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Adjusting the Portfolio

We're closing one position, taking profits in another and adding to two holdings.
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We're up 13% in Weyerhaeuser (WY) , and we will lock in the gain, selling out of the position of 1,900 shares at $30.74. We'll also take profits by selling 200 shares of Emerson Electric (EMR) at $55.01 and redeploy the money by buying 200 shares of United Technologies (UTX) at $85.65 and another 300 shares of Cisco Systems (CSCO) at $20.85.

We have traded the Weyerhaeuser position multiple times as our way to play the housing theme. Lumber futures continue to be very strong, and estimates have been working higher. But even given the new estimate revisions, the stock is close to fair value. We also need to right-size the number of stocks in the portfolio, and over time we want to get back to owning 30 stocks in total (this Weyerhaeuser sale gets us to 33). We'll take the profits and wait for a pullback in shares before we get involved again.

The Emerson sale is also profit-taking, since the stock is near our price target. We continue to like the Emerson story, since the company has 30% of its exposure in emerging markets and strong momentum in process automation, and it will soon sell its embedded power segment (within Network Power). We see more upside to United Technologies as it integrates Goodrich and sees sizable synergies over the next few years ($0.70 a share this year alone). Plus, now that the deal is closed, the company can resume its buyback and dividend strategies. And since Cisco shares are down nearly 1% today, we'll continue to build this newest position.

After our trades, we'll be out of WY, and we'll own 1,500 shares of EMR, or 2.91% of the portfolio, 950 shares of UTX, or 2.87%, and 2,300 shares of CSCO, or 1.7%.

Regards,

Jim Cramer, Stephanie Link, and TheStreet Research Team

DISCLOSURE: At the time of publication, Action Alerts PLUSwas long WY, EMR, UTX and CSCO.

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