Dear Action Alerts PLUS Subscriber, What a shellacking. Didn't matter what you were in this week -- if you were in, you were hurt. This was the week I felt the full brunt of the restrictions on my account: no shorting, no short-term trading, no puts, no protection. I think this personal fund I'm running is what's making me feel so embittered by so many of the mutual funds out there. They can take action, they can protect themselves; if they can't they can change the charter of the fund with ease (don't tell me otherwise, I know better). Me, I'm just out to dry. That's why my advice this week was better than my portfolio. Small buys spaced out during the week, carefully not putting in too much money, but putting some money to work. I didn't want to put no money to work during the worst week in the market's history. That would be a mistake. But I also expect we could still see lower prices down the road, and I want to be ready for that occasion, too. As I said, it didn't matter what you owned, it went down this week -- health care, financial, industrials, drugs, foods and, of course, technology. Many of my predictions last week of what the market would do to my portfolio were, unfortunately, true, with the exception of the oil service stocks, which I thought might have had a bit of a rally. They sold off huge, as people deal with the weirdness of massive credit inflation and massive commodity deflation. These stocks are levered to natural gas, and natural gas trades like a telecom-tech stock. I continue to think a diversified portfolio is your best bet here, with an emphasis on companies with stable cash flow. In fact, every time I ventured into a stock that didn't have bulletproof cash flow (EMC and United Technologies) I got smoked, just smoked. Let's go over the actuals and the real and imagined (future) impact on the stocks. Alcoa (AA) : They clubbed this one through $30 to the high $20s. In an aerospace-derived recession, people decided they would rather not own Alcoa, which makes aluminum for planes. Amazing, the company also makes aluminum for other uses including aluminum foil, but people didn't care. Boeing is an important client, and that said it all for this company. I bought a little around $30. I will buy a little more around $25. Right AmerisourceBergen Brunswick (ABC) : What a star, the drug wholesale business will show some of the best compares around and this company will show terrific synergies. So right. Want to buy more soon. Right AOL Time Warner (AOL) : Now that Disney (DIS) has traded at $15, we know AOL can trade lower. I haven't been able to figure out what the normalized earnings power of this one is. I think it's still not right and can go lower, but I have been holding it for the long term. Right on a Pullback Bank of America (BK) : New to the list. Gary doesn't like it technically, but I think the stock will report better-than-expected earnings this quarter because of the lower fed funds rate. They can coin money here. Right Best Buy (BBY) : Despite the good sales, this stock sold off because a prominent momentum fund was bailing all week. If I hadn't mentioned it, I would have been buying it right here. High-quality survivor of this period. Right Caterpillar (CAT) : Now that we're looking at a recession, people don't want to own the world's foremost earth mover. CAT has a product line that encompasses much more than just construction of buildings, so I bought a little down here. Its earnings should hold up remarkably well, and I'll buy more if it dips below $40. Right on a Pullback Chevron (CHV) : New to the list. Integrated oil that yields more than 3%. Soon will merge with Texaco and could be a terrific long-term winner. Intend to buy more below $80. Right Cisco (CSCO) : They will pick up share but American business isn't moving right now and Cisco is a cyclical company, so I suspect another earnings shortfall is in the works. Wrong for now Citigroup (C) : Looks like people have given up on the financials at the exact time the Fed is giving them the green light to coin money. As Citi is a worldwide financial, people are quite worried that its business will tail off. I think that's temporary. Citi, though, is also Travelers, and even though I think the old TRV was well- run, if you mentioned insurance, people ran the other way this week. Constellation Energy (CEG) : This one just keeps going down. It is statistically cheap and recession proof but it had momentum funds in it. Not giving up here, just putting it on hold. Will make more calls on it next week and come back to you. Right on a Pullback EMC (EMC) : Just when you thought tech had a bottom, tech turns out, once again, to be worse than expected. I think EMC is going to take huge storage market share here and am quite bullish about 2003-05. But 2002? Looks as if we're a little too early to make that determination. That said, I was rebuilding a little of a position that I had taken off a few points ago. No sin. But it taught me a big lesson: Tech is not done going down, and you will have to see much lower prices before disappointment is truly priced in. Right Fluor (FLR) : Just bought some more when, on Friday, this company said its order backlog is increasing. That's great news. It is not levered to New York or financials or insurance or aerospace, so it can prosper here. Right Ford (F) : Nope, wait until the dividend is cut and then you can pounce. It will go lower the day it is cut. Wrong General Electric (GE) : Bought some down here as it reaffirmed targets. I like this one down here. Right. Goldman Sachs (GS) : Wrong, but too cheap to sell. Will have problems with earnings this quarter and still isn't doing what it should do, which is trim the workforce as Goldman of old would have done. Wrong Guidant GDT: One of the best, just got