After 4%-plus gains across the board this week in the major market averages, we once again find ourselves at levels at which previous rallies have stalled this year. But this one feels like it might stick, like it was more than just short-covering.
What made this rally different was that it was strong across the board, especially on Friday. Since General Electric (GE) disappointed the market a week ago, we've seen a wide range of companies deliver better-than-expected results.
And if you thought there was a lot of data to digest this week, there are several more companies reporting earnings next week. I'll try to keep you readers apprised of the action, and you can bet that it will be coming at us fast and furious.
So despite the gains we saw this week, it looks like we could push even higher in the near term. And finally, there are more groups than oil and agriculture that look safe to buy -- even if the consumer names are not on that list.
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Here's the quick guide to my rating system, too: Ones are stocks I would buy right now, Twos are stocks that I would buy on a pullback, Threes are stocks I would sell on strength and Fours are stocks I want to unload as soon as my trading restrictions allow.
ONES
Altria (MO:NYSE, $22.10, 4,000 shares, 2.53% of the portfolio): Added a total of 600 shares this week to take advantage of the company's 5%-plus dividend yield. The company is cutting costs in its domestic tobacco business, and will use its strong cash flow to return billions to investors through the form of buybacks and the dividend. I believe the stock can trade up toward the mid-$20s, following last month's split. We'll get a first look at the stand-alone businesses results at Altira's quarter report Thursday night.
Discovery Holding (DISCA:Nasdaq, $22.77, 8,500 shares, 5.53%): Gained more than 5% on the week, and I continue to believe that the upcoming restructuring strategy will attract a larger investor base. Given strong viewer rates at the core Discovery channel and the company's aggressive expansion plan, the stock could trade back up toward the high-$20s in the coming quarters.
El Paso (EP:NYSE, $17.62, 5,000 shares, 2.52%): Added 500 shares Friday. The stock traded up ahead of the company's analyst meeting this week, and I maintain that management will deliver on its growth targets in both the natural gas production and pipeline businesses. With that in mind, El Paso can trade up through $20 over the coming quarters.
Philip Morris International (PM:NYSE, $49.96, 4,000 shares, 5.71%): Bought 200 shares Friday, ahead of the upcoming April 23 quarterly report. I just came back from a trip to Europe, where I saw first hand that the demand for cigarettes remains high. The company has high growth potential in Asia and has pledged to return tens of billions of dollars to investors in the form of dividends and its buyback program.
Schering-Plough (SGP:NYSE, $16.87, 12,500 shares, 6.03%): Picked up 1,000 shares Friday ahead of the company's quarterly report Wednesday. Despite Pfizer's poor results this week, the stock remains oversold on the Vytorin headlines, and CEO Fred Hassan will continue to rebuild investor confidence on the conference call. In the meantime, the stock is giving little value to Schering's clinical pipeline and other solid drug franchises.
Yamana Gold (AUY:NYSE, $14.49, 8,000 shares, 3.31%): Added 500 shares Thursday as gold did not participate in the market rally this week. While the underlying commodity may still have to digest some of its gains, the company's growth prospects and lower operating costs continue to make it the most attractive name in the group.
TWOS
Annaly Capital (NLY:NYSE, $16.96, 5,000 shares, 2.42%): Bounced back about 8% for the week, along with the rest of the financial sector. While there are still plenty of storm clouds on the horizon, I believe the company's worst liquidity fears are behind it. But until Annaly posts first-quarter results in the coming weeks, we still don't have enough information about the situation to take further action.
Black & Decker (BDK:NYSE, $68.33, 2,300 shares, 4.49%): Early-cycle name whose April 24 quarterly report will be an important litmus test for this market. The stock held up well despite an earnings miss last quarter, but an upside surprise in this environment would really create a buying frenzy.
BP (BP:NYSE ADR, $68.20, 3,000 shares, 5.85%): Took profits off the table with 200 shares Friday. The stock is up 8 straight points from where we were buying it three weeks ago. BP held an upbeat investor meeting this week at which management said that profit will continue to grow in the second half of the year. But with the dividend yield back below 5%, I want to right-size my position ahead of the company's upcoming April 29 quarterly report.
EMC (EMC:NYSE, $15.52, 13,500 shares, 5.99%): Told readers to buy the stock Tuesday on weakness caused by an analyst downgrade, more than a point lower where it ended Friday. We've seen across the board that technology had a strong quarter, especially overseas. EMC remains one of the cheapest names in the group, ahead of its own upcoming earnings report on Wednesday.
Foster Wheeler (FWLT:Nasdaq, $65.79, 3,500 shares, 6.58%): Pushed 11% higher for the week as the early earnings reports this quarter have shown strong infrastructure demand, especially overseas. At current levels, the stock is now 13 points higher than where I was buying it a month ago. And while the prudent move is to take some shares off the table, Foster will remain a core holding in the portfolio.
Goldman Sachs (GS:NYSE, $180.03, 1,100 shares, 5.66%): Gained about 8% on the week, fueled by the better-than-expected quarterly reports of some of its competitors. The stock is now up 20% from its recent lows. So while the stock has likely bottomed, the prudent move might be to take 100 or 200 shares off the table into the next rally.
Hologic (HOLX:Nasdaq, $27.57, 2,000 shares, 1.58%): Quiet week for the stock, which treaded water even though all signs point to the fact the company had a solid first quarter. Hologic would be attractive to purchase ahead of earnings if it pulled back toward $25.
NYSE Euronext (NYX:NYSE, $68.12, 2,500 shares, 4.87%): Kept pace with the broader market averages this week, and I would not likely sell more shares ahead of the upcoming May 6 quarterly report, unless the stock moved up into the low- $70s.
Raytheon (RTN:NYSE, $66.14, 1,700 shares, 3.21%): Pushed up toward its recent highs ahead of the upcoming April 24 quarterly report. The company continued to add to its backlog this week, signing a new GPS contract with the Air Force. I expect a strong earnings report and maintain that the stock can trade up through $70 over the coming months.
St. Jude Medical (STJ:NYSE, $45.04, 2,500 shares, 3.22%): Posted better-than-expected results Wednesday, though the stock is once again struggling to break through above $45. The company is performing well across the board, and I believe that St. Jude will continue to beat expectations and raise guidance throughout 2008.
UnitedHealth Group (UNH:NYSE, $37.25, 1,500 shares, 1.60%): Scheduled to post first-quarter results Tuesday morning, and I'm hoping the results will finally answer some questions about margins and the company's near-term growth prospects. The stock is already pricing in disappointing numbers, and I'd be ready to add to my position if UnitedHealth pulled back toward the mid-$30s.
Verizon (VZ:NYSE, $36.03, 3,500 shares, 3.60%): Quiet week for the company ahead of the upcoming April 28 quarterly report. The stock remains attractive for its 4.8% dividend yield, and I continue to believe that Verizon can trade up toward $40 over the coming months.
XTO Energy (XTO:NYSE, $67.57, 1,000 shares, 1.93%): Moved another 6% higher this week after the company announced another $600 million purchase Wednesday, for production rights in the Marcellus Shale. This is one of the new hot spots in the natural gas industry, and management has a solid track record of growing through acquisitions. I feel a bit piggish holding onto the stock with a 52% profit into Wednesday's quarterly report, but XTO remains one of the best performers in an area of the market that should remain white-hot.
THREES
ConocoPhillips (COP:NYSE, $83.89, 1,000 shares, 2.40%): Gained more than 6% for the week, closing Friday at its highest level in about six months. Conoco is another name set to post results the morning of April 24. The real question mark remains just the effect that shrinking refining margins will have against record oil prices.
Corning (GLW:NYSE, $25.73, 3,200 shares, 2.35%): Kept pace with the rest of the tech sector this week ahead of the company's own quarterly report on April 29. While I believe that Corning likely had a good quarter, this is another stock sitting at a level at which it's stalled before. With that in mind, readers should consider taking some shares off the table into any further rallies.
Freeport-McMoRan (FCX:NYSE, $113.89, 400 shares, 1.30%): Gained more than 7% on the week as the stock went out Friday at a five-month high. I'm now up more than 63% on my average cost basis. The company posts first-quarter results Wednesday, but my small position in Freeport is essentially a place-holder for the white-hot metals market at current levels.
Inverness Medical (IMA:Amex, $34.43, 4,800 shares, 4.72%): Sold 300 shares Friday, as the stock is up more than 20% from its recent lows. The company will post first-quarter results Thursday, and I'd look to further scale back my position if Inverness moves up through $36 in the near term.
McDonald's (MCD:NYSE, $58.30, 2,000 shares, 3.33%): Gained more than 5% ahead of Tuesday's quarterly report. While the market is expecting another month of low U.S. sales growth, the company will likely continue to outperform its peers over the coming quarters.
Sears Holdings (SHLD:Nasdaq, $104.72, 800 shares, 2.39%): Failed to keep pace with the broader market this week, even though the company announced another round of cost cuts at its corporate headquarters. While other signs of the economy are showing they may have bottomed, it might still be too soon to make that call for retail. That said, I remain patient that Eddie Lampert can unlock value here over the next several quarters.
Regards,
Jim Cramer
DISCLOSURE: At the time of publication, Cramer was long Annaly Capital, Black & Decker, BP, ConocoPhillips, Discovery Holding, El Paso, EMC, Foster Wheeler,Freeport-McMoRan, Corning, Goldman Sachs, Hologic, Inverness Medical Innovations, McDonald's, Philip Morris International, Sears Holdings, Altria, NYSE Euronext, Raytheon, Schering-Plough, St. Jude Medical, UnitedHealth Group, Verizon, XTO Energy and Yamana Gold.
Send email to james.cramer@thestreet.com.