Jim Cramer's 7 Favorite Stock Picks

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Includes: AAPL, CAT, CMG, GLD, IBM, NFLX, SO
by: Insider Monkey

Jim Cramer is the host of CNBC's "Mad Money" show and the chairman of TheStreet.com. In 1987 Cramer started his own hedge fund and returned an average of 24% per year between 1987 and 2001. Cramer also authored six money management books.

During the last 30 days his favorite buy recommendations (based on number of mentioned days) on Mad Money were as follows:

Company

No. Of Times Picked

First Date*

Return**

Excess Return (wrt S&P500)

Apple (NASDAQ:AAPL)

7

20-Jul-10

53.6%

23.1%

Chipotle Mexican Grill (NYSE:CMG)

5

29-Apr-11

23.7%

26.6%

Netflix (NASDAQ:NFLX)

5

16-Mar-11

31.6%

24.0%

SPDR Gold Shares (NYSEARCA:GLD)

4

7-Sep-10

26.0%

2.1%

Intl Business Ma (NYSE:IBM)

4

5-Oct-10

35.1%

16.5%

Southern Company (NYSE:SO)

4

27-Jun-11

1.3%

-2.3%

Caterpillar (NYSE:CAT)

4

25-Mar-11

2.0%

0.4%

Average

24.8%

12.9%

*Represents latest recommendation change from sell to buy. The study interval includes only past one year.

**Includes the duration from first date till July 20, 2011.

Jim Cramer's favorite stock recommendations returned 24.8% on average since they have been recommended. The average relative performance of these stocks against the S&P 500 is 12.9%. Six out of seven of his favorite stocks have managed to beat the market.

Jim Cramer's most favorite stock during last 30 days was Apple. He repeated his buy recommendation of AAPL seven times during last 30 days.

AAPL has a market cap of $358.4 billion and P/E ratio of 18.5. AAPL recently traded at $387.59 and has gained 53.6% since July 20, 2011, beating the SPY by 23.1 percentage points. Recently Whitney Tilson recommended “big-cap blue chip companies that are trading at moderate prices," and “(Apple is) a fabulous business, but I’m simply pointing out that you can own a better business, albeit one that is not growing as quickly - but still growing nicely - for half the price in terms of price-to-earnings multiple,” Tilson said to Reuters. Apple is also one of the Fortune’s top 10 picks for 2011 which fail to beat the market. Last summer, David Einhorn bought more than 800,000 shares of Apple (AAPL), arguing that the stock’s PE ratio is extremely low compared to its growth prospects.

On July 20 Cramer said the following about Apple: “It's hard for me to think of Apple in terms of a stock, even as right here, right now, today ... I'm raising my price target for Apple, from $400 to $500 ... where it will be selling at a measly 11.5 times my estimate for next year's fiscal year earnings ... only about three-quarters of what the average company in the S&P 500 sells for."

Chipotle Mexican Grill operates fast-casual, fresh Mexican food restaurants in the United States. He repeated his buy recommendation on CMG five times during the last 30 days. CMG has a market cap of $10.2 billion and P/E ratio of 55.6. CMG recently traded at $328.8 and has gained 23.7% since April 29, beating the SPY by 26.6 percentage points. In the first quarter, CMG opened 12 new restaurants. CMG plans to open 135 to 145 new restaurants in 2011, bringing the total restaurant count to roughly 1,220. CMG’s revenue for the first quarter was $509.4 million, up 24.3% from the prior year period. Net income for the first quarter of 2011 was $46.4 million, compared to $37.8 million in the first quarter of 2010.

On 20th July, Cramer stated, “Look, there's a reason why this stock's at $330. Because it's the best in show. And I favor best of breed. I'm not backing away one bit. I think you should understand that this has a much greater future than it already has. And it's going to be in Europe and Asia, and they haven't even started scratching the surface. Stay with Chipotle.”

Mark Broach’s Manatuck Hill Partners and Jim Simons’ Renaissance Technologies had the largest positions in CMG. Manatuck Hill Partners was the second best performing hedge fund during second quarter (See the top 25 hedge funds in Q2 2011).

Netflix has gained 31.6% since March 16, 2011, beating the SPY by 24 percentage points. Leonard Brecken predicted that Netflix (NFLX) is going to fall 70% within 12 months. He was on CNBC’s Fast Money and told viewers that Netflix is playing accounting games and that content costs are skyrocketing. Blue Ridge Capital’s John Griffin had $125 million invested in Netflix shares at the end of 2010.

We believe investors can beat the market by imitating Jim Cramer's favorite stock picks.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.