Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday February 25.
Good As Gold: Agnico Eagle Mines (AEM), Eldorado (EGO), SPDR Gold Shares (GLD), Yamana (AUY), Goldcorp (GG), Newmont (NEM)
In spite of gold’s dip from $1,000 to $950, Cramer thinks the uncertainty in the U.S. and in Europe will be good news for the traditional hedge. The question is how to invest in gold. One way is to buy bullion or gold coins, but Cramer prefers stocks. SPDR Gold Shares is a good way to track the price of gold. Cramer would buy a fourth of a position at $90, another at $88, then $85 and $82. He reminded viewers that gold stocks have unique metrics; production growth, sensitivity of earnings to changes in gold prices and price-to-net-asset value. Two gold stocks worth looking at are Agnico Eagle Mines and Eldorado. Agnico has an impressive 344% growth rate, with Yamana at 56% and Eldorado at 27%. Eldorado keeps production costs very low at $286 per ounce: Goldcorp’s expenses are $397, Yamana $411 and Agnico is $483. Even though Agnico’s production costs are at the top, Cramer says they are going down. However, EGO is less sensitive than gold prices than AEM. According to the price-to-net-asset value, AEM is the most expensive, with EGO and Newmont behind. In short, Agnico has an impressive growth rate, but Eldorado might be a better value.
A Bank Rally? Bank of America (BAC), JP Morgan Chase (JPM), Wells Fargo (WFC), PNC Financial (PNC)
A whisper from Tim Geithner that even the hardest hit banks won’t necessarily go bust under a stress test created an unexpected bank rally, followed by a drop when on Obama’s speech provided no further information. Bank of America, JP Morgan, Wells Fargo and PNC all saw significant gains. The fact that Fed Chairman finally “gets it” also helped the financial sector. In his testimony to Congress, Ben Bernanke has said that he won’t let any banks go under, nor will they be nationalized. He spoke against unbridled short-selling and bear raids. FDIC Chairwoman Sheila Bair agrees with Cramer that banks can resolve their problems in the private sector and pay the government back. Cramer sees at least some hope in the financials.
Mad Mail: Enterprise Products Partners (EPD), Kinder Morgan (KMP), Procter&Gamble (PG)
Cramer reassured one viewer that Enterprise Products Partners’ dividend is safe and it is declining only because it has had a strong performance so far this year. Cramer also likes Kinder Morgan. Cramer told another viewer he is more worried about annuities from major life insurance companies than individual pensions from the states. “States can raise taxes…no state has ever gone bankrupt.” When another viewer asked Cramer why he said Procter and Gamble was a buy at $53 but a sell at $49, Cramer quoted John Maynard Keynes and said he changed his mind when the fundamentals change: the company’s “awful” quarter has made it a sell.
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