Adding to APC on Weakness

After you receive this Alert, we will be buying 75 shares of Anadarko Petroleum Corp (APC) at roughly $61.45. Following the trade, APC will represent 2.51% of the portfolio.

In energy market, we wrote in our Cimarex (XEC) trim earlier here that the price of WTI Crude broke through the $70 level today. The renewed sense of higher prices and, perhaps, overblown Permian concerns, is giving lift to many oil names, except for Anadarko Petroleum Corp, which is trading lower due to greater attention to the upcoming Colorado ballot initiative.

We've said APC will be noisy until the election result is known, and it is possible that it could go lower into the event. However, we want to pick at shares at this heavily discounted price because we do not think the initiative will pass due to the negative ramifications on the state's economy. Plus, the initiative does not appear to have political support from both parties, and we expect the oil and gas industry to heavily campaign against the measure. Analysts at Morgan Stanley wrote last night their estimate of a 60% probability that the measure fails and noted that the removal of this overhang would cause a nice pop in shares. This has all been a distraction to the company's terrific free cash flow and shareholder return story, and we patiently await the passing of the overhang. All in, we are doing some maneuvering in the portfolio today, selling XEC on a 3% pop and redeploying those funds into APC which is down about 2% at the time this was written.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long APC, XEC.