Mad Money host Jim Cramer isn't just a commentator. He also purchases shares of many of the stocks he touts for his charitable trust. Here we take a look at 20 of the stocks that currently make up his $2.95 million dollar, charitable portfolio. As always, we recommend that you use the list below as a starting point for your own due diligence:
Apple, Inc. (AAPL): Cramer owns 200 shares of Apple. There has been a lot of hype since Apple recently passed Microsoft (MSFT) as the world’s largest tech company. In this article we will find out what all the hype is about, who is listening, and if it is reasonable.
Over the past few years we have seen revolutionizing technologies come out of Apple such as the Ipod, Iphone and Ipad. Together, these products have transformed the company into a tech giant. They have also left the internet abuzz with popular reviews and rumors of the release of the newest gadgets. The fact is that each new release is highly anticipated, and no matter if consumers just bought the newest model, there is an always present demand for newer gadgets. With this in mind, here are a few new releases and rumored near-future releases for Apple.
Here are the numbers that separate AAPL from almost every competitor in the same industry: in the last three years, the company has grown earnings per share by 56.8%, the industry average for the same time period is a shocking -0.2%. In the same period, AAPL has grown its revenue by 39.5%, while the industry average is only 6.7%.
This industry domination is insane, since only half a decade ago AAPL was just considered a niche computer company that had a stock price of roughly 55 dollars. AAPL has a current price to earnings of 16. We think AAPL still has some of its best years ahead of it, though we're wondering if the company will weigh in on the AT&T (T) and T-Mobile (OTCQX:DTEGY) merger.
Accenture (ACN): Cramer owns 1800 shares of Accenture. Accenture is a management consulting, technology consulting, and technology outsourcing firm with operations around the world. It has a market cap of $32.04B, and is currently at a 19 price-to-earnings ratio. The firm recently won a contract with Israel’s monopoly power supplier-- Israel Electric Corporation, which should be a positive for growth.
We think growth prospects at Accenture remain bright. ACN has been able to hold its own on several sides of the consulting equation, with Wipro (WIT) and Infosys (INFY) on one end and IBM (IBM) on the other. This $40B company's shares yield 1.6%. With $4.5B in debt and a mere $400M in cash, there is plenty of room for new initiatives and dividend growth.
Alcoa (AA) Cramer owns 5500 shares of this aluminum company. It has a P/E of 22.66, a P/B of 1.3, and P/B of 0.8.From 2001 to 2007, AA shares traded at the following respective P/S multiples over the last three years: 1.3, 1.0, and 1.5, respectively.
In 2010, the company made $21 billion in revenues, which was an increase of 13.96%, after dropping 31.46% in 2009. For 2011, the company expects 5% to 7% sales growth in its aerospace division, 5% to 11% sales growth in its automotive division, 0% to 5% sales growth in its heavy truck and trailer division, 0% to 2% sales growth in its beverage can packaging division, 2% to 3% sales growth in its commercial building and construction division, and 5% to 10% sales growth in its industrial gas turbine division. The company also expects the aluminum global demand growth rate in 2011 to be 12% vs. 2010.
American Express Company (AXP). Cramer owns 2700 shares of AXP. American Express Company has broken its credit card and lending business into a few smaller segments like three main businesses: U.S. card services, international card and global commercial services, and global network and merchant services. AXP has become very successful using these segments to place itself in a lucrative niche in the financial service markets, where it owns its entire value chain.
This gives it a closed looped network with products and services that allow it to have a competitive advantage through pricing. For the last 13 quarters the dividend has been held at $0.18 a quarter; before that increases had been steady since 1977. Some are concerned AXP could lose membership to competitors, but debit card legislation could boost the entire industry. Given AXP’s low 15% payout ratio, this could be an opportunity to sneak your way into a financial sector recovery while compounding dividends for the future.
Apache Corporation (APA): Cramer owns 1100 shares of APA. Apache is one of the largest independent exploration and production companies in the world with plays throughout North America, and oil and gas projects in Egypt, Australia, Argentina and the U.K.
President Obama called natural gas’s potential as a vehicle fuel "enormous," and Apache has already undertaken steps to push natural gas as a fuel for vehicles. Apache announced that it would provide a compressed natural-gas fuel station at Houston’s George Bush Intercontinental Airport to serve the airport parking shuttle fleet. This move is likely just the first of many, as Apache tries to expand the role of CNG-powered vehicles. Apache shares trade at $118.53 with a P/E ratio of 12.75.
Credit Suisse revised its medium-term WTI crude price forecast to $101/Bbl from $83/Bbl and long-term (2015+) price increased to $90/Bbl from $80/Bbl. We think these numbers are conservative. Higher oil prices are a good driver for continued revenue growth. The company also made $11.5B of acquisitions in 2010. Also, APA shares trade below our fair value estimate. We place a $152 price target on shares, and believe this is a great buy at current price levels.
