Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday January 19.
Continuing his week-long series of segments about the energy sector, Cramer discussed integrated oils. These companies tend to be less exciting than exploration and production companies, because they tend to be well-established, mature companies whose major growth days are behind them. One exception has been Marathon (MRO), which saw an 11% stock rise on the spin-off of its downstream business so it could concentrate on exploration and production. Cramer discussed a stock that is "the next Marathon," and could create significant value by spinning off its downstream segment.
ConocoPhillips (COP) was a company that had "lost its way," until it initiated a multi-year strategic turnaround by selling off non-core assets that were slow growth. The company is reducing its refining segment to only 15% of its business by next year and is soon becoming a "leaner, meaner Conoco," like Marathon was when it spun off its assets. While COP has exposure to natural gas, Cramer thinks the fuel is close to bottoming, and prices may begin to recover in 2011.
Every portfolio needs a solid dividend stock, and Master Limited Partnerships, like Kinder Morgan Partners (KMP) and Ferrellgas (FGP) have famously generous yields. Both businesses are steady, conservative and are not hostages to commodity prices. KMP is like a "toll road operator" of natural gas, since its business is fee-based. The stock is up 77% since Cramer got behind it in 2007.
Ferrellgas is the second major supplier of propane, and is up 23% since Cramer recommended it in 2009. The company buys propane and sells it to customers at higher prices. It yields 7.3%, the highest dividend in its cohort and its margins stayed strong last year when other companies reported flat or lower volumes.
FGP disappointed in its December 10th conference call because of lower volumes thanks to the unseasonably warm fall weather. However, the cold snap that followed will mean higher volumes for the next quarter. The CEO discussed price protection and hedging programs that keep the company safe from commodity price swings; "We have a stable, conservative platform." The company is considering raising its distribution and reducing costs. Cramer is bullish on FGP.
CEO Interview: Aaron Regent, Barrick Gold (NYSE:ABX) with NovaGold (NYSEMKT:NG), SPDR Gold Trust ETF (NYSEARCA:GLD), Agnico-Eagle Mines (NYSE:AEM), Eldorado Gold (NYSE:EGO)
The recent plunge in gold prices has provided a great opportunity to add exposure to the yellow metal. Since there is a dwindling supply of gold and growing worldwide demand, the danger of a bubble has been taken off the table. Gold is the best hedge against instability in currencies since the metal itself is more like a currency than a commodity. Cramer's favorite gold picks have been NovaGold (NG), SPDR Gold Trust ETF (GLD), Agnico-Eagle Mines, Eldorado Gold (EGO), and he added Barrick Gold (ABX) to the list.
Barrick is the largest gold producer in the world and is a relatively safe mining play. The company has terrrific leverage to rising gold prices, and yet it manages to keep its production prices low, thanks to the high quality of its resource and its high grade deposits, according to CEO Aaron Regent. He added gold prices should continue to rise as production has declined 1% every year for the last decade as gold becomes more scarce and more difficult to extract.
Cramer called Barrick the "blue chip of gold stocks" and a "terrific way to diversify" into gold.
The indexes saw the biggest sell-off in two months, and what annoys Cramer so much about this decline? "There is no reason for it except that stocks went up too far, too fast." Bears were looking for reasons for the sell-off; banks seemed to be to blame, because of Goldman Sachs' (GS) poor quarter. However, other banks were not so bad and Wells Fargo's (WFC) earnings were "terrific."
Those who blamed Cree (CREE) for bringing down tech on the stock's 9 point decline had to explain why IBM's (IBM) $5 rally didn't offset the bad news. Cramer told viewers to prepare for another dog day for tech Thursday on F5 Networks' (FFIV) weakness.
There was no rhyme or reason for other movements in stocks; Ford (F) dropped 80 cents for apparently no reason and McDonald's (MCD) and Procter & Gamble (PG) were up, even though there was no outside data that would suggest defensive stocks should be up. Cramer emphasized this action is typical for earnings season, a time for listening to what companies say and not moving too quickly in and out of stocks. He suggest buying on declines, but only those companies investors have done thorough homework on and are sure they want to buy. JP Morgan (JPM) is a good choice.
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