Jim Cramer is one of the top watched TV personalities on CNBC. He is the host of Mad Money and also the co-founder and chairman of TheStreet.com. Nearly 250,000 people watch his show daily on TV, and most of these are ordinary investors trying to understand what’s going on in the market. Jim Cramer’s bullish and bearish stock picks on his show is the starting point for many investments made by these folks.
During the August 17 show, Cramer made a sweeping analysis of how the well-run companies that continue to perform well may have a more accurate outlook on consumers and the economy than the pessimistic leaders of consistently poor performers.
Here are the stocks Cramer discussed in this show:
Dell (DELL): After Dell reported a good quarter, they threw ice water on it by lowering their guidance, citing consumer weakness and uncertain times. Are these just excuses? Maybe the revenue forecast is lower because they’re losing market share to Apple (AAPL) as more people shun traditional PCs.
On the retail front, Saks (SKS) CEO said performance was terrific, but he worries about the impact of the declining stock market, which could make him very cautious. Dick’s (DKS) CEO Edward Stack said the food-fight we see everyday paired with the gamesmanship in Washington has made consumers very cautious. However, Target (TGT) reported that things were going well and that consumers were shopping aggressively. TJX Companies (TJX) also reported that business is running smoothly with lean inventories. Yet, Urban Outfitters (URBN), which has been a dog of a stock for 5 years now, said the last 10 days of Anthropologie shook things up because business was so terrible.
The verdict? Cramer said that companies that complain about the consumer aren’t the ones we should be relying on. They’re either executing poorly, misjudging the environment or just have the wrong products. The companies with visionary and battle-tested executives who say things are going well are closer to the truth.
Home Depot (HD): This home improvement retailer consistently delivered better than expected results. The stock is down just 4.7% YTD, most of which had little to do with the company. The company reported a $0.04 cent beat on a $0.80 basis and projected an upside guidance for the upcoming year. Their restructuring plan has led to much of the company’s success.
Lowe’s (LOW): Struggling to compete with Home Depot (HD), Lowe’s stock is down 20.3% YTD and they’ve consistently delivered disappointing results. Cramer recommended Lowe’s on May 16 based on a theory that they’d be able to catch up to Home Depot (HD) by initiating a restructuring program that their competitor is already in the third year of. Cramer said the difference simply comes down to execution and that Lowe’s cannot compete.
Deere (DE): Cramer feels this company is conservative to a fault. While 3Q net income rose 15% year-over-year, executives have such a glum outlook on things that it hurts their stock. It currently trades at 12.9 times earnings and yields 2.2%
Mercer International (MERC): A viewer once again asked how Cramer felt about this pulp business, to which he repeated that he is a fan of the pulp business and that shares should be bought and put away. Cramer also likes International Paper (IP) as well.
Edwards Lifesciences (EW): This medical device company is a defensive company that will not only hold up in this tough market, but is also poised to increase by 30% should the FDA approve a device that prevents open-heart surgery (for heart valve replacement). The device is already approved in Europe and has already passed a preliminary FDA panel with a 9-0 vote in favor.
Because the company already has a solid product pipeline, Cramer feels the downside is only about 10%, should the FDA not approve the device. Although the stock sells at 24 times earnings, the price fell far enough over the last month that it offsets the risk involved with the impending FDA decision.
Toll Brothers (TOL): Although Cramer said it’s the best of the homebuilders, and they’d eventually rebound better than the others, he’s reluctant to pull the trigger just yet. Eric Bannasch of Cadian Capital increased his position by 40%.
Crocs (CROX): Cramer admitted to missing the run-up in the niche footwear company, but said he would recommend it if it went back down to $24 per share.
Alcoa (AA): This aluminum producer received a buy recommendation from Cramer, as he said the cash flow is bountiful, CEO Klaus Klienfeld is the real deal and that “Alcoa is back and will be bigger than ever." John Paulson of Paulson & Co. increased his AA position by 59% in the first quarter and held the position constant in the second quarter. (More of Paulson’s stocks can be found here.)
Covidien (COV): Cramer gave COV a buy recommendation, as it is one of the cheapest healthcare companies around. The stock currently trades at 13 times earnings and yields 1.5%.
