Cramer's Mad Money - The Next XTO (12/17/09)

 |  Includes: C, CHK, PEP, RRC, XOM, XTO
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday December 17.

The Next XTO (XTO), Exxon Mobil (NYSE:XOM), Chesapeake Energy (NYSE:CHK), Range Resources (NYSE:RRC)

With its purchase of XTO Energy (XTO), Exxon Mobil (XOM) is giving credence to Cramer's thesis that natural gas will be the next big trend in alternative energy. XTO has returned an impressive 4,500% in 15 years, and Cramer would take profits and look for the next natural gas takeover target. He compared Chesapeake (CHK) and Range Resources (RRC). Both resemble XTO Energy in the fact that 80% of their revenues come from natural gas, and they have significant technical expertise in using cutting edge horizontal drilling for hard-to-reach areas. The two companies combined should satisfy 50% of the natural gas demand by 2030.

Chesapeake has a huge 12 trillion cubic feet of reserves in several regions and of many types, including Marcellus Shale. Cramer is impressed with CHK CEO Aubrey McClendon who has been successful at keeping production costs low. The company's joint venture with BP could lead to a takeover bid, predicts Cramer.

Range Resources' reserves, at 2.7 trillion cubic feet, are smaller than Chesapeake's, but the company keeps production costs low while introducing new technology. Chesapeake has risen 829% in the past decade and Range Resources is up 2,530%. "After this deal," (with XTO and Exxon), "I really can't imagine that either of these companies will be stand-alone companies this time next year."

CEO Interview, Indra Nooyi, PepsiCo (NYSE:PEP)

With the Dow's 133 point drop on Thursday, Cramer said he preferred to focus on stocks that perform well regardless of the economic climate. Pepsi (PEP) has been a winner in good times and bad, and currently has a strong balance sheet, is trading at a discount and has a solid yield of 3%. Cramer calls Indra Nooy a "truly transformative CEO" who has kept the best the company has to offer while allowing Pepsi's brands to evolve to fit the changing needs of the consumer.

Nooyi discussed Pepsi's "Performance with a Purpose" vision; a company shouldn't profit at the expense of society, so Pepsi has become aware of social issues such as alternative energy, sustainable farming and obesity. While Nooyi thinks obesity is a societal problem and not attributed to a single food, she has worked to expand PepsiCo's offerings to include healthier choices.

Despite rumors that the company is not advertising at the Superbowl, Nooyi clarified that Gatorade and Doritos Brands are going to have advertising time, but Pepsi as a brand is not. When asked about Tiger Woods, who was often featured in ads, Nooyi commented that Woods is "a great golfer" and added that Pepsi has a broad portfolio of athletes to represent the company.

Mad Mail: Citigroup (NYSE:C)

Cramer once again expressed his outrage that the government did not sell its stake in Citigroup when it was at $5, but instead, waited for the price to go higher only to see it fall; "The U.S. government has no right to play the stock market whatsoever. When you have a big gain, you take it. I thought this was a completely shameless thing they did. I want an apology for the American People."


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