By Larry Gellar
Today we’ll be taking a look at 5 stocks recently recommended by CNBC’s Jim Cramer. Our list includes companies in a variety of sectors including banking, insurance, oil, software, and the Internet:
Bank of America (BAC) – Recommended at $7.65. Bank of America has fallen quite a bit since then, as the debt crisis in Europe continues to cause trouble for the industry as a whole. Bank of America is also in talks to sell one of its mortgage units. Dan Frahm, a spokesman for Bank of America, recently commented, “We continue to work with interested parties, and feel we are making positive progress toward a potential sale.” Fortress Investment Group LLC is the most likely buyer for the troublesome division. Meanwhile, Bank of America is the recipient of yet another lawsuit, as a shareholder alleges that the bank did not disclose a large sum of money it owes to AIG (AIG). While the facts surrounding the situation haven’t been confirmed, the lawsuit claims, “Throughout the class period, defendants repeatedly informed investors about the claims of other entities for RMBS losses but not about the massive losses suffered by AIG.” As for value metrics, Bank of America is still quite a bit cheaper using price to sales than other big banks like Citigroup (C), JPMorgan Chase (JPM), and Wells Fargo (WFC). On the other hand, operating margin for BAC is 1.91% and quarterly revenue growth is -52.6%. Investors may also be interested to know that this stock’s beta is 2.46.
ConocoPhillips (COP) – Recommended at $64.78. ConocoPhillips has dropped a bit since then, and declining oil prices aren’t exactly working in the company’s favor. Environmental concerns have been mounting as well. In fact, ConocoPhillips as well as a host of other oil companies could be affected by new regulations in North Dakota. The problem here is that during operations, many oil companies create pools of liquid that are mistaken by birds as ponds. Needless to say, this creates a dangerous situation that is severely hurting the state’s bird population. Meanwhile, ConocoPhillips’ Kendall Motor Oil is getting rave reviews from at least one driver who has put over 500,000 miles on his car. A director for ConocoPhillips had this to say: “We are really pleased that Mr. White came to us with his compelling testimonial on how well our Kendall Motor Oil has performed for him.” Other oil stocks to consider include BP (BP), Chevron (CVX), and Exxon Mobil (XOM). ConocoPhillips falls in the middle of those companies in a variety of measures including price to earnings ratio, price to sales ratio, operating margin, and gross margin. Quarterly revenue growth (year over year) has been quite strong though: that number is 45.7%. Investors may also be interested to know that this stock’s beta is 1.23.
SAP AG (SAP) – Recommended at $51.22. SAP has dropped a bit since then, although many think that this stock could be a good choice in light of all the chaos going on at Hewlett-Packard (HPQ). Despite the hiring of Meg Whitman to be that company’s new CEO, the stock has fallen even further. As for actual SAP news, the company stands to benefit from its purchase of Crossgate. Here’s what SAP’s head of Line Business Solutions had to say about the business-to-business service provider: “By acquiring Crossgate's highly differentiated solution, we help our customers extend their end-to-end business processes running on SAP to their customers and partners. As a result, thousands of SAP customers will join the network to exchange information easier, execute transactions faster and collaborate better.” Not everything is rosy at SAP though, as the company recently had to pay $20 million to settle with the Department of Justice. The case actually involved TomorrowNow, an SAP subsidiary that’s already been shut down. Important competitors for SAP include IBM (IBM), Microsoft (MSFT), and Oracle (ORCL). Those stocks have lower price to earnings ratios, and SAP is a bit on the high end for price/earnings to growth ratio and price to sales ratio. Gross margin at 70.24% and operating margin at 30.7% are about average for this industry.
Travelers Companies (TRV) – Recommended at $47.99. TRV has fallen a bit since then, although the stock may be due for a rebound as the Federal Reserve’s Operation Twist continues to develop. Specifically, the Fed’s purchase of long-term bonds will probably help insurance companies that hold these securities. Travelers has also benefited from an upgrade from Goldman Sachs. In fact, the stock’s rating was reversed from Sell to Buy as TRV stands to profit from price increases in the insurance industry. With aftermath from Hurricane Irene not as bad as expected, the insurance company got some help on that front too. Other big players in this industry include Hartford Financial Services (HIG) and W.R. Berkley (WRB). TRV falls in the middle of those companies for statistics like price to earnings ratio, price to sales ratio, operating margin, and gross margin. Price/earnings to growth at 1.42 is somewhat though. As for cash flows, the company had $55 million flow out in 2010 and $73 million flow in during the first half of 2011. The outflow in 2010 was caused mostly by changes in working capital as well as stock repurchase. In fact, those two items have taken its toll on the company’s 2011 cash flows as well.
Baidu.com (BIDU) – Recommended at $133.09. Baidu.com has moved down since that recommendation, and the big news here is that Chinese regulators are taking a look at the foreign listings of companies like Baidu.com. Chinese law prevents companies from receiving foreign investment in industries such as the Internet, although some Chinese companies have gotten away with listing themselves as “variable interest entities.” Sina (SINA), Renren (RENN), Sohu.com (SOHU), Netease (NTES), E-Commerce China (DANG), Tudou (TUDO), and Youku (YOKU) are other companies that use this financial structure. It seems unlikely that China would completely shut down this method of financing, however. Meanwhile, different accounting standards in China have also made these stocks the subject of scrutiny from American regulators. Additionally, weak manufacturing reports from China have many investors worried. Note that Baidu.com currently trades at 56.14 times earnings and 26.02 times sales. Price/earnings to growth is more normal though at 0.89. Gross margin of 80.51% and operating margin of 52.18% are strong. Furthermore, quarterly revenue growth (year over year) is 78.4%. As for cash flow, this company brought in the equivalent of $546.55 million during 2010. Strong operating activities as well as limited spending contributed to this. Investors may also be interested to know that beta for this stock is 1.50.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.