Trimming a Financial, Adding to Trucks

Earlier this week, I took profits in American Express (AXP) . After you have received this Alert, I am going to trim this position again by selling 300 shares at $48.22 and taking further gains. The Senate just voted against a bill that would have delayed the Durbin amendment for debit- card swipe fees, and that is why Visa (V) and MasterCard (MA) are both down. American Express is not down as much, but I believe the near-term upside will be capped as investors speculate that regulators will turn their attention to credit card fees.

I don't believe credit-card regulation would pass, especially given the political fight over the debit-card situation. But the stock is volatile, so I will take the 13% gain, and if it falls to the low $40s, I'll buy it back.

Separately, I'll buy 100 shares of Cummins (CMI) at $96.71. I've waited patiently to buy this, and even down $4 today, it is well above my $65 cost basis. That said, I sold shares at $116, and with the stock now at $96, it is attractive, especially since the secular growth story in the truck market remains bullish (replacement demand is high while inventories are low). Recall that Class 8 truck orders for May increased 80% year over year, and the ability for the industry to produce at the rate of demand remains difficult, suggesting strong pricing.

Cummins' stock is down today, probably because Westport (WPRT) missed estimates, but I view this as a Westport-specific issue due to higher costs and because it looks like Westport is making an expensive acquisition in Emer, which moves it further away from the truck segment. This is on top of Navistar's (NAV) earnings miss yesterday, which is also tied to company-specific cost issues associated with new product launches. Importantly, Navistar indicated that demand remains strong, with production of 240,000 to 260,000 trucks this year. These are much inferior companies to Cummins, so I'll take advantage and pick.

Novagold (NG) is down almost 6% today, and I'd typically be a buyer down this much. But there is word the company will do an equity deal to finance its two large mining projects, and the stock could see further weakness as a result. I will stay patient on it, still liking the gold exposure in the fund.

After my trades, I will own 2,000 shares of AXP, or 3.2% of the portfolio, and 900 shares of CMI, or 2.91%.

Regards,

Jim Cramer, Stephanie Link, and the Research Team

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

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James J. Cramer is a Markets Commentator for TheStreet and CNBC, as well as co-founder of TheStreet. TheStreet is a publisher. Cramer graduated magna cum laude from Harvard College, where he was president of The Harvard Crimson. After receiving his J.D. in 1984 from Harvard Law School, he joined Goldman Sachs, where he worked in sales and trading. In 1987, he left Goldman to start his own hedge fund. While he worked at his fund, Cramer helped start Smart Money for Dow Jones and then, in 1996, he founded TheStreet.com.

Stephanie Link is the director of research & vice president of strategy for TheStreet. She is the co-portfolio manager for Action Alerts PLUS and works daily on the strategy and stock picks chosen for the portfolio. Stephanie is also responsible for recruiting talent for the paid sites including options, technicians and fundamental contributors. Prior to joining TheStreet, Link worked on Wall Street for 16 years. She spent nine years at the Prudential Equity Group as a managing director in U.S. institutional sales and as the New York sales manager covering top national accounts. She was the managing director of equity research in her final year at the firm. Prior to that position, she worked at Dean Witter as an institutional sales person for six years. Link's investment specialties include large-cap core stocks as well as value ideas.