Lightning Round: 6 Buy And 3 Sell Ideas By Cramer - Part 1

by: Efsinvestment

The markets are in a full recovery mode, showing all-green today. Since the earnings season is approaching, I expect the upward trend to continue for a while. Financials performed the best (4.7%), followed by basic materials (4.2%), and industrials (4.0%). I think it is the time to make the most out of this positive environment. To choose the right stocks, Jim Cramer is helping investors shape their portfolios. In the week’s first Lightning Round, he made ten calls. I divided my article into two to analyze all of them, along with my alternatives. 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 applicable, as well. Here is a fundamental analysis of the first five stocks from Cramer's October 10 Lightning Round:

Stock Name


Cramer's Suggestion

O-Metrix Score

My Take





Vector Group


Buy, but alternative is better



Philip Morris










Entertainment Properties


No Calls



(Data obtained from Finviz/Morningstar, and is current as of October 10 close. You can download the O-Metrix calculator here.)

Cramer recommends buying Amazon, as it is “going higher.” It has a P/E ratio of 102.0, and a forward P/E ratio of 71.4, as of October 10. Five-year annual EPS growth forecast is 26.9%, which sounds reasonable when its 26.44% EPS growth of past five years is considered. Profit margin (2.6%) is lower than the industry average of 3.8%, while it has no dividend policy.

The stock is trading 5.20% lower than its 52-week high, whereas it has an O-Metrix score of 1.55. Target price is $241.73, which implies a 4.5% upside potential. Amazon returned 51.1% in a year, and cash flow is not doing good. P/B is 13.5, and P/S is 2.6, both of which are well above their industry averages. Gross margin and operating margin are 22.4% and 3.1%, respectively. ROA is 6.84%. Amazon has a PEG value of 2.7. The stock is among my high-fliers list, and staying away is the only option that I can recommend. (Full analysis of Amazon, here.)

eBay (EBAY) is a much better buy for me, with a P/E ratio of 24.4, and a forward P/E ratio of 13.9, as of the October 10 close. Estimated annualized EPS growth for the next five years is 12.0%. Profit margin (17.4%) crushes the industry average of 3.8%, while it pays no dividend. O-Metrix score is 3.13, and its target price indicates a 21.4% increase potential. eBay returned 32.9% in the last twelve months. (Full analysis of eBay, here).

Cramer rather prefers Philip Morris, although he likes Vector Group. Here is a brief comparison between these two stocks:

Current as of October 10 close.

Vector Group

Philip Morris

P/E ratio



Forward P/E ratio



Estimated EPS growth for the next 5 years



Dividend yield



Profit margin



Gross margin



Upside movement potential



Vector Group is currently trading 5.43% lower than its 52-week high, while Philip Morris is trading 8.10% lower. Vector Group returned 1.5% in a year, and Philip Morris returned 17.0%. Vector Group’s debt-to assets ratio is strolling around 60%, whereas that of Philip Morris is hovering around 50%. I don’t believe Vector’s dividend is safe, so it shouldn’t be counted on