Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Monday December 1.
Tough but Fair? Fannie Mae (FNM), Freddie Mac (FRE), Citigroup (C)
Cramer rejected the notion that the government is habitually bailing out undeserving financial institutions and insists it has been a lot tougher on Citi, Fannie and Freddy than many people think. He also thinks the huge drop in the Dow on Monday is a buying opportunity unlike other declines, simply because the government is finally getting it right. While Lehman fell and all of Fannie and Freddie’s preferred stock was wiped out, Cramer thinks the government is taking the wiser tactic in helping Citi get back on its feet rather than merely punishing the bank for its excesses. The government’s handling of AIG felt more like a bailout, according to Cramer, and GM and Ford may be handled in a similar fashion, but with Citigroup, Cramer has at least some confidence in the government’s ability to help repair the damaged economy.
There was a rally in the infrastructure sector on President-Elect Obama’s announcement of an over $500 billion stimulus plan to rebuild highways, bridges and roads. However, not all stocks in the sector deserved to rise. Companies that drill for oil or produce gas will not be aided by the president, So Cramer thinks Shaw Group, Foster Wheeler and Chicago Bridge and Iron are not worth buying. He likes Martin Marietta at the mid-$60s and Vulcan Materials at $59, since both companies derive half of their revenues from road and bridge construction. Caterpillar’s yield gives it an added advantage. And Aecom, which has 70% of its backlog from the government-funded projects, is worth a look under $20. While Granite Construction may benefit from Obama’s plan, it has already moved too far and is not performing well. Cramer counseled patience for these picks, since it will take a while to see results reflected in the stock prices.
Cramer told one viewer that housing will bottom by June 30, 2009. When another viewer asked about Herbalife’s falling stock price, Cramer declared it is a buy especially with its 4.8% yield.
Many expected Ray Michovich to retire from Foster Wheeler, but the CEO says he plans to stay at the helm for at least three more years. However, the stock has fallen 50% since September, and Milchovich said a decline in its power business, which comprises 30% of its sales was to blame. However, its oil, gas and chemical segments have not declined and Foster Wheeler has booked one mega-project, is currently signing on another one, and expects six more to follow. “2009 is shaping up as we expected,” the CEO said. Milchovich is not bothered by delays due to falling oil, and says such delays are normal. Cramer agreed the multiple is “absurd” and noted Foster Wheeler keeps buying back stock. He says Foster is a buy at its current levels.
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