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Taking Gains, Raising Cash

The portfolio's returns have doubled the S&P so far. Find out where Cramer is taking profits.
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Dear Action Alerts PLUS Subscriber,

We've enjoyed a great run in the portfolio, up better than 17% year-to-date as I write this. That's double what the S&P 500 has returned.

The prudent move after this run is to raise some cash. I think this market will trend higher, but I don't want to take the risk that some of these gains will slip back into losses.

After you read this note, I am going to sell 1,500 shares of Royal Dutch RD. I think ChevronTexaco (CVX) and BP (BP) have more upside potential at these levels. Both stocks could be due for some analyst upgrades when the market realizes just how inexpensive this sector is.

I also want to sell 500 of my 1,500 Target (TGT) shares here, around $35.31. a share. The retailer said that comp sales picked up last week, but I feel that my thesis that Target would be an early mover in a recovery rally has mostly played out.

I think it's also prudent to sell 10,000 shares of Conexant Systems (CNXT) at $3.53. The stock has flirted with this level a few times before, and I have a 130% unrealized gain on the position sheets. I would be piggish not to book some profits here.

Conexant still will make up 5% of my portfolio after this trade. A lot of the near-term gains from the Mindspeed spin may already be factored in, but I was very encouraged by the recent insider purchase by Scott Mercer. The new Director is the CFO of Western Digital (WDC) by day, and just ponied up to buy 50,000 CNXT shares with his own money. He obviously sees something at Conexant he likes, because this is a statement purchase.

These trades would give me nearly $200,000 in cash. While I want to be positioned for the next buying opportunity, money market funds just aren't paying much these days. With the benchmark long-term treasury yielding just 3.47%, I think dividend-paying stocks remain a solid bet.

That's why I'm going to buy 1,000 shares of Eastman Chemical (EMN) here at $32.01. The stock yields 5.5% at these levels, an attractive return, even before the new dividend tax cut. Eastman also is seeing a significant margin recovery, with per share earnings expected to almost double this year. This purchase will give me a total of 2,500 EMN shares.

Regards,

James J. Cramer

DISCLOSURE: At the time of publication, Cramer was long Royal Dutch, ChevronTexaco, BP, Target, Conexant and Eastman Chemical. ********************************************************* READ MORE CRAMER Stay in tune with Cramer's thinking throughout the trading day by reading his columns on RealMoney. Click here to subscribe:

https://secure2.thestreet.com/cap/prm.do?PID=PRRM- 01&OID=000385 ********************************************************* Don't forget, you can listen to Cramer's radio show on your PC! Just click here:

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James J. Cramer is a Markets Commentator for TheStreet.com and CNBC, and a director and co-founder of TheStreet.com. TheStreet.com is a publisher and has registered as an investment adviser with the U.S. Securities and Exchange Commission. We are not a registered broker-dealer.

Mr. Cramer is subject to certain restrictions in transacting for his own benefit in securities he purchases for his Action Alerts PLUS portfolio. SPECIFICALLY, MR. CRAMER MUST HOLD ALL SECURITIES IN HIS ACTION ALERTS PLUS PORTFOLIO FOR AT LEAST ONE MONTH. IN ADDITION, HE IS NOT PERMITTED TO BUY OR SELL ANY SECURITY HE HAS SPOKEN ABOUT ON CNBC OR HIS RADIO PROGRAM FOR FIVE DAYS FOLLOWING THE BROADCAST. Action Alerts PLUS contains Mr. Cramer's own opinions and is provided for informational purposes only, and no mention of a particular security constitutes a recommendation to buy, sell or hold that or any other security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. You further understand that Mr. Cramer will not advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the information contained in Action Alerts PLUS may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Mr. Cramer's past results are not necessarily indicative of future performance. DO NOT EMAIL MR. CRAMER SEEKING PERSONALIZED INVESTMENT ADVICE, WHICH HE CANNOT PROVIDE. He welcomes your editorial comments at jjcletters@thestreet.com.