approval for a new device. Tried to get permission to buy it but had mentioned it on radio on Monday. Right Halliburton (HAL) : I can't believe that this stock actually went up on Friday. I thought it could only go down. I want to buy more where Gary B. Smith says it bounces, which is in the high teens. It has been an unmitigated disaster for me, and I can't believe how the threat of an asbestos problem has just crushed this. IBM (IBM) : Bought some because I think it takes share after the crisis subsides. But that's too long for most to think about and it will probably drift lower still even though it represents great value. Right on a Pullback International Paper (IP) : Glad I sold a lot of this. Below $30 I will buy it back as a value play. Still too early, even though its raw costs and the dollar are now going its way. Right on a Pullback Kohl's (KSS) : Wrong stock, wrong time. Said so on air so I can't sell it. Very tough to own retail here. Wrong Merck (MRK) : Now its $3 earnings power looks good and its price seems reasonable historically. I like Merck very much here. Right. Merrill Lynch (MER) : Even here the stock is probably wrong. I sold as much as I could. Now I have to wait for a bounce as the stock is just too low to sell. Wrong Microsoft (MSFT) : Stock still has downside because it is a source of funds for so many growth funds, not because it isn't reasonable. Right on a Pullback Morgan Stanley MWD: The only brokerage stock I tried to buy this week (I had spoken on it so couldn't). Reported an excellent quarter on Friday. I think this company is really pulling itself together. Traded at two times book, and I never thought that could happen. Boom, lot of stuff I never thought would happen is happening. Right PepsiCo (PEP) : Sold off at the end of the week and that's nothing but opportunity. The only stock that was up big on Monday; I think you have to buy more of it on any weakness. Right Pfizer (PFE) : Stock is too cheap statistically even in an era of lowered price-to-earnings ratios. Great pipeline. Right Philip Morris (MO) : Great yield, very recession resistant. A real keeper and one that if I ever stop talking about I will buy more of. Right Qwest Q: Sold some and will keep selling because they bagged me. Enough said. I know it's cheap but I never keep a stock where I have been bagged to my face. Wrong Schlumberger (SLB) : I can't believe that this high- quality stock has been cut in half at a time when oil, which it is really leveraged to, has held up. Bought more this week. Right United Technologies (UTX) : I was too quick-draw on this one. I saw it so cheap and thought that the other businesses (Carrier and Otis and Defense) would mitigate the Pratt %26; Whitney. Sellers saw it otherwise. They are right short term and wrong long term. Looking to buy more. Right. Universal Health Realty (UHT) : As cash rates get lower I want to buy more of this and did so this week. Health care REIT that is recession proof. Right UnitedHealth Group (UNH) : Best in show but had run so I lightened up to buy cyclicals that were trashed. Don't know if that decision will come back to haunt me. Anxious to get back in at $55. Announced a really great quarter on 9/11 -- so what given that day. Right on a Pullback Verizon (VZ) : My favorite telecom play. I intend swapping the rest of Qwest for it. VZ just got approval for Pennsylvania long distance. This one could be a juggernaut here. Right People have asked me about the action alerts that I didn't remove but didn't buy: AMD (AMD) and Bank of New York (BK) . BK has been punished, but not mercilessly, because of its incredible systems breakdown. It now seems like a takeover target down here. Too low to sell. AMD? What can I say? Intel at $20, you buy that over AMD at $9.
I have too many names on the list and added Clorox (CLX) Friday. I would have taken off some of the wrong ones but I described them on air as wrong, which froze me. As soon as I'm unfrozen I will downgrade them if they have rallied. Let's hope for a better week even as hope should play a role only in other aspects of life. Not too much to ask, is it? Regards, James J. Cramer Please send comments on Action Alerts PLUS to jjcletters@thestreet.com. DISCLAIMER: James J. Cramer is Markets Commentator for TheStreet.com and CNBC, and a director and co-founder of TheStreet.com. TheStreet.com is a publisher, and neither we nor Mr. Cramer is registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission or with any state securities regulatory authority. From time to time, Mr. Cramer may write about stocks in which he has a position. In such cases, appropriate disclosure is made. At the time of publication of this Action Alert, Mr. Cramer was long Alcoa, AOL Time Warner, AmeriSource-Bergen, Bank of America, Best Buy, Caterpillar, Chevron, Cisco, Citigroup, Clorox, Constellation Energy Group, EDS, EMC, First Union, Fluor, Ford, General Electric, Goldman Sachs, Guidant, Halliburton, IBM, International Paper, Kohl's, Merck, Merrill Lynch, Microsoft, Morgan Stanley Dean Witter, PepsiCo, Pfizer, Philip Morris, Qwest, Schlumberger, TRW, UnitedHealth Group, United Technologies, Universal Health Realty and Verizon. Mr. Cramer's Action Alerts represent his own opinions and should not be relied upon for purposes of transacting securities or other investments, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. He cannot and does not assess, verify or guarantee the suitability or profitability of any particular investment. You bear responsibility for your own investment research and decisions and should seek the advice of a qualified securities professional before making any investment. While Mr. Cramer cannot provide personalized investment advice or recommendations, he invites you to send your comments to jjcletters@thestreet.com.