Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday March 7.
Suntrust's (NYSE:STI) Watershed Moment
Next Thursday is going to feature a "watershed moment" for regional banks, as the results of the new round of stress tests are going to be announced. Depending on the results, some banks will be allowed to buy back stock or increase dividends. STI wears a "scarlet letter" because it failed the last time around, but Cramer is confident that it will pass on Thursday, and he predicts the stock will rise. The company reported a 4 cent earnings beat, and is the top player in Southern states that are seeing dramatic increases in housing prices and decreases in unemployment. The company has been cutting costs and has a "gigantic" deposit base. If STI passes, it could raise its dividend payout ratio to as high as 20%, which will mean a 2% yield. It is likely to buy back 5% of its share count, which will increase its earnings per share. Cramer's charitable trust has been buying STI ahead of the stress test results.
Follow The Market Leaders: Berkshire Hathaway (NYSE:BRK.B), Boeing (NYSE:BA), Honeywell (NYSE:HON), Colgate-Palmolive (NYSE:CL), Johnson & Johnson (NYSE:JNJ), Pfizer (NYSE:PFE), JPMorgan (NYSE:JPM), Cisco (NASDAQ:CSCO). Other stock mentioned: AeroVironment (NASDAQ:AVAV)
When bears say that the recent rally in stocks is not sustainable, Cramer thinks viewers need to look at the stocks that are leading the move higher. He calls the following stocks "generals," and they are at the top of the 52 week high list: Berkshire Hathaway (BRK.B), Boeing (BA), Honeywell (HON), Colgate-Palmolive (CL), Johnson & Johnson (JNJ), Pfizer (PFE), JPMorgan (JPM), Cisco (CSCO). What makes the recent rise in stocks different from the peaks of 2000 and 2007 that preceded the painful valleys is that the generals this time represent diverse sectors and are stocks with strong fundamentals. Even when a correction happens, these companies are likely to be survivors.
Berkshire Hathaway is the "United States of American Business" and its President is Warren Buffett. The holdings of Berkshire represent the best in American business, and the stock is finally leading the market, as it deserves to.
Boeing is an unlikely general, given its array of problems: exploding batteries, labor issues, worries about sequestration, and its rival Airbus benefiting from the strong dollar. The fact that the stock is up amid all of these challenges demonstrates its resilience, and it should continue to fly, given the aerospace bull market.
Honeywell has exposure to many thriving industries, and its rise indicates the strength of the underlying economy.
Colgate, Johnson & Johnson and Pfizer define what were once called "blue chips," given their reputation for sturdiness. These stocks are more secure than bonds and are strong companies.
JPMorgan has weathered the scandal in London and is now an "unstoppable force." Despite its rise, the stock trades at a multiple of only 9. The bank also has a "fortress balance sheet."
Cisco was a challenged company for a while, but is now thriving, since it represents the "backbone" of the internet.
Cramer took some calls:
AeroVironment (AVAV) disappointed badly and Cramer thinks its troubles are just beginning; "Don't touch it."
Silver Wheaton (SLW) is an investment firm, or a "streaming company" that provides miners with funds and receives a percentage of their finds. SLW deals mainly with silver miners, but it recently has closed a deal funding Vale's (VALE) gold mining projects. SLW's stock tends to mirror moves in silver, and it is down 17% this year, but the stock rallies hard when the price of silver rises. Since SLW's IPO in 2005, silver has risen 300%, but SLW's stock has gained 900%. CEO Randy Smallwood discussed the reasons the company tends to prefer to invest in silver projects. Silver's industrial uses in the tech and industrial sectors mean increased demand for the metal. The rising middle class in emerging markets may opt to buy silver rather than gold, because silver is, what Smallwood calls, "the affordable precious metal." While there are risks in mining, SLW carries less risk than the mining companies and reaps rewards when precious metals are found.
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