by Larry Gellar
Today we’ll be taking a look at some recent recommendations from CNBC’s Jim Cramer. The markets have been turbulent, so let’s see how Cramer’s picks have fared.
Apple (AAPL) – Recommended at $379.74. AAPL stock hasn’t moved much since then, as investors eagerly awaiting the unveiling of the iPhone 5. This latest iPhone will be thinner and weigh less, but few other details have been announced. One new feature is a better camera, but the real question is whether the iPhone can keep up its monstrous market share. With improved competition coming from a variety of companies, it’s hard to imagine what this phone will do that others can’t. Instead, Apple may have to continue to rely on the iPhone’s enormous App Store.
Other news for Apple has centered on the company’s patent wars. Indeed, the latest headlines on that front come from Australia, where Apple is seeking to prevent Samsung (SSNLF.PK) from selling its newest Galaxy tablet. That case will resume late Monday EST, and a longer trial can only benefit Apple. Besides Samsung, Apple’s biggest competition comes from Google (GOOG), Hewlett-Packard (HPQ), and Research In Motion (RIMM). In categories such as price to earnings, price/earnings to growth, and price to sales, Google remains more expensive, while Research In Motion is significantly cheaper. Margins for Apple are about average, with gross margin at 39.82% and operating margin at 30.43%.
Amazon.com (AMZN) – Recommended at $216.18. Like Apple, Amazon.com is trading about where it was when Cramer recommended it. The latest news for this company actually comes from the company’s audio book segment, where it’s been announced that some new audio books will have use celebrity voices. Audible has said that the idea is for actors “to inhabit a character that has always fascinated them, show a different side of themselves from what audiences have seen on camera or tell a personally beloved story.”
More importantly for AMZN stock though is the company’s release of the Kindle Fire. This hot (no pun intended) new piece of hardware will be selling for much less than many investors expected - $199 – so it could capture a piece of the market that the iPad’s had trouble with. In fact, the iPad’s biggest problem for many is merely its high price point. Important competitors for Amazon include Barnes & Noble (BKS) and eBay (EBAY). While Barnes & Noble’s price to earnings ratio is currently incalculable due to negative trailing twelve-month earnings, Amazon’s P/E ratio is a whopping 95.38. Price/earnings to growth is 4.08 and price to sales is 2.51. Meanwhile, margins are only 22.45% gross and 3.14% operating.
Johnson & Johnson (JNJ) – Recommended at $64.64. Down a bit since then, many investors love this stock regardless because of its 3.6% dividend yield. Meanwhile, Johnson & Johnson will be buying Merck’s (MRK) stake in its partnership to distribute medicine such as Pepcid, Mylanta, and Mylicon. A statement from Johnson & Johnson said: “These acquisitions will allow McNeil and McNeil Canada to enhance their positions in the United States and Canada, respectively, in the important digestive health category.” Both stocks reacted positively to the news as this deal should certainly be a win-win situation.
On the acquisition front, one of Johnson & Johnson’s subsidiaries, Ethicon Endo-Surgery, will be buying SterilMed. SterilMed focuses on repairing medical devices as well as selling hardware, so this could be an important addition. Important competitions for Johnson & Johnson include Abbott Laboratories (ABT), Covidien (COV), and Novartis (NVS). Johnson & Johnson has the highest price/earnings to growth and price to sales ratios out of those stocks, although gross margin of 69.25% and operating margin of 26% help account for this. As for cash flows, $3.545 billion came in during 2010 and $4.381 million flowed out during the first half of 2011. Recent outflows have mainly been caused by acquisitions, however.
Pier 1 Imports (PIR) – Recommended at $10.85. Pier 1 has fallen a bit since Cramer’s recommendation, although investors are eagerly awaiting presentations at conferences hosted by Credit Suisse and Telsey Advisory Group. While many analysts believe that this will be a strong holiday season for retailers, seasonal hiring will probably be limited. The idea behind this strategy for companies like Pier 1 is that it will keep costs down, and many retailers already have a decent amount of employees on hand anyway. Pier 1 was also recently upgraded by KeyBanc Capital Markets.
Other news in the retail sector has centered on the retirement of David Stovall, CEO of Stein Mart (SMRT). Pier 1 also competes with Bed Bath & Beyond (BBBY) and Cost Plus (CPWM). Pier 1 is cheaper than both of those stocks using price to earnings and price/earnings to growth, although price to sales is closer to average. As for margins, gross margin is 58.96% and operating margin is 8.55%. Cash flows have been mixed, with $113.56 million coming in during fiscal year 2011 and $110.67 million streaming out in the 6 months after that. Recent outflows have been primarily caused by stock repurchase, however. Investors may also be interested to know that this stock has an extremely high beta of 5.21.
Philip Morris International (PM) – Recommended at $67.81. Philip Morris has dropped more than a few dollars since then, and a downgrade from Citigroup didn’t help. The bank says that recent currency movements could hurt this company’s earnings, and we’re inclined to agree. Other news affecting this stock is new label requirements in Canada. There, tobacco producers will have to cover 75 percent of their package with health warnings. This could have the effect of making packages look quite tacky, so it remains to be seen how tobacco sales will be impacted.
On the other hand, a recent increase in dividends has many shareholders excited. In fact, continued success in the emerging markets could have this tobacco giant raising dividends for quite some time. Important competitors for Philip Morris include British American (BTI) and Imperial (ITYBY.PK). Philip Morris is the cheapest using price/earnings to growth but the most expensive using price to sales. Margins are pretty solid though at 65.42% gross and 43.05% operating. As for cash flows, $163 million came in during 2010 and $475 million came in during the first half of 2011. Strong cash from operating activities have been the major proponent behind this. Investors may also be interested to know that this stock has a somewhat defensive beta of 0.84.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.