by Larry Gellar
Back on August 9th, CNBC’s Jim Cramer recommended a variety of stocks during Mad Money. Let’s see how those picks have performed since then:
Apple (AAPL) – Recommended at $374.01; currently trading at $377. Shareholders are now eagerly anticipating the iPhone 5, and it appears that the device will be released in October. The big question is when in October, although there are plenty of other things that are still unknown. For instance, will Apple release an iPhone 4G S for customers who are on a tighter budget? Additionally, one part of Vodafone’s (VOD) website implies that the iPhone 5 will come in black / white and have a 16GB version as well as a 32GB version. Lack of a 64GB version would certainly surprise many techies out there.
Clearly, as the holiday season approaches, the iPhone 5 could be the type of monster hit that sends AAPL stock even higher. Important competitors for Apple include Google (GOOG), Hewlett-Packard (HPQ), and Research In Motion (RIMM). Google’s price to earnings and price to sales ratios are even higher than Apple’s, although Hewlett-Packard and Research in Motion are much cheaper using both of these measures. Price/earnings to growth for Apple is actually pretty low – that number is 0.6. Margins for Apple are about average – gross margin is 39.82% and operating margin is 30.43%. With a beta of 1.07, this stock is not particularly defensive nor particularly aggressive.
Consolidated Edison (ED) – Recommended at $51.90; currently trading at $55.12. The most recent news for the company has been the announcement that it will be on the Dow Jones Sustainability Index again this year. In fact, Randolph S. Price, one of Consolidated Edison’s vice presidents, had this to say:
"Our listing on the Dow Jones Sustainability Index is important to us because it's based on performance in areas that we have identified as priorities."
What that actually translates to is the company’s environmental awareness and numerous benefits to society. Strong financial performance was another factor. Consolidated Edison has also been in the news for the impact that Hurricane Irene had on the company. As discussed here, ConEd was able to restore power for many of its customers pretty quickly after the storm moved through New York City. American Electric Power (AEP) is another important utility that investors should consider. This stock offers lower price to earnings, lower price / earnings to growth, and lower price to sales than Consolidated Edison.
Additionally, AEP’s margins and quarterly revenue growth are better than ED. In fact, Consolidated Edison’s quarterly revenue growth (year over year) is -0.80%. As for cash flows, ED brought in $78 million during 2010 and $154 million during the first half of 2011.
International Paper (IP) – Recommended at $24.81; currently trading at $26.37. This company has been in the news primarily because of its acquisition of Temple-Inland (TIN). That deal will cost International Paper $4.3 billion, and the company will also have to take on $600 million of debt. Shareholders are also excited for International Paper’s prospects due to the impact that bioproducts might have on the company’s business. International Paper may be well-positioned for business in diverse products including antifreeze, glue, plastic, and special fibers. This would be an important source of income for the company as demand for paper declines and the housing market continues to sour.
Other stocks similar to International Paper include MeadWestvaco (MWV) and Weyerhaeuser (WY). Using price to sales, IP is cheaper than both of those companies – that number is 0.45. On the other hand, International Paper ‘s numbers for price to earnings and price / earnings to growth are in between MeadWestvaco and Weyerhaeuser. Gross margin for IP is strong (27.59%), while operating margin is closer to average (8.75%). As for cash flows, IP brought in $181 million in 2010 and $326 million in the first half of 2011. Strong operating cash flows have played a big role in this.
Union Pacific (UNP) – Recommended at $91.89; currently trading at $85.07. As one can see, this railroad stock has fallen a bit since Cramer’s recommendation, although CEO Jim Young remains optimistic that the economy will not fall into a recession. On the other hand, he had this to say:
“Inventory ratios are as low as they’ve ever been…Our customers are really keeping their inventories tight. So for us, if you get any kick of consumer demand, you will see a jump in production.”
Other railroad plays to consider include Canadian National Railway (CNI) and CSX (CSX). Both of these stocks are a bit cheaper using price to earnings ratio, although UNP is in the middle of the two for price to sales and price / earnings to growth. UNP is also about average for gross margin (41.43%) and operating margin (28.61%). Cash flows, on the other hand, have been a bit weak. $764 million flowed out in 2010 and $31 million flowed out in the first half of 2011. Heavy spending for things like dividends, stock repurchase, and debt payment played a large role in that, however. Railroad companies overall are also in the midst of a heated labor dispute right now, and some are speculating that the government may get involved.
United Parcel Service (UPS) – Recommended at $64.10; currently trading at $64.22. The biggest news lately for UPS has actually been what’s happening with the United States Postal Service. Specifically, USPS may not be able to pay the a $5.5 billion bill it has coming up, and many question whether it won’t be long before this government-supported operation shuts down completely. If such a thing were to happen, UPS is one company that would clearly benefit. Additionally, many think that UPS’s business should be sound for years to come because of the lower wages that its employees receive.
In other news, the UPS website was the victim of hackers recently. Users would be redirected to another website when trying to access the UPS web site, although it does not appear that hackers were trying to stake personal information. Investors interested in mail-related services may also wish to consider FedEx (FDX). That company offers cheaper price/earnings to growth and price to sales, although price to earnings is a bit higher. UPS has the better operating margin, although FedEx has a slightly higher gross margin. On the other hand, cash flows for UPS have been quite good: $1.828 billion came in during 2010 and $1.321 billion came in during the first half of 2011.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.