First Niagra (FNFG): This bank stock is yielding close to 6%, and Cramer advised a viewer who already owned shares to hold on to it, but warned others to be careful buying bank stocks.
Alcatel Lucent (ALU): A viewer tried to make a case for this communication service provider, but Cramer gave it a sell recommendation and deemed it “one of the worst stocks ever.” Stuart Peterson of Artis Capital Management reduced his ALU holdings by 11%, but still has 14% of his portfolio in the stock. (See more of Peterson’s holdings.)
Dolby Labs (DLB): Cramer advised against owning this company, as it isn’t a bull-market stock. Items like home theaters, speakers, etc. need to perform better. Which, in this market, is unlikely as consumers are likely to place discretionary dollars elsewhere. The stock currently trades at 12 times earnings
Medco Health Solutions (MHS): With a deal for a potential buyout on the table, Cramer recommended buying the pursuer, Express Scripts (ESRX), and not Medco. This way, if the deal is blocked by the Justice Department, you’ll be stuck with bad stock. If the deal goes through, however, you’ll be left with a powerhouse of a company. Cramer’s charitable trust owns ESRX.
Robert Half International (RHI): Cramer does not feel a company that provides temporary help is not the type of stock to own when there is talk of potentially reentering a recession. The stock closed just $2 above its 52-week low.
Tiffany & Co. (TIF): As a great retailer that is continuing to rebound, the stock is trading at 21 times earnings. Jason Horseman of Horseman Capital Management increased his position in the stock by 19%. (Turn here for more of Horseman’s picks).
Conoco Phillips (COP): Cramer favors COP because it is the highest-yielding major oil company. High yield in a solid stock is a hard combination for him to turn down.
DuPont (DD): Cramer’s charitable trust owns this renowned chemical company, which trades at 13 times earnings and yields 3.5%.
Cree (CREE): While Cramer said this tech stock is currently making a comeback, he still advises to avoid that sector for the time being. However, Seymour Kaufman and Michael Stark of Crosslink Capital just increased their shares of the stock by 37%.
Blue Coat (BCSI): This ailing tech stock is down 23.7% since reporting weak quarterly results and announcing the CEO’s departure. Cramer recommended a viewer to immediately get out of this stock and maybe instead pick up Verizon (VZ), which is yielding close to 5.5%.
Goldman Sachs (GS): Cramer’s former stomping grounds is truly an ailing investment bank that he recommended neither buying nor selling, but OK’d a viewer having it as a part of a diversified portfolio. Bruce Berkowitz of Fairholme has 7.35% of his firm’s portfolio in the stock. (See more of Berkowitz’s picks here).
Kinder Morgan (KMI): This is Cramer’s favorite master limited partnership, and it currently yields 4.5%.
El Paso (EP): Not that Cramer didn’t like El Paso, but he recommended a viewer remove it from his portfolio because it was too much like Kinder Morgan (KMI), which the viewer also owned. He suggested a solid food stock like Kellogg (K), which yields 3.2%.
SPDR Gold Trust ETF (GLD): Advising everyone to have a 10-20% portion of their portfolio in GLD, Cramer said its one of the best ways to protect yourself in uncertain markets.
Deckers Outdoors (DECK): This perennial favorite of Cramer, Deckers took a 6.85% hit today. Cramer still recommends this footwear company long-term.
Annaly Capital Management (NLY): This high yielding REIT is one of Cramer’s favorites. The stock currently yields 14.2%.
Sodastream (SODA): In light of criticism from his recent negative analysis of this stock, Cramer said the stock plummeted simply because management didn’t think it would do as well in the future as it did in the past. In high-flying stocks like this one, you must always accept that momentum will always play the largest role in the stock’s trajectory.
As long as management beats estimates by a mile and raises guidance substantially, it will trend higher. However, Sodastream did the exact opposite during its latest conference call, and that is why the stock fell.
NetApp (NTAP): NetApp failed to deliver the good quarter Cramer felt they desperately needed to in order to salvage some aspect of the technology sector. The data center company not only reported a bad quarter, Steve Gomo, the CFO, said the numbers were because of the budget ceiling crisis in Washington. The stock closed below its 52-week low at $37.28.
Additional disclosure: I am long physical gold.