Jim Cramer recently sold his positions in all of the stocks below. We think that even as the key equity indices dampen investor expectations, it would be unwise to panic and dump these stocks as he did. We think these Cramer sell ideas have potential to fight the overall market turbulence over the long term, and might spring back to life quicker than market expectations:
One of the largest financial services company in the world, JPMorgan Chase & Co. saw its stock slipping by 4.34% over the last trading week and by 28.44% in the last six months. The downfall in the stock price has been slow and steady considering the overall market sentiments. The current price of the stock is $34.35 per share which almost seems to approach the 52-week low price of $33.69. The company announced its second quarter results on July 14, 2011. The net income of the financial services giant was at $5.4 billion or $1.27 per share, which is 12.5% more than the last year’s second quarter.
The poor results of the commercial banking and retail financial services sections of JPMorgan were offset by the earnings of its other business sectors. As of June 30, 2011, the assets of the company were worth $2.2 trillion and stockholders’ equity was at $182.9 billion. The PE ratio of 7.33 was almost same as its peers.
The products offered by the company are the best among its peers. While its competitors like Bank of America Corporation (BAC) and Barclays PLCC (BCS) reported damp quarterly revenue growth (yoy) of -52.60% and -0.50%, respectively, the corresponding figures of JPMorgan shone at 14.90%. The net income (ttm) of JPMorgan stands at $18.63 billion while BAC struggles with losses of $16.32 billion. These are some strong points that advocate accumulating the JPM shares in order to reap benefits when the markets bounce back.
Despite these facts, the future of the company for the next couple of quarters is partially affected by the ongoing fluctuations in the banking, mortgage and credit regulations. Low interest rates will force the banking business to maintain lower interest margins and the consumer lending is expected to remain slow owning to high credit costs.
Honeywell International, Inc. (HON)
Honeywell International Inc. is leading manufacturer of products related to aerospace, automation, transportation, chemicals and control systems. The current price of the stock is $42.19 per share which is almost 3 times its latest annual earnings. The price of the share is well between the range of its 52-week low of $38.08 and 52-week high of $62.27.
The firm is at an average standing amongst its competitors such as BorgWarner Inc. (BWA), Johnson Controls Inc. (JCI) and United Technologies Corp. (UTX). Its latest revenue (ttm) was reported at $35.67 billion and quarterly revenue growth (yoy) was at 14.60%. These figures were far lower than those of UTX and JCI. The net income of HON was $2.48 billion, whereas the net incomes of BWA, JCI and UTX are $504.90 million, $1.54 billion and $4.73 billion, respectively.
The company is working on some promising projects in various countries. On May 25, 2011, it announced energy conservation and building modernization projects worth $4.7 million with the Washington Housing Authority & Mid-East Regional Housing Authority (WHAMERHA). Another project is due to start in Iraq that will utilize the technological services of UOP LLC, a Honeywell company, at a new transportation fuel refinery.
The overall economic pressure on the European business would easily be offset by the strengths of the company. The company is very strong in terms of cash holdings ($3.1 billion), operating profits and value-adding acquisition strategies. Overall, this stock is a safe bet.
Novagold Resources, Inc. Co. (NG)
Novagold Resources Inc. deals in exploration and development of precious metal products. The current market price of the share is $10 which lies well between its 52-week high of $16.90 and low of $6.30. The company announced its second quarter results in May 2011, which consisted of very heavy losses amounting to $10.9 million. Last year, the firm incurred losses of $16.8 million. The net profit margin and operating margin was -1378.72% and -1339.56%, respectively. The return on average assets and return on average equity was -5.57% and -9.58%, respectively. Though the financials have improved from the second quarter of 2010, the figures suggest staying away from the stock at the moment.
The analysts’ views on the Galore Creek project in British Columbia are not encouraging because of project delays and rising costs. Studies reveal that the project might not begin before 2018. The firm insists that its projects have been undervalued and a fresh valuation by JPMorgan Securities and RBC Capital markets is underway. It would be wise to wait and watch till these valuations come out.
Weyerhaeuser Company (WY)
Weyerhaeuser deals primarily into timber and forest products. At $15.70, the current share price is nearing its 52-week low of $15.06. The price of the shares has plummeted by 28.17% in the last quarter and 37.88% in the last six months. International Paper (IP), a competitor of WY, has shown increase in its share price by 10.94% (yoy) to $23.53.
The company announced its first quarter financial results on April 29, 2011. Excluding the gain from sale of assets, the EPS of the company was almost zero. This showed some improvement from the last year results for the first quarter when a loss of $0.07 per share was reported. Due to weak economic conditions, high commodity prices and euro fluctuations, the earnings of the company have been affected in the past and the pattern is likely to continue in future. Net sales have plummeted to $1.5 billion, down 5.2% in the previous quarter.
Despite the weak market conditions, the company has reported a strong cash balance of $1.5 billion in the first quarter results. It also plans to reduce debt by 40%. Upcoming projects include a deal with Chevron (CVX) to develop a new technology for converting forest waste into transportation fuel. This stock is good for long term investment due to its niche in the timber products and renewable transport fuel.
ConocoPhillips announced its first quarter results on April 27, 2011. The company reported total revenue of $58,247 million, 27.28% higher than the previous year whereas the earnings per share were at $1.82 which is 23.81% higher than the last year’s first quarter results. The current share price is at $63.81.
In June 2011, the net profit margin of the company rose to 5.11% from 5.75% reported in 2Q10. Other ratios showed positive change as compared to the second quarter of 2010. The operating margin dropped to 9.25% from 9.94%, the EBITD margin was 15.15%, the return on average assets increased to 8.58% from 7.40% and the return on average equity jumped to 19.49% from 17.40%. These are a net positive for the company.
The firm deals in exploration and production of oil and gas related products. Over the past two years, it has been undergoing aggressive restructuring to reduce its debt and increase equity by selling $17 billion worth of assets.
Throughout the year, the business faced many adversities such as volatile crude oil prices and high tax rates. To deal with the taxes eating away into the profits, the company is creating two separate public companies out of its oil and gas business by next year. It would take a couple of quarters before it generates appreciable returns and pay dividends.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.