opted to take my profits ahead
of the number. That strategy paid off; the stock sold off
Friday on word that management might delay the sale of its
KBR division.

Kmart Holding (KMRT:Nasdaq, $93.94, 2,000 shares, 5.21%):
The Sears (S:NYSE) deal remains on plan because the
antitrust waiting period expired without government
regulators objecting. Even though I nearly have a double on
this position, I'm holding on to Kmart because I think the
shares can trade back above $100 after the deal closes in
March.

Regards,

James J. Cramer

DISCLOSURE: At the time of publication, Cramer was long
American Physicians Capital, Cabela's, Cendant, Charter
Communications, Comcast, Commerce Bancorp, EnCana, Fortune
Brands, Halliburton, Intel, JDS Uniphase, J.P. Morgan,
Kmart Holding, Kerr-McGee, Lucent, Nortel, Pentair, PNC
Financial, St. Joe, Symbol Technologies, Toyota Motor,
Tyco, UnitedHealth Group, Urban Outfitters and Yahoo!.