6 Ideas By Cramer

|
 |  Includes: BK, BMY, DUK, ED, ETN, FE
by: Efsinvestment

I would like to start my article with offering my condolences to the Jobs family, who has lost an “amazing human being”, as Apple describes. He was a truly inspiring figure.

The global economy is in the worst environment since the Lehman disaster. It is hard to find a safe haven in this uncertain environment. Jim Cramer, one of the greatest stock pickers of all times, is helping investors by giving tips to sail through this extremely rough ocean. In October 5th’s Mad Money, he gave names of six stocks and explained his opinion about them.

Five of them were bullish this time, and one bearish. I have examined all of his stock mentions from a fundamental perspective, and added my opinion about them. I have applied my O-Metrix Grading System where possible, as well. Here is a fundamental analysis of these stocks from Cramer's October 5 Mad Money:

Stock Name

Ticker

Cramer's Suggestion

O-Metrix Score

My Take

BNY Mellon

BK

Avoid

7.06

Long-Term Buy

Eaton

ETN

Buy Some For Now

6.90

Buy

Bristol-Myers

BMY

Buy

2.53

Buy After Pullback

ConEdison

ED

Buy

2.79

Hold

First Energy

FE

Buy

2.50

Hold

Duke Energy

DUK

Top Pick

3.33

Hold

Click to enlarge

Data from finviz/morningstar and is current as of October 6 close. You can download O-Metrix calculator, here.

Cramer is bearish on BNY Mellon, as it fell its three-year low. He says:

I don't like the financials. I like this even less.

The financials have a significant P/E ratio of 8.4, and a forward P/E ratio of 7.6, as of the October 6th close. Analysts estimate an 11.3% annualized EPS growth for the next five years. With a profit margin of 18.2%, it pays a 2.84% dividend.

O-Metrix score is 7.06, and it is trading 42.86% lower than its 52-week high. Target price is $28.24, which implies a 53.9% upside potential. BNY Mellon returned -31.5% in a year. Institutions own 80.40% of the stock, and earnings decreased by 328.33% this year. Debt-to equity ratio is 0.6, far better than the industry average of 1.8. PEG value is 0.7, and it has a five-star rating from Morningstar. Beta value is 0.77. I wouldn’t ignore such a lovely stock. Although it is currently having hard times, BNY Mellon is capable of beating the market in the long run.

Cramer suggests homegamers buying Eaton, the “best of breed,” which returned 114% since 2008. He says:

This market is giving you a terrific chance to get into a great long-term story at a bargain basement price.

As of October 6, it was trading at a P/E ratio of 11.0, and a forward P/E ratio of 8.3. Five-year annual EPS growth forecast is 9.7%. Profit margin (7.7%) is below the industry average of 8.8%, while it offers a 3.62% dividend.

Earnings increased by 46.39% this quarter, and 139.92% this year. Target price is $56.36, indicating an about 44.5% upside movement potential. O-Metrix score is 6.90. The stock is currently trading 30.01% lower than its 52-week high, whereas it returned -6.2% in the last twelve months. Yields are impressive. The debt-to assets ratio is going down for the last three years, and it has a four-star rating from Morningstar. Institutions own 83.53% of the shares. ROE is 15.91%, whereas PEG value is 0.8. 12 out of 22 analysts recommend buying, and I agree with them.

Cramer is bullish on Bristol-Myers as it has “good growth and a strong dividend.” The New York-based healthcare giant, as of October 6, shows a trailing P/E ratio of 16.8, and a forward P/E ratio of 16.0. Estimated annual EPS growth for the next five years is 4.3%, which sounds fair when its 4.38% EPS growth of past five years is considered. With a profit margin of 16.3%, and a dividend of 4.03%, Bristol-Myers is a charming stock for dividend lovers.

The stock is trading only 0.92% lower than its 52-week high, and it has an O-Metrix score of 2.53. Target price is $32.15, implying a 1.0% downside potential. The stock returned 19.3% in a year, while yields are consistent. Debt-to equity ratio is 0.3, way lower than the industry average of 0.8. The debt-to assets ratio is falling for the last five years, and cash flow is impressive. Beta value is 0.56. Gross margin and operating margin are 72.9% and 28.7%, respectively. ROE is 20.74%, whereas ROI is 15.06%. While SMA200 is 18.40%, SMA50 is 10.69%. Bristol-Myers can be highly rewarding in the long-term, but a pullback should be waited for.

Cramer thinks that Consolidated Edison is “best in show,” and Duke Energy is “terrific.” While he also likes First Energy, the CEO stated that he will wait until the dividend rises. Here is a brief comparison between these three stocks:

Current as of October 6 close.

Consolidated Edison

Duke Energy

First Energy

P/E ratio

15.0

12.7

25.1

Forward P/E ratio

14.9

13.8

13.1

Estimated EPS growth for the next 5 years

4.0%

3.7%

4.5%

Dividend yield

4.35%

5.13%

5.07%

Profit margin

8.0%

14.0%

4.1%

Gross margin

59.4%

64.7%

54.8%

Upside movement potential

-5.0%

-4.2%

7.7%

Click to enlarge

I eliminate First Energy at first, as it is the poorest in terms of average P/E ratio, profit margin, O-Metrix score, and gross margin. It is not a great buy, but it is okay to hold. First Energy. ConEdison is currently trading 4.47% lower than its 52-week high, while Duke is trading 3.02% lower. O-Metrix scores of ConEdison and Duke are 2.79 and 3.33, respectively. Edison returned 16.5% in the last twelve months, whereas Duke returned 10.7%. While I am big fan of utilities with fat dividends, the recent sell-offs created better opportunities in the market. Thus, holding is the best bet for all these three stocks.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.