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As global markets are suffering severely from the financial panic, Jim Cramer gave names of the stocks and a commodity that he finds trustworthy. His picks include a brilliant stock, Johnson & Johnson (JNJ), and a precious metal, Gold (GLD), a purely speculative play. I have investigated his picks from a fundamental perspective, adding my O-Metrix Grading System where applicable. Here, is a fundamental analysis of these stocks from Cramer's Mad Money

(Data obtained from Finviz/Morningstar and current as of Aug.10):

Stock Name


Cramer's Suggestion

O-Metrix Score

My Take

Johnson & Johnson







Long-term Buy



SPDR Gold Trust




Do NOT Buy

Nordic American Tanker Shipping





Johnson & Johnson: "I think the stock of Johnson & Johnson is safer than U.S. Treasurys over the next 10 years and S&P seems to agree, at least when it comes to the balance sheet. I like the risk reward, along with the favorable tax treatment and I want to get my price," comments Cramer.

The healthcare titan shows a trailing P/E ratio of 14.1, and a forward P/E ratio of 11.76, as of August 10. Analysts expect the company to have a 5.8% annual EPS growth in the next five years, which sounds reasonable given the 7.35% EPS growth of the past 5 years. With a profit margin of 19.8%, Johnson & Johnson offered a 3.67% dividend last year. It has an O-Metrix score of 3.66, and insider transactions have decreased by 22.31% in the last six months. Institutions own 64.16% of the stock. Target price implies a 20.3% upside potential, while it is currently trading 11.27% lower than its 52-week high. It returned 1.2% in the last twelve months, and debt-to assets ratio is slightly increasing for the last five years. Gross margin is 69.11%. The company is relatively less volatile, and the current price is a safe entry point. It is much better investment than U.S. treasuries.

Cramer likes Eaton Corp. also, but he rather prefers waiting for a pullback. The Ohio-based Eaton was trading at a P/E ratio of 11.95, and a forward P/E ratio of 8.51, as of the August 10 close. Estimated annualized EPS growth for the next five years is 9.7%. Profit margin in 2010 was 7.77%, while the company offered a 3.34% dividend. Earnings increased by 46.39% this quarter, and 139.92% this year. Institutions own 83.71% of the stock, while O-Metrix score of the company is 6.37. Target price is $61.49, indicating an about 57.6% upside potential. The stock is trading 29.97% lower than its 52-week high, while it returned -1.4% in a year. Debt-to assets ratio is nearly stable for the last five quarters. Insiders have been mostly exercising options for a while. I believe the stock is underpriced, and dividend yield is satisfactory. Current price is an advantageous entry point.

SPDR Gold Trust: "This is a scary, chaotic environment and in moments of fear and chaos, the one thing you need to own is gold, which is why the precious metal has been soaring of late, hitting new highs again today and going out above $1,700 an ounce," says Cramer. He also favors Goldcorp Inc. (GG).

I also like Goldcorp since the company pays substantial dividends. Incorporated in 1994, Goldcorp Inc. (GG) became one of the world’s largest gold producers in just two decades. Goldcorp has 16 major operations and development projects in 6 countries across the Americas. The company operates several gold mines in Canada, Mexico, the United States and Argentina. Goldcorp expects to increase its gold production capacity by more than 50% over the next five years. The outstanding performance of Goldcorp in last decade shows that the company has a masterful management team. If the trend goes on, a relatively tiny mining company is on its way to becoming a global gold titan. However, note that the future success of Goldcorp is highly correlated with future gold prices. If things go south for gold miners, Goldcorp might start consuming its asset base soon. (Full analysis, here)

As I have mentioned before, I do not recommend buying gold until this gold-mania stops, and gold drops to reasonable prices. George Soros already sold out his SPDR Gold holdings. Gold is extremely overpriced as I explained here, and here. Current macro-economic worries, the AA credit problem, and Euro-zone debt crisis are speeding up the upwards trend of gold. The power of supply and demand for physical gold is not enough to explain this trend. Sooner or later, this gold bubble will burst.

When it comes to the oil tanker industry, Cramer recommends just one company: Nordic American Tanker. The Bermuda-based tanker company shows a trailing P/E ratio of -1000.0, and a forward P/E ratio of 454.5, as of Aug 10. Analysts estimate a 147.90% EPS growth for the next year. Although profit margin is awful (-0.6%), dividend yield is enjoyable (6.24%). Earnings decreased by 169.46% this year, and 173.05% this quarter. Moreover, sales decreased by 38.87% this quarter. ROA, ROE, and ROI are all -0.08%. Target price is $21.92, implying an 18.9% upside movement potential. It returned about -37.2% in the last twelve months, and debts have increased by 60% within the last three quarters. Yields are decreasing terribly. Average analyst recommendation for Nordic American is 3.40 (1=Buy, 5=Sell). The stock is in a downward trend for a while and I believe it will not get rid of it so easily.

Find more information on O-Metrix Grading System here.

Disclosure: I am short Gold futures.

Source: Jim Cramer's Safe List to Ride Out the Storm