Cramer's Stop Trading! America Is Still Smoking (11/13/09)

Stocks discussed on Jim Cramer's Stop Trading! TV Segment, Friday November 13.

Altria (MO), Whirlpool (WHR), Masco (MAS), Fortune Brands (FO)

Conventional wisdom that says the number of Americans lighting up is declining has been debunked by a New York Times report that puts the adult smoker population at 20.6% compared to 19.8% a year ago. Cramer would play this trend with Altria (MO), which yields 7% and trades at a multiple of only 10.

Whirlpool (WHR) and Masco (MAS) are "real signs for housing," since both companies sell products that furnish homes and are essential for refurbishing older houses. Both stocks were up on Friday, but Fortune Brands (FO), which usually moves with the pair, was lagging. Cramer expects Fortune Brands to move higher.

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Comments

[mbkelly75:]

I had not seen that statistic on smokers, but it does not surprise me. The so-called sin stocks have darn near always been a great place to invest or to look for a good stock. MO has been VERY good to me over the long-term and I expect it to continue being good to me in the future.

Nov 15 08:40 AM

[StockMaster...:]

When the USA has a coming health care crisis since we have to support say 2 million illegals in California alone I think the risk of owning MO is greater than owning PM since that has international risk where more than 1 country is involved. The dividend growth of PM will make the same investment in PM yield the same as MO in 10 years. But then again, who listens to Cramer?

Nov 15 09:56 AM

[107Sid:]

If one embraces the smoking thesis, VGR may make more sense then MO. VGR provides a double digit yield via its $1.60 annual dividend rate. Not only has the company maintained this dividend for many years, but has also supplimented it with a 5% stock dividend each year, thereby in effect growing he dividend by 5% annually. The stock has sold on a double digit yield basis for years eflecting both the tobacco industry issues and the fact that the dividend is not covered by earnings...but rather by cash flow. In addition, it is considered to be of lessor quality than MO.

Nov 16 10:17 AM

[bobbybutte:]

check to ee what S&P stock did the best since 1925 and 1957

Jeremy Siegel reinvested dividends S&P study from 1957 then decide

Nov 16 12:22 PM

[mbkelly75:]

VGR is an interesting choice and their Operational Cash Flow does cover the dividend quite well where their earnings does not even come near. The Payout Ratio is triple-digits and that is a cause for worry. The 5 year average growth rate of the dividend = 4.73% and their Total Return over that same 5 year period = 55.75% which is a good return (>10% average annual growth). The dividend yield currently is around 11%. They are good financially with a decent (if not spectacular) Piotroski Score of 5/9. They are also 40.93% insider owned and that is good also.
On the bad side, their PEG, P/B, P/S, and long-term debt are all huge showing that this may NOT be the time to buy them. On 26 Oct - their 20 Day MA crossed the 50 Day MA heading down and they are heading down to the 200 Day MA rapidly. I would not buy any stock that is trending down. The good part about the downtrend is simply that the lowering price may, in fact, make them a good buy from a fundamental basis soon. I would watch and wait until they start trending up again - shown by either crossing the 50 Day MA moving back up or a Golden Cross when they move past the 200 Day MA going back up (assuming that they go below the 200 Day MA as they look like they will). It looks like they are going to pay their next dividend in December rather than in January and that is something to look at also. Good job on pointing it out. Thanks!

Nov 17 12:29 PM