Selling Out of GS and Adding to UPS

We trimmed back the Goldman Sachs (GS) position on Friday. We will follow through today by selling out of the entire position to lock in gains and raise cash. It is ranked Three in the portfolio, and with shares near our target price, we'll take profits. Also, we will add 100 shares to our newest position in UPS (UPS) at $110.02.

GS is a best-in-breed financial stock, and it has posted strong results over the last two quarters, owing to better M&A and Investment Banking results (it saw the highest backlog level in seven years). We expect the company to continue to deliver solid results, but the valuation is less compelling than it had been when we started buying in the $160s.

At the same time, UPS has also lagged the market and its industry peer Federal Express (FDX) . It is a play on the U.S. consumer, improving business sentiment, the potential recovery in Europe, and the strong balance sheet.

The holiday headlines have been mixed so far, with sluggish sales in the mall stores: down 11% over the Thanksgiving weekend. The offset is that according to ChannelAdvisor, online sales were strong. The three-day average (Thursday, Friday, Saturday) sales rose 23%, led by 32% growth at Amazon (AMZN) , 15% growth in ebay (EBAY) and 13% growth at Google GOOGL.

This doesn't surprise us, as online retail takes on more market share at the expense of the mall-based stores. Simply put, traffic at the malls has been eroding for quite some time, something that Howard Schultz has said numerous times on the Starbuck's quarterly conference calls. At the same time, online sales remains robust, which is why so many companies (Starbucks, Macy's, Gap, Burberry, etc.) have spent so much time and money on their Omnichannel strategies, in an effort to drive a better Internet experience.

By owning UPS, we get the benefits from this shift, against easy upcoming comparisons and improved operational results (following heavy investment spending this year). the company is positioned well to see strong earnings power recovery in 2015.

Separately, the other name we are looking to trim or sell out of is PVH (PVH) , which is also near our $130 target price. We like the restructuring story, and should it rally into the print, we're inclined to take the gains and further build up our UPS position and/or look to a long-term favorite in TJX (TJX) , which has lagged the retail group year-to-date, and is positioned well in the current mixed consumer environment.

Finally, Starbucks (SBUX) will hold its analyst day on this Thursday, Dec. 4. We expect it to be a positive event with long-term growth goals, improving market share results internationally, strong trends in China, and a continued commitment to shareholder returns (buybacks and dividends) that support a 35%-45% payout ratio.

We believe this is one of the more compelling consumer stories for the long run. Starbucks has the ability to consistently grow top-line 10%, bottom line 15%-20%, and double-digit returns. We're pleased to see the stock recover from its third-quarter lows, but we see more upside as the company is able to deliver strong results around the world.

Regards,

Jim Cramer, Stephanie Link, and TheStreet Research Team

DISCLOSURE: At the time of publication, Action Alerts PLUSwas long GS, UPS, PVH, SBUX, and GOOGL.