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Recently, Jim Cramer advised investors to start buying stocks that are in “great secular bull markets.” He introduced a large list of must-have stocks from different sectors. I investigated these picks from a fundamental perspective, using my O-Metrix Grading System and FED+ (Future Earnings Discounted Plus Equity) Model where necessary. Here is a fundamental analysis of these stocks from Cramer’s Mad Money (data obtained from Finviz/Morningstar and is current as of July 29):

Aeorospace: Cramer thinks that there is a high demand for new and more efficient planes. He suggests considering Boeing (BA), Honeywell (HON), and Precision Castparts (PCP). Here is a brief comparison of these three companies:

Current as of July 29 close.

Boeing

Honeywell

Precision Castparts

P/E ratio

14.9

16.7

23.02

Forward P/E ratio

13.50

11.5

16.22

Estimated annualized EPS growth for the next 5 years

10.70%

14.44%

11.32%

Dividend yield

2.38%

2.50%

0.07%

Profit margin

5.28%

6.96%

16.3%

Gross margin

19.14%

24.40%

30.44%

Upside movement potential

23.2%

29%

8.5%

O-Metrix scores of Boeing, Honeywell, Precision Castparts are 4.60, 6.00, and 2.90, respectively. Boeing is trading 12.16% lower than its 52-week high. Honeywell is trading 14.25% lower than its 52-week high, and Precision Castparts is trading 5.86% lower than its 52-week high. Since last year, Boeing returned only 1.1%, whereas Honeywell returned 21.4% and Precision Castparts returned 29.2%. Honeywell’s debt-to assets ratio is unstable, while those of Boeing and Precision are at a decreasing trend. I would prefer Boeing and Honeywell over Precision, as these companies have lower P/E ratios and offer better dividend yields.

Oil & Gas: This industry is a truly speculative bet. The stock prices of these companies are highly correlated with commodity prices. However, I think the strong upward trend in oil prices will continue for a while. Cramer believes that Baker Hughes Inc. (BHI), Schlumberger (SLB), Weatherford International (WFT), and Halliburton Co. (HAL) are all profitable picks in the oil & gas industry. Here is a brief comparison of these four companies:

Current as of July 29 close.

Baker Hughes

Schlumberger

Weatherford

Halliburton

P/E ratio

31.33

25.1

833.3

21.30

Forward P/E ratio

13.94

17.5

14.42

12.3

Estimated annualized EPS growth for the next 5 years

22.08%

20.66%

18.00%

25.03%

Dividend yield

0.78%

1.11%

-

0.66%

Profit margin

6.55%

14.2%

0.2%

11.4%

Gross margin

22.14%

23.9%

25.96%

19.14%

Upside movement potential

23%

19.9%

13.1%

27.9%

I would eliminate Weatherfood at first, as the company has sky-high P/E ratio with no dividend policy. O-Metrix scores of Baker Hughes, Schlumberger, and Halliburton are 5.04, 5.11, and 7.64, respectively. Baker Hughes returned 54.0% in a year, while Schlumberger returned 44%, and Halliburton returned 78%. Among these three companies, only Baker Hughes’ debt-to assets ratio is unstable. Baker Hughes is trading 4.47% lower than its 52-week high. Schlumberger is trading 5.40% lower than its 52-week high. Halliburton is trading 5.26% lower than its 52-week high. All of the three companies are truly profitable companies with solid upside potentials, but Schlumberger and Halliburton have better balance sheets.

Trucks: Cramer suggests only Cummins Inc. (CMI), the Indiana-based engine maker, in this industry. As of July 29, Cummins shows a trailing P/E ratio of 13.8, and a forward P/E ratio of 10.6. Analysts expect the company to have an 11.23% annual EPS growth in the next five years. With a profit margin of 9.3%, Cummins offered a 1.53% dividend yield last year. It returned 28.8% in the last 12 months, and debt-to assets ratio is slightly going down for the last five years. Earnings increased by 133.26% this quarter, and 143.66% this year. The stock is trading 13.46% lower than its 52-week high, while analysts average target price implies 27.6% increase potential. SMA50 is 2.52% and SMA200 is 1.05%. Institutions own 85.83% of the stock. O-Metrix score of 5.22 is better than the market average. Debt-to equity ratio is 0.1, far better than the industry average of 0.8. Analysts give a 2.20 recommendation for the company (1=Buy, 5=Sell).

Plastics: Cramer thinks that stocks like Dow Chemical (DOW) and Airgas (ARG) are good picks in the industry. Here is a brief comparison of these two companies:

Current as of July 29 close.

