Cramer's Mad Money - Fatal Assumptions (11/11/08)

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Tuesday November 11.

 

Fatal Assumptions: Proctor & Gamble (PG), Hartford (HIG), Prudential (PRU), Hartford (HIG), MetLife (MET), Goldman Sachs (GS), Tyson Foods (TSN), JC Penney (JCP), Saks (SKS)

Assumptions can make a you know what out of you and me, how much more so otherwise stable companies that are not sufficiently cautious. Even a conservative company like Procter& Gamble suffered from its assumptions that oil prices would stay steady, raw costs wouldn’t rise excessively and the dollar would stay low. Hartford, Prudential and MetLife were all downgraded by Goldman Sachs. The companies made a big bet on commercial real estate and lost, and didn’t predict such a huge drop in their stock prices. Now they lack the needed capital to get themselves out of their mess. The funds assumed oil would rise forever and that China would remain strong. Tyson did not foresee rising feed prices. Some thought things would look up for retailers because of falling gas prices and the upcoming holiday season. However, JC Penney dropped from $51 to $19 and Saks is down to $4 from $23. The only bright spot is that cheap commodities will be good news for everyone else but commodities.

 

Staying Afloat: Nordic American (NAT)

Although the stock has fallen 44% since May, Cramer is bullish on this tanker company because of its competitive pricing and steady dividend. Cramer thinks the dividend is safe after Nordic's 45 consecutive quarters of raising the yield, and the company has no debt. Nordic is in a position to buy tankers at reduced prices. Cramer thinks all other tanker companies are risky and would invest only in Nordic American. He added Nordic is levered to tanker prices and not to crude oil prices.

 

More Dividends: Emerson Electric (EMR)

 

 

Mad Money viewers know Cramer likes dividend stocks as a way to play the bearish market. Emerson not only yields 4.1% but has a diversified collection of businesses including industrial automation, climate control, power transmission equipment and energy conservation technology. Emerson actually saw gains in the 1990-91 recession and is likely to thrive during the current crisis. The company has raised its dividend consistently for 52 years and reported a better-than-expected quarter. Even if the company has a bad year, earnings expectations are twice the dividend, so the yield is safe. Cramer would buy Emerson on scale, but would not pay more than $33 for it or would buy if the dividend goes below 4%.

 

Mad Mail: Starbucks (SBUX), Goodyear (GT), Monro Muffler (MNRO)

 

When a viewer asked about Starbucks, which is down significantly, Cramer said, "…While that's a great idea to look at it, until we see…more of a turn with Starbucks…every time we try to call a bottom in the stock we've been wrong." Cramer told another viewer that while he is bearish on a company as levered to new cars as Goodyear, he would recommend Munro Muffler.

Seeking Alpha publishes a summary of Jim Cramer's stock picks every day including: Mad Money Recap, Lightning Round and Stop Trading!

Get Cramer's Picks by e-mail -- it's free and takes only a few seconds to sign up.

Seeking Alpha is not affiliated with Jim Cramer, CNBC or TheStreet.com

Comments

[engprof:]

Learn to use hyphens, as well as ordinary adverb clauses or phrases, properly placed. I gave up on trying to read this article as I tried to make sense of its opening sentence. Glancing at the rest, I saw, for example, "Cramer thinks all other tanker companies . . . would invest only in Nordic American." Learn to place verb phrases in the same clauses as their subjects; learn parallel structure: Cramer thinks THAT all other tanker companies are risky, SO he would invest only in Nordic American. He added THAT Nordic is levered to tanker prices and not to crude oil prices." Cramer has literacy skills--he writes clear standard English--and literacy skills inspire readers' trust in writers. You should try to acquire that set of skills before publishing your thoughts.

2008 Nov 12 01:32 PM

[polo-marco:]

No, you don't need extra, assorted words to litter such a blog posting such as 'that' and 'that' and 'so'. "That" would be superfluous. The article is efficient as written. The meaning is understood and the extra words, while not even necessary grammatically only serve to clutter the sentence and add no purpose or meaning. "That" is so overused, without any purpose - and that's a fact, Jack!

2008 Nov 13 11:16 AM

[anotherengrof:]

engprof is right about the hyphens; not properly using them in compound adjectives leaves a sentence nearly illegible.

2008 Nov 18 01:33 AM

[Ted Jankowski:]

GT- Big Deal!
WHo cares if Goodyear sells tires to automakers. THey don't make hardly anything off the OE sales of tires anyway. The money is in the after market. Goodyear makes, numerous private label tires and Dunlap and Kelly. Kelly is an excellent sell. As good a quality yet priced much lower because they are not OE tires. GY figures on loosing money or breaking even on OE tires. THe real money is in replacement. Thus anytime you see an OE tire. It costs you more because it cost the dealer more.

2008 Dec 01 11:45 AM