Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Monday October 27.
Dow Down but Not Out - PNC Financial (PNC), Wells Fargo (WFC), BB & T (BBT), Altria (MO), Pepsi (PEP), Verizon (VZ)Even though the Dow climbed 100 points on Monday only to tumble to 203, Cramer notes foreign markets, particularly Brazil, Russia India and China, are more volatile; The Dow has lost 38% this year while the above-mentioned economies have declined 50-75%. The reason BRIC economies have come crashing down is because their previous gains brought them to artificially high levels, while the Dow has remained low but stable over the long-term. Now that the dollar is “the strongest currency in the world,” Cramer would look to financials PNC, BBT and WFC. He also recommended dividend plays such as Altria, Pepsi and Verizon that don’t rely heavily on exports.
Steel’s Raw Deal - U.S Steel (X), Nucor (NUE)
In an ordinary market, a stock selling at just two times earnings would be a steal. Cramer explained this is not the case for X which is definitely headed south. He does not expect to hear good news when the company reports earnings, and he doubts X will even meet UBS’ lowered estimates, which were downgraded from $8.15 to $5. The stock has already tumbled from $196 to $31, and while some analysts are still bullish, Cramer sees a wave of downgrades approaching. X’s end markets, which include oil and gas drillers, appliance producers and automotive companies, are in trouble and a rising dollar will bring the price of steel even lower. It is unlikely X, which mines its own iron ore, will be able to keep up with competitors who use scrap metal. Nucor, which has a variable cost structure and a strong dividend, may be a better buy than X, but steel is no longer strong.
Arch Enemy - Arch Coal (ACI), Clorox (CLX)
Coal has “fallen off a cliff,” says Cramer as hard-hit hedge funds have “gone wild” raising money as their investors sell out. Many investors sought shelter in the promise of “clean coal,” but it is unlikely that coal will ever be clean enough for Obama, should he be elected. Arch coal missed its 59 cent estimates by 10 cents and noted increasing inventories, “the kiss of death for the coal industry,” said Cramer. While Arch CEO Steven Leer pointed to strong exports, foreign markets are suffering and a strong dollar will deal yet another blow to the ailing coal industry. Cramer would only touch coal by picking up a bag of Kingsford owned by Clorox, which has a respectable 3.4% dividend.
Mad Mail: Covance (CVD), Goodyear (GT)
A viewer asked why Covance, which Cramer said was “recession-proof” has taken such a hit. Cramer says even “recession-proof” stocks, apart from those which offer a huge dividend or which trade in cash, have been hit. He suggests buying rather than selling CVD. Another viewer wondered why Goodyear declined from $37 to $10, even though the company has strong fundamentals. Cramer says nothing can stop a decline in a tire company if auto production also declines.
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