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Adding to Two Exciting Holdings

This gold producer and this credit-services company have catalysts for further growth.
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After you have received this Alert, I am going to buy 1,200 shares of NovaGold (NG) at $14.33 and 100 shares of American Express (AXP) at $43.87. I am going to sell 200 shares of Procter & Gamble (PG) at $64.86, as the stock is at my target, and I'll lock in the profit.

NovaGold is a Canadian-based precious-metals company with three world-class assets in Alaska and British Columbia. It has a 50% stake in the Donlin Creek gold project in Alaska that it partners with Tech Resources (Canadians largest mining company) and a 50% stake in the Galore Creek in British Columbia that is a joint venture with Barrick Gold (the world's largest gold company). It also reacquired 100% interest in the Ambler copper/zinc/gold project in Alaska. In total, NovaGold's net interest in these projects in is 30 million ounces of gold, 157 million ounces of silver and 9.1 billion pounds of copper, but the potential is far greater as commodity prices move higher and the company begins production (expected in 2015-2016).

The story is exciting on its own merits, given the huge potential and quality of reserves in its projects (Donlin and Galore Creek are two of the largest gold/copper mines in North America), the limited political risk and NovaGold's exploration expertise. Its balance sheet has dramatically improved after getting financing from two of the most respected investors in the sector -- Paulson & Company and Soros (priced back in the spring at $5.50/share) -- which brought in $175 million, which will enable the company to continue to build out these assets.

2011 will bring a few catalysts that should move the stock higher, independent of higher gold prices -- feasibility studies, permitting and construction completion of its Galore Creek project as well as potential sponsorship and analyst coverage. Interestingly, back in 2006, Barrick Gold made a $1.53 billion hostile bid for the company ($16 a share, which was rejected by shareholders) when gold was half the price it is today. Considering the ore grade and quality of the minerals in its mines, the stock is worth far more, in my view. I wouldn't rule out another takeover bid from either of its partners or from a foreign buyer such as one from China, as companies around the world look to bulk up natural resources, particularly gold deposits.

American Express is a two-part story of consumer/business spending recovery as well as the improving credit cost trends and further balance-sheet strengthening. In the most recent quarter, the company released $600 million in reserves (50 cents a share), charge-offs fell to 5.1% (down 1%), and delinquencies fell to 2.5% (down 30 basis points). The company covers 7.5% of its total loans, which is very conservative, so I expect further releases to come, providing a cushion to earnings.

Loan losses totaled $373 million vs. $1.1 billion last year and below the $700 million expected, and the write-off rate fell below 5% for the first time since 2008. On the fundamental side, revenues gained 17% on higher card spending, higher international and travel activity. Cards in force increased 1% to 89 million, with international growing 5%. And the company raised guidance despite its plans to increase marketing and promotional activity by $1 billion. Even though the stock has moved from my initial buy level of $40, I believe it has upside to $53 as both fundamentals and credit costs improve.

I am getting close to pulling the trigger on Fluor (FLR) if it weakens 3%-5% from here, because I don't want this high-quality, late-cycle infrastructure play to get away from me. Its quarter last week showed significant improvement in orders, bookings and backlog. It reported noticeable strength in its oil and gas orders -- tripling from last quarter (carrying higher margins than its other projects), and that is exactly what investors have been waiting for, because it is a leading indicator of revenue and earnings trends. The balance sheet is the strongest in the industry, and the company bumped up its share- repurchase program, which will likely keep a floor on the stock. So I'll keep a close eye on this bet, and if there is further weakness (profit-taking after the 11% gain in the past two days), I'll add more.

After my trades, I will own 6,000 shares of NG, or 2.66% of the portfolio; 2,700 shares of AXP or 3.63%; and 1,300 shares of PG, or 2.58%.

Regards,

Jim Cramer, Stephanie Link, and the Research Team

DISCLOSURE: At the time of publication, Cramer was long NG, AXP, PG and FLR.

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