7 Stock Picks From Cramer's July 21 Lightning Round

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Includes: BUD, CHK, COP, DOW, F, HD, MPEL
by: Efsinvestment

In Cramer’s Lightning Round, Jim Cramer makes calls on the viewer’s stocks. However, the one on July 21 was more like, “Cramer's Favorite Stocks”, as there was no bearish calls he made. Moreover, he mentioned alternative stocks to them. Almost all of the stocks he mentioned returned large amounts of profits to shareholders this year. Here, is a fundamental analysis of the stocks mentioned in Cramer’s Lightning Round on July 21 (data from finviz/morningstar, and current as of July 21’s close):

ConocoPhillips (NYSE:COP): ConocoPhillips returned 45.2% in a year, and Cramer is bullish on this stock. As of the July 21 close, the company had a P/E ratio of 9.12, and a forward P/E ratio of 8.55. Estimated annualized EPS growth for the next five years is 5.40%, and earnings increased by 158.45% this year. With a dividend yield of 3.48%, COP had a profit margin of 5.85% last year. Target price is $83.53, which implies a 10% increase potential. SMA50 is 3.83%, while SMA200 is 8.58%. Debt-to assets ratio is slightly decreasing for the last five quarters. Yields are enjoyable. Moreover, the stock just multiple topped. Large long-term profits are no sweat for COP.

Dow Chemical Co. (NYSE:DOW): Cramer believes that this stock is undervalued as natural gas is cheap. While he is bullish on DOW, he thinks LyondellBasell (NYSE:LYB) is even better. Here is a brief comparison of these two companies:

Current as of July 21 close.

Dow Chemical

LyondellBasell

P/E ratio

16.60

10.00

Forward P/E ratio

10.01

8.97

Estimated EPS growth for the next 5 years

7.33%

8.67%

Dividend yield

2.80%

1.02%

Profit margin

4.53%

24.8%

Gross margin

15.70%

10.8%

Upside movement potential

24.2%

36.6%

Click to enlarge

Although DOW is a profitable stock, it is no match for LYB. $1000 invested in Oct, 2010 in DOW is about $1191 now, whereas the same amount invested in LyondellBasell is around $1450. DOW is trading 14.75% lower than its 52-week high, and LYB is trading 18.59% lower. Moreover, LYB had a 6530.00% EPS growth this quarter. Cramer’s alternative pick is a bulls-eye.

Anheuser-Busch InBev (NYSE:BUD): Although BUD did not show a significant performance this year, I believe it will beat the market in the long term. The beer company has a P/E ratio of 20.71, and a forward P/E ratio of 13.50, as of the July 21 close. Estimated annual EPS growth for the next five years is 15.93%, while earnings increased by 102.70% this quarter. Profit margin in 2010 was 17.28%, and the company paid a dividend yield of 2.03%. Gross margin is 55.83%, whereas the stock is trading 9.82% lower than its 52-week high. Analysts’ average target price is $67.59, which indicates an about 16.1% increase potential. Debt-to assets ratio is going down for the last three years. Moreover, analysts give a 1.90 recommendation to BUD (1=Buy, 5=Sell). Cramer thinks BUD is a “buy, buy, buy.”

Home Depot (NYSE:HD): HD has had a slow, but strong momentum for about three years. $1000 invested in HD in Oct,2008 is about $1983 now. Home Depot has a trailing P/E ratio of 17.57 and a forward P/E ratio of 13.75, as of July 21. Analysts expect the company to enjoy a 12.77% annualized EPS growth in the next five years, while the stock is currently trading 5.41% lower than its 52-week high. With a net profit margin of 5.04%, Home Depot offers a 2.72% dividend yield. Target price implies an 11.5% upside movement potential. SMA50 is 2.83%, and SMA200 is 5.38%. P/S is 0.86. Debt-to assets ratio is decreasing for the last four years. Like Cramer, I am bullish on this stock, too. I think the stock is fairly-priced.

Chesapeake Energy Corp. (NYSE:CHK): CHK is a truly admirable stock. It survived the crisis in 2008 with a solid momentum having gained since then. The stock returned 200% since its dip in Dec, 2008. The oil company shows a trailing P/E ratio of 27.3, and a forward P/E ratio of 10.79, as of the July 21 close. CHK is expected to increase its annual earnings by 9.08% in the next five years. It offers a 1.03% dividend yield, while its profit margin is 10.68%. Gross margin is 83.94%, and the stock is trading 4.97% lower than its 52-week high. Target price is $37.77, which implies an about 11.1% increase potential. Chesapeake had a 126.27% EPS growth this year. While SMA200 is 19.93%, SMA50 is 13.36%. Yields and debts seem all right. However, the stock seems expensive too me. I would rather wait for a pullback.

Ford Motor Co. (NYSE:F): Ford is a company to stick. It has a cheap P/E ratio of 7.86 and a forward P/E ratio of 6.71, as of July 21. Analysts expect the company to have an 8.58% annualized EPS growth in the next five years, which is quite reasonable given the 14.04% EPS growth in the past 5 years. Ford has a profit margin of 5.39%, higher than the industry average of 4.1%. P/S is 0.39, and earnings increased by 92.86% this year. Although the company has no dividend policy, it returned 740% since Feb, 2009. Insider transactions for the last six months had a 97.26% increase, while target price indicates a 47.8% upside movement potential. Interestingly everybody loves Ford, but the stock just does not go up. The stock is trading 30% lower than its 52-week high. Debt-to assets ratio is slowly decreasing for the last three quarters. Ford has a 5-star rating from Morningstar. It is a risky investment but it might be a rewarding stock for the long-term.

Melco Crown Entertainment (NASDAQ:MPEL): While Cramer is bullish on MPEL, he would prefer Wynn Resorts (NASDAQ:WYNN). Here is a brief comparison between these two companies:

Current as of July 21 close.

Melco Crown

Wynn Resorts

P/E ratio

764.50

66.84

Forward P/E ratio

41.32

31.19

Estimated EPS growth for the next 5 years

-

37.14%

Dividend yield

-

1.22%

Profit margin

0.32%

6.8%

Gross margin

23.02%

36.39%

Upside movement potential

-13.8%

-7.8%

Click to enlarge

Although I do not like stocks with P/E ratios of that high, these two returned large amounts this year. Melco returned 269% in a year, while Wynn returned 91.5%. Melco’s SMA50 is 30.40%, while SMA 200 is 84.34%. On the other hand, Wynn’s SMA50 is 13.40%, whereas its SMA200 is 32.16%. I believe in mean-reversion effect. Thus, it is inevitable to see a pull-back in these stocks. However, if I were to invest in one of these two, I would invest in Wynn after a pullback.

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