Cramer's Stop Trading! Costco Comes Back (10/7/09)

Stocks discussed on Jim Cramer's Stop Trading! TV Segment, Tuesday October 7.

Costco (COST), Apple (AAPL), AT&T (T), ConcoPhillips (COP)

Costco was up 2.3% on a strong earnings report, and Cramer thinks the stock is making a comeback; “Costco deserves to sell at a healthy premium to the rest of the group,’ Cramer said. “This is just the beginning of the move.” He would buy the stock on an expected decline Thursday following the report on the retail sector.

In spite of the inconveniences caused by data bottlenecking thanks to Apple's iPhone and lost revenue caused by the addition of voice-over-internet Protocal applications on its networks, AT&T is a buy because of its 6% dividend yield, says Cramer.

Eric Schmidt, who Cramer says is “probably the least promotional CEO in America" stated the ad-spending recession is over; Google's stock price jumped 3%. Cramer welcomes the news but is somewhat hesitant to buy Google.

ConcoPhillips is up five points on the strength of oil and news of its dividend increase; People are being too foolish buying it at this price,” Cramer said. “Wait until it comes in a little.”

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Comments

[CFO:]

COP already started such a massive cost & asset reduction plan. Wonder what is the logic behind dividend increase?

Oct 08 08:35 AM

[Not Broke:]

I'm surprised Cramer is now praising Costco. Back in August, when the stock was below 50, he liked Costco as a store, but not the stock. Said it wasn't worth the premium multiple. He preferred BJs as the much cheaper alternative. COST now approx 20% higher than less than two months ago, and even higher a price multiple than BJs. What gives, Jim?

Oct 08 10:42 AM

[Dr. Duru:]

Interesting that COST is also showing a spike in healthcare costs: inflationwatch.wordpre.../

Oct 08 10:49 AM

[Paul Price:]

Not Broke is correct. A few months back Cramer specifically warned against holding COST shares as he said they were not worth the premium multiple.

Now at a much higher absolute price and a higher multiple he says to buy. What a tool!

Oct 08 12:20 PM

[Don-n-ABQ:]

The reason COP went up was because they said that they were going to sell $10 billion in assets and cut the exploration and capital expenditures budget to pay down debt. Their are trying to fix their balance sheet, which is not as attractive as the other big boys. The increase in the dividend is to retain investors from fleeing to higher quality and maybe attract some new investors looking for dividend yield.

Yield investors are usually longer term investors, so the company is trying to attract long term investors who want a better balance sheet, but a slower growth rate (they will grow slower by giving up some of their assets and cap-ex budget).


On Oct 08 08:35 AM CFO wrote:

> COP already started such a massive cost & asset reduction plan.
> Wonder what is the logic behind dividend increase?

Oct 13 02:58 AM