Jim Cramer is famous for his ability to dig into every event for the companies he covers. The secret to his success is simple: Due diligence. Here’s a list of Jim Cramer buy calls from August 5 and a look at how they have performed in this volatile market.
Sodastream International Ltd (NASDAQ:SODA)
Sodastream International is a company that sells sodas through its SodaStream and Soda-Club brands. The unique proposition is that it allows users of its products to turn tap water into carbonated water and soft drinks. The company sells its product with a distribution network of over 35,000 retail stores in several countries. The market is concerned that the product may be a fad. The stock price reached as high as $77 but has fallen below $30 in recent months.
Jim Cramer made a buy call on this stock on August 5. Based on the last closing price, the stock has declined further by 53%. The stock has also fallen by 45.31% for the month. Investors are more concerned that growth will be lower in the coming quarters. The latest quarterly report revealed that its international growth may be losing steam. The stock is valued at 22 times next year’s earnings and 3.21 times book value. Looking at these figures, the stock does not come cheap. A similar international company, Belgium-based Fountain SA, trades at 14 times earnings. However, SODA’s valuation is justified based on growth expectations from the market. Analysts are expecting earnings growth of 30% for next year. Notable research firms like Oppenheimer and J.P. Morgan are bullish on the stock. They cite retail expansion as the main driver to future earnings and margin expansion. Based on historical data, I think sales could perk up around the end-of-year holidays.
PepsiCo Inc. (NYSE:PEP)
PEP is a global food and beverage company. Its brands include Tropicana, Gatorade, Lay’s, Pepsi and Quaker Oats. Over the last five years, it has grown its revenues by 12% and earnings per share by 10.37%. This is higher than the industry’s average revenue growth of 6% and earnings per share growth of 0.80%. While the carbonated drinks market has become saturated, the company has moved its focus to non-carbonated drinks and snacks. This move has driven the company’s steady earnings and revenue growth for the last five years.
Since Jim Cramer recommended PEP last August 5, the stock has fallen by 3.51% based on the last closing price. It has also declined by 2.65% for the month. At current prices, the stock trades at 12.80 times next year’s earnings and carries a dividend yield of 3.30%. This is lower than its competitors’ valuations. The Coca-Cola Company (NYSE:KO) is valued at 15.50 times earnings and has a dividend yield of 2.80%. On other hand, Dr Pepper Snapple (NYSE:DPS) trades at 13.05 times earnings and has a dividend yield of 3.30%. PEP trades at 16.17 to 22.48 times historical price earnings band. PEP deserves a second look for investors seeking both safety and growth.
O’Reilly Automotive Inc. (NASDAQ:ORLY)
O’Reilly Automotive is an aftermarket and auto parts retailer. In these uncertain times, consumers would rather stay with their old cars than purchase new cars. This will ultimately give them tremendous savings over time. This kind of environment allows aftermarket retailers like ORLY to post strong revenue. Analysts are expecting earnings per share of $3.61 this year, up by 18% compared to prior year’s results. It added 99 stores this year and plans to open more stores by year end. This brings the total count to 3,675 stores. Management is confident that that they will exceed analysts’ expectations.
Since the August 5 Jim Cramer recommendation, shares increased by 11.35% based on the last closing price. For the month, shares are also up by 14.14%. The stock is currently valued at 15.89 times next year’s earnings. This is higher than Autozone's (NYSE:AZO) earnings multiple of 12.14 times and Pep Boys' (NYSE:PBY) at 9.68 times. It seems that the market believes that ORLY has a better earnings growth profile than its peers. In fact, the company sports a return on equity of 15%. This is higher than PBY‘s return on equity of 8%. Analysts have upgraded the stock to a buy on improving fundamentals and prospects.
Annaly Capital Management (NYSE:NLY)
Annaly Capital is a mortgage real estate investment trust (mREIT). The majority of its assets are fixed, high-quality, long-term mortgages. Given the current low interest rate environment, it has a lower cost of funding to finance the purchase of these assets. The company will make a lot of money from this spread, noting that rates will be higher in the future.
Jim Cramer recommended this stock last August 5. Since the recommendation, the stock has declined by 6% based on the last closing price. For the month, its share price is slightly lower by 0.12%. Similar mREITs have also performed poorly in this market. Chimera Investment Corp. (NYSE:CIM) has fallen by 9.34% for the month and Invesco Mortgage Capital (NYSE:IVR) has declined by 18%. At the current price around $15.8, the stock trades at 6.19 times next year’s earnings and has a dividend yield of 14.40%. In contrast, CIM is valued at 5.24 times earnings and carries a dividend yield of 18.80%; and IVR trades at 3.51 times next year’s earnings and has a dividend yield of 22%. Analysts have a neutral rating on the stock. However, investors will soon notice the high dividend yield most mREITs carry. This will be the stock’s near-term catalyst.
MarkWest Energy Partners LP (NYSE:MWE)
MWE is a master limited partnership stock engaged in the natural gas liquid business. The NLG industry is poised to post strong multi-year growth rates. There are studies proving that natural gas will become the major player in the energy industry in the future. The main argument for MLPs is the good distribution yield they carry. In fact, Jim Cramer has been recommending MLPs recently, and MWE is one of his favorites.
Since the August 5 recommendation, the stock has gained by 4.67% based on the last closing prices. For the month, it has also gained by 5.03%. At the current price of $46, the stock trades at 22 times next year’s earnings. It has a dividend yield of 6.10%. This is lower than other MLP stocks, like Kinder Morgan Energy Partners (NYSE:KMP) and Enterprise Products Partners LP (NYSE:EPD). KMP trades at 28 times earnings and has a dividend yield of 6.70%. However, this is higher than EPD’s 17 times earnings. EPD also carries a dividend yield of 6%. The strong economics of NLG market will produce better earnings in the future. This will ultimately reward investors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.