Dow Chemical

Airgas

P/E ratio

16.2

23.45

Forward P/E ratio

9.79

14.97

Estimated annualized EPS growth for the next 5 years

7.33%

12.47%

Dividend yield

2.87%

1.69%

Profit margin

3.9%

5.87%

Gross margin

15.70%

54.98%

Upside movement potential

27.1%

13.8%

Dow Chemical returned 23% in a year, while Airgas returned 4.5%. O-Metrix scores of Dow and Airgas are 3.92 and 3.68, respectively. Dow Chemical is trading 16.85% lower than its 52-week high, whereas Airgas is trading 3.13% lower than its 52-week high. Dow Chemical’s debt-to assets ratio is decreasing for the last two quarters, while that of Airhas is in an increasing trend. Average analyst recommendation for Dow Chemical is 2.50, and 2.10 for Airgas (1=Buy, 5=Sell). I would pick Dow Chemical, if I were to choose one between the two.

High-End Retail: “The rich are staying richer,” says Cramer. His favorite stock picks in this market are Tiffany& Co. (TIF), Coach, Inc. (COH), Nordstrom Inc. (JWN), VF Corp. (VFC), and Phillips-Van Heusen Corp. (PVH). Here is a brief comparison of these companies:

Current as of July 29 close

Tiffany

Coach

Nordstrom

VF Corp.

Heusen

P/E ratio

26.62

22.42

17.42

21.1

37.3

Forward P/E ratio

19.3

19.50

14.4

13.69

12.66

Estimated annualized EPS growth for the next 5 years

14.48%

15.58%

11.08%

10.84%

14.43%

Dividend yield

1.46%

1.39%

1.83%

2.16%

0.21%

Profit margin

11.98%

21.43%

6.46%

7.72%

2.58%

Gross margin

59.14%

73.09%

39.22%

46.8%

52.6%

Upside movement potential

9.1%

3.7%

6%

6.1%

8.2%

O-Metrix scores of Tiffany, Coach, Nordstrom, VF Corp., and Heusen are 3.47, 4.04, 4.05, 3.73, and 2.93, respectively. Since last year, Tiffany returned 82.7%, Coach returned 67.9%, Nordstrom returned 41.2%, V.F. returned 44.3%, and PVH returned 33.9%. The debt-to assets ratios of all mentioned companies has been decreasing for the last four quarters. It is true that the rich is getting richer. However, these stocks does not seem to have a lot of potential left for the short-term. Analysts expect double digit EPS growth rates for these stocks. Neverthless, the expectations is already priced by the market.

Agriculture: Cramer says that there are several stocks to consider like Potash Corp. (POT), Deere & Co (DE), and Dupont de Nemours (DD) in this industry. Here, is a brief comparison of these companies:

Current as of July 29 close.

Potash

Deere

Dupont

P/E ratio

25.03

13.49

14.36

Forward P/E ratio

14.53

10.68

11.4

Estimated annualized EPS growth for the next 5 years

13.30%

10.04%

9.38%

Dividend yield

0.48%

2.09%

3.19%

Profit margin

29.8%

8.55%

9.89%

Gross margin

42.6%

31.3%

28.8%

Upside movement potential

12.7%

32.3%

19.8%

Potash returned 61.1% in the last 12 months, while Deere returned 16.8%, and Dupont returned 23.5%. O-Metrix scores are 3.48, 5.01, and 4.87, respectively. Deere and Dupont are doing well with their debts, while Potash’s debt-to assets ratio increased sharply in the last four years. Deere and Dupont are my picks, as they have lower P/E-forward P/E ratios, and offer better dividend yields.

Technology: While Cramer is mostly bearish on the technology sector, he recommends Apple (AAPL), Amazon (AMZN), and Google (GOOG) only. Here is a brief comparison of these stocks:

Current as of July 29 close.

Apple

Amazon

Google

P/E ratio

15.46

98.0

21.6

Forward P/E ratio

12.2

59.2

14.47

Estimated annualized EPS growth for the next 5 years

20.44%

28.69%

19.14%

Dividend yield

-

-

-

Profit margin

23.53%

2.6%

27.05%

Gross margin

39.82%

22.37%

65.18%

Upside movement potential

24.9%

-3.7%

21.1%

Apple is trading 3.47% lower than its 52-week high. Amazon is trading 2.06% lower than its 52-week high. Google is trading 6.11% lower than its 52-week high. Apple returned 49.1% in a year, whereas Amazon returned 85.3%, and Google returned 23%. My FED+ fair-value estimates are $430 per share for Apple and $796 per share for Google. None of these stocks has any debt problems. Analysts give a 1.60 recommendation for Apple, 2.30 recommendation for Amazon, and 1.80 recommendation for Google (1=Buy, 5=Sell). With its extreme P/E- forward P/E ratios, thin profit margin, and high-risk profile, I would not consider Amazon. Apple and Google are still great buys even after returning 16% and 21% in a month. However, I would rather wait for a pull-back before adding more of these stocks to my portfolio.

Source: Cramer's Must-Buy Calls in 7 Bull Markets