Note: The program on August 14 was a compilation of picks and comments from various programs in June 2006.
Panera Bread (NASDAQ:PNRA), General Mills (NYSE:GIS), Walter Industries (NYSE:WLT) and Mueller (NYSE:MWA)
Cramer identifies three kinds of good stocks: high-growth, consistent-growth and value, and says that investors should know exactly what they want to get out of a company before buying. He suggests picking up only best-of-breed companies and not settling for second-best. Cramer likes high growth PNRA, and notes that PNRA was able to survive the anti-carb craze with it innovative menu. For consistent growth, Cramer likes GIS, which was upgraded by Merill Lynch and may buy back shares and increase dividends. When looking for value stocks, Cramer suggests finding large discrepancies between the company's assets and its valuations, and its growth and its valuations. Walter Industries fits these criteria and is the parent company of MWA, which has enjoyed success since it has gone public.
Fistful of Dollars: Gateway (GTW), Apple Computer (NASDAQ:AAPL), Cnooc (NYSE:CEO), Schering-Plough (SGP), Sears Holdings (NASDAQ:SHLD), Deutsche Telekom (DT)
"Cash is the best defense in a bad market," Cramer told viewers, because it allows a company to buy back stock and to protect itself when things get tough. However, Cramer points out that extra dollars are no help if a company, such as Gateway, is not strong. Cramer crowns AAPL, CEO, SGP, SHLD and DT as cash kings.
Cramer recommends looking for hidden value in special dividends offered by companies such as NUE and FCX; Freeport, which has the world's largest gold mine, has paid out $2.25 in special dividends since December 2004, and NUE, a big steel producer with a lot of surplus cash has been offering $1.25 in dividends. NUE will probably buy back some stock and it is even cheaper than it looks on paper, according to Cramer, because the cost of raw materials is low right now.
"When a company borrows money to buy back stock, it is the kiss of death," says Cramer, who saw NBR and AMGN get punished for this move and predicts that the same thing will happen to SYMC. He also suggests staying out of companies that issue convertible bonds, which Cramer says are terrible for stockholders.
Former Orphans: Intuitive Surgical (NASDAQ:ISRG), Whole Foods (WFMI), Commerce Bancorp (CBH), Quest Diagnostics (NYSE:DGX),and Chico's FAS (NYSE:CHS)
Cramer suggests picking up some orphans, or good companies Wall Street neglects, since it is easier to make money if you "discover" a company than if you stick with the giants. The best orphans are worth less than $2 billion (Cramer says a preferable figure is $1 billion), are covered by no more than two analysts, don't have a lot of debt, have great organic growth potential, and are characterized by insider buying. Cramer points out that orphans are riskier, but good "adoptions" spell profits. Some successful adoptions include ISRG, which grew from a $400 million company to a $4 billion success story, Whole Foods, Commerce Bancorp, which has made banking more like retail, Quest Diagnostics, which spun off from Corning, and Chico's FAS, which has increased its number of stores more than threefold in five years.
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