Bank of America (BAC): Cramer owns 6000 shares in this bank. Most analysts maintain that Bank of America’s business model is fundamentally sound, despite a questionable balance sheet. The company remains bloated, with nearly 5,900 retail banking offices to serve its approximately 57 million consumers and businesses. Management's stateside approach on the retail banking side is summed up in one sentence: BAC maintains dominant positions in regions expecting high growth such as California, Florida and Texas. There is the expectation that these markets will rebound soon.
We disagree. Heightened competition from Toronto-Dominion (TD) pushing south and Wells Fargo (WFC) pushing in all directions will dampen margins within BAC's retail segment and frustrate deposit growth. We believe the worst may be behind BAC, but repurchasing obligations are likely to be double the current outlays.
Boeing (BA) Cramer owns 1300 shares of BA. The stock has a current yield of 2.25%. The next dividend should be declared in late April or early May, and paid out in early June. View a history of the company’s dividend payments here. In 2010, revenues fell by 5.82% to $64.306 B, but GAAP EPS jumped by 141.85% to $4.45. This was done on an improving profit margin at 19.38% from 17.20%. For 2011, the Street estimates that the company will earn $4.18 in non-GAAP EPS, a decrease of 6.04% with revenues of $69.2B, an increase of 7.54%.
For Q1 2011, analysts estimate BA will earn $0.71 in non-GAAP EPS, an increase of 1.05% over Q1 2010 with revenues of $15.2 B, which would be a decrease of 0.26%. The company also has a debt to equity ratio of 4.15. BA shares trade above our fair value estimates, and we are not bullish on Boeing due to lighter deliveries volumes announced earlier in the month. We do not recommend BA for capital appreciation opportunities, but we would recommend BA on a pullback for its dividends.
Caterpillar (CAT) Cramer owns 1000 share of CAT. In 2010, GAAP EPS jumped by 190.21% to $4.15, after falling by 74.74%. Revenues grew by 31.46% to $42.58 billion, after dropping by 36.88% in 2009. The EBT margin also improved to 8.81% from 1.76%. In 2011, analysts expect non-GAAP EPS to be between $5.49 and $6.90. In 2010, the actual non-GAAP EPS was $4.15. The Street is forecasting between $0.97 and $1.52 for the next earnings release . In comparison, Q1 2010 produced $0.36.
CAT shares trade with a price to sales multiple of 1.7. This is the high multiple, if looking at the period from 2001 to 2010. These shares should be trading 1.5 times sales. The company also has a debt to equity ratio of 1.89. The company is aiming for $8.00 to $12.00 in non-GAAP EPS in 2012, and we believe that it will get there.
The Coca-Cola Company (KO): The iconic cola manufacturer, along with its lines of sodas, produces several different brands of juices, teas, waters and sports drinks. The massive amount of cash that it can earn from its well established products means that it can offer a 2.88% yielding dividend of $1.88 for each share. What’s more, it has grown this dividend by an above-average 9.46% every year and its 9.23% expected annual earnings growth would allow it to keep up this pace.
Besides the expected boost from summer heat, Coca-Cola is finding new success in new markets as it expands rapidly in countries like China. The company has a goal outlined for the next 10 years named the 2020 Vision, to double global sales and improve profitability margins. If executed as planned, this will be an incredible source of value for shareholders over the next decade. For any investor, it should be hard to say no to a company that has been able to achieve as much growth, and pay out as significant a dividend as Coca-Cola has.
Deere & Company (DE): Cramer owns 800 shares of DE. If ever there was a name brand in the agriculture business, the iconic John Deere tractor is it. This behemoth of agricultural machinery manufacturing controls more than 50% of the U.S. market, but has seen growth of its non-U.S. sales rate tear upward and away from its U.S. sales rate in recent years.
The company has outperformed over the past 12 months, but so long as you believe in the broader macro thesis and subscribe to the brand loyalty Deere has built and its long history of competitive innovation, you might consider adding it to your portfolio. We think Deere's penetration of the Chinese market is in its early stages. The company is building its seventh mainland production facility, this time in Harbin near the JD Jiamusi Works site. John Deere Jiamusi is already the leading equipment supplier in many categories in China.
DuPont (DD) Cramer owns 500 shares and this is his newest position. It trades with a P/E of 14.05, P/B of 4.3, and P/S of 1.38. The industry averages are 19.9, 1.3, and 0.4, respectively.
In 2010, EPS was $3.28, which was an increase of 70.83%, after falling by 12.73% in 2009. According to the company, it raised its guidance from a range of $3.30 to $3.60 per share to a new range of $3.45 to $3.75 per share. This excludes the impact of the planned Danisco acquisition, which could reduce 2011 earnings by $0.30 to $0.45 per share on a reported basis.
The driver for the increase in guidance is a lower tax rate, driven by increased earnings in lower-tax jurisdictions outside the U.S., and reduced non-cash pension expense. We think DD represents a solid long-term buy.
Freeport-McMoRan Copper & Gold Inc. (FCX): Cramer owns 800 shares of FCX. Often called simply Freeport, is the world's lowest-cost copper producer and one of the world's largest producers of gold. Currently, Freeport even sports a P/E of 9.72. That represents a discount to mining competitors such as BHP (12.2), Newmont (12.0), and Southern Copper (10.6).
Freeport Inc has reserves of approximately 120 billion pounds of copper, 40 million ounces of gold, 266 million ounces of silver and 2.48 billion pounds of molybdenum. The current cash cost is approximately $1.10 per lb. of copper based on $1350 for gold and $15 for molybdenum. Cash costs will vary by about $.02/lb with every $50 change in gold or $2 change in molybdenum.
FCX currently trades at 9.46 times earnings, and the median for analysts is a target price of $66 for 2011. FCX has a market cap of 49 billion. At the end of 2010 FCX had 3.1 billion in cash; the company declared a special dividend of $.25 and has just retired 1.1 billion in debt. The 8.25% notes were not due until 2015; early retirement will save 90 million in interest expense per year.
FCX incurred a "loss" in the first quarter of 2011 due the retirement of this debt. Cash flows in 2011 are expected to be about $8 billion. With gold and copper still selling at historical highs, expect good times ahead for Freeport.
General Motors (GM) Cramer owns 2700 shares of GM. GM-- another company burned by the recession-- is back, re-formed as a new firm. The car company, which has a market cap of $44.36B, has bounced back from its problems, and had EPS of $0.95 in Q1, just above consensus estimates. Overall projected EPS for 2011 is $4.00, with projected 2012 EPS at $4.94.
These numbers represent solid bottom-line growth for the company. Much of this growth will come from China, where GM has a surprisingly large presence. GM has also been ahead of the curve in developing hybrid and fuel-efficient vehicles, which could help it survive rising oil prices. Investors may worry about GM’s financial health after going through bankruptcy, but for now the balance sheet is quite strong. While its operating margin of 4.24% in 2010 was modest, EBITDA was over $12B, a good amount. ROE was over 27%, also strong.
Given its comeback, which likely isn’t done yet, GM offers a good valuation. Its P/E is around 11.7. The main concern with GM is what will happen with the government’s stake in the company. At some point, the government will look to unload its 500 million shares, possibly in the near future. However, much like with AIG, we think this will only be a small blip on the radar, and for investors looking for long-term returns we think GM is a buy.
While we do like GM, we think Ford (F) shares represent a better buy. See our opinion here on whether Ford can turn around its luxury Lincoln segment in time to compete with Toyota Motors' (TM) Lexus brand.
Hess (HES): Cramer owns 900 shares of HES. On April 27, Hess reported Q1 2011 results with non-GAAP EPS coming in at $1.82, excluding proceeds from selling natural gas-producing assets in the U.K. portion of the North Sea. This was +22.14% from Q1 2010's $1.49. This also beat the consensus estimate of $1.85, ex-items. Revenues rose to $10.515 B (+14.04%), and exceeded Street forecasts of $10.03 B. Oil and gas production was 399,000 barrels per day (b/d), compared with 423,000 in Q1 2010 due to the shedding of the North Sea assets and temporary shutdown of operations in Libya. For Q2 2011, the Street expects to see $2.16 in non-GAAP EPS (+87.82%) alongside revenues of $9.3 B (+20.08%). In 2010, GAAP EPS surged by 185.02% to $6.47 with revenues of $34.613 B (+17.06%).
We expect Hess to continue to benefit from higher crude oil prices. We have consistently stated that the U.S. will grow at a stagnant rate, and the market is starting to price this in. The Chicago Fed's National Activity Index fell -0.45 in April, after rising +0.32 in March. Moreover, the Philadelphia Fed's Business Outlook dropped to 3.9 in May from 18.5 in April. The Richmond Fed also released its Manufacturing Index, which came in at -6. The consensus was +9. In April, it was +10. Yet, WTI Crude remains near $100. In Q1 2010, Hess' average worldwide crude oil selling price, including the effect of hedging, was $87.22 per barrel, an increase from $63.62 per barrel in Q1 2010.
International Business Machines (IBM): Cramer bought 400 shares of IBM recently. IBM shares have dipped recently, but but we expect a bounce. Currently trading at $162/share and with a P/E of 13.7, IBM is at our fair value price of $162. Disruptions in the supply chain, specifically microchips, because of Japan will likely be short-lived.
As the Japanese continue to be lauded in the international media for their incredibly orderly response to the crisis, it is clear that prioritizing the strength of the country’s economy will spell out a quick solution.
IBM has done a good job of managing client expectations in the face of increased competition from the likes of Infosys (INFY) and Wipro (WIT). We think shares should continue to outperform the rest of the Dow Jones Industrials (DIA).
Juniper Networks, Inc. (JNPR): Cramer owns 2500 shares of Juniper. JNPR offers a high-performance network infrastructure that creates a responsive environment for accelerating the deployment of services and applications over a single network. JNPR recently invented Junos Pulse, which secures remote access and connectivity to iPhone, iPod touch, and iPad anytime and anywhere.
With the addition of millions of new subscribers to AT&T, and thus a vast increase in the amount of iPhone and iPad users in AT&T’s network, JNPR’s customer base for its integrated AT&T/Apple interface will soon grow considerably. JNPR is currently trading at a 28.20 P/E multiple and has a 19.17% operating margin.
Oracle (ORCL) Cramer owns 3100 shares of ORCL. It sits at the bottom of the dividend barrel with a current yield of 0.75%. I can see it already; you’re saying “How can I possibly make money with a yield this low?”
Oracle owner Larry Ellison doesn’t quite have that concern with his 1.1 Billion (yes Billion) shares nabbing him about $500 a minute. However, this technology giant’s low yield leaves the average investor wanting. But ORCL just started making payments in April of 2009 and the payouts appear to be up and coming. For 8 quarters it has held its payout at $.05 a share, until earlier this year when it was bumped up a penny.
Not quite there yet, but a 20% dividend increase is rarely a bad sign, particularly since this growth rate can continue for many years. Add in the 13% payout ratio and ORCL is a definite candidate for future growth. The P/E ratio of around 23 looks high but is slightly below what it was 5 years ago. 37 brokers are looking for a targeted 1-year upside of about 6%, which is consistent with our trading projections. Overall, we think ORCL is the best software maker and vendor out there, and represents a better buy when compared with Microsoft (MSFT).
PNC Financial Services Group (PNC): Cramer owns 1900 shares of PNC. PNC’s performance has been ahead of the projections curve. Beating expectations and generating healthy profits, Deutsche Bank reaffirmed a buy rating for the stock and set a top-end target at $73/share, well above its current trading price of $59/share. The forward P/E is 9.6 and its modest .65% dividend could soon be reworked in a positive direction.
PNC has proven itself to be one of the better run banks in the sector. After paying back TARP funds, the bank quickly reinitiated a dividend. And though the acquisition of National City could prove cumbersome over the long run, we like the bank's conservative management team lead by James Rohr and its broad exposure to the high-growth southern U.S. market.
We still think Wells Fargo (WFC) represents a better buy than PNC because of its more disciplined approach with commercials loans. In southern U.S. markets, Suntrust (STI) is a close-second to PNC.
Sanofi-Aventis (SNY): Cramer owns 2600 shares of SNY. Sanofi has reported a few disappointing quarters lately and takeover rumors of Dendreon (DNDN) and Mannkind (MNKD) are ever-present. We value shares at $48 apiece on a discounted cash flow basis. We use a 9.5% discount rate. This geographically well diversified company has been trending downwards since the beginning of May, we think the pullback represents a buying opportunity.
Warren Buffett is also a shareholder. Berkshire (BRK.A) maintains a $130 million stake in the giant drug-maker. Some of these are held as depository receipts, and shares held on non-US exchanges are found in Berkshire's annual reports. Buffett began accumulating the Sanofi stake in the second quarter of 2006. His initial purchase prices were between $44.52 and $47.51, with an estimated average price of $46.1. His holdings amounted to 488,500 shares. Shares trade at $36 at the time of writing.
Stryker Corp. (SYK): Cramer owns 1000 shares of Stryker. This is a new position. SYK designs and produces medical devices that are used mostly in orthopedic surgeries. The company is broken down into two segments. The first is Orthopedic Implants and provides reconstructive, trauma, and spinal implant systems. The second segment, MedSurg Equipment, produces and sells surgery equipment. This equipment consists of surgical navigation systems, endoscopes, digital imaging systems, patient handling equipment, and more.
Stryker announced a first quarter dividend of $0.18. This is only the second year that Stryker has given quarterly dividends. In 2010, Stryker moved away from annual cash dividends to quarterly cash dividends. The current forward annual dividend yield is 1.22%. SYK has a payout ratio of 20.6%. It also has a little less than $1.5 billion in operating cash flow. I think Stryker has cemented itself within the industry and is a leader in innovation and will see growth because of it. The company has also been raising dividends every year for 20 years and I think it will maintain this reputation moving forward. We still think Stryker offers a better bet than Zimmer (ZMH) due to Stryker's growth prospects.
Disclosure: I am long SYK.
Additional disclosure: short F puts.