After you receive this Alert, we will be initiating a position in Amgen Inc (AMGN) , buying 150 shares at roughly $195.05. In addition, we will be buying 100 shares of Anadarko Petroleum Corp (APC) at roughly $69.36. Following the trade, AMGN and APC will represent 1.03% and 1.96% of the portfolio, respectively.

We are bringing AMGN out of the Bullpen and into the portfolio as our exit of Eli Lilly (LLY) has made room for an additional name, especially in health care. Members can read our very detailed Bullpen Alert that describes our thesis in the name here. Furthermore, the company posted a very strong beat and raise with its second-quarter 2018 result on July 26, and that presentation, as well as the company's 2017 annual report, can be found here.

We are starting relatively small in AMGN as we, of course, want to leave room to scale into the position over time. While we believe the stock has significant room for upside, we also recognize that the shares have been on a tear since May. We welcome any pullback from current levels as a buying opportunity.

We're initiating our AMGN position with a $220 price target, which reflects roughly 15x consensus 2019 earnings estimates. That being said, we believe there is room for upside here, both on further multiple expansion and also earnings growth should value biopharmaceuticals re-rate to a higher multiple and analyst estimates get taken up on better-than-expected launches in Aimovig as well as continued performance in Repatha, offsetting declining sales in more mature products (one of the major reasons the multiple on shares remains depressed at around 13x - 14x estimates for next year's earnings). Lastly, we believe the consistent dividend pays shareholders to wait while the ramp up plays its course.

Meanwhile, with APC showing signs of stability, our APC purchase comes in addition to our buy from earlier this morning (see here) as we believe the reaction to the $250 million increase capital expenditure outlook does not justify this move in the stock. The company's free cash flows are still attractive in this energy environment. It has an "oily" production mix (and should become even more oil based through 2019), and we appreciate management's shareholder-friendly capital strategy.

What's more, today's post-earnings selling (which is being aggravated by a surprise U.S. inventory build as well as an increase in OPEC production) is a lesson on discipline. Anadarko has been in the portfolio since the beginning of May, but we applied strict discipline to our cost basis throughout the stock's quick move higher, continually reiterating that we must not chase this name. To be clear, we never want to see a stock down more than 5% on a single day, but our discipline prevented today's losses from hurting further and has given us the opportunity to buy shares at/below our average cost basis.

Lastly, we want to turn attention to Kohl's (KSS) . The shares are taking a hit today on little company-specific news, but the selling could be related to the reports that some administration advisers to President Trump are pushing for additional tariffs on Chinese imports. Looking past the selling and focusing on the company's smart initiatives to boost sales, its positioning to capture business from foreclosed competitors (BonTon), and is consistent high-yielding dividend, with shares down roughly 11% from its 52-week high made in June -- a point near when we most recently locked in a sizeable profit (see here) -- we believe the stock is back to an attractive valuation to start a position in if not owned. As such, we our upgrading our rating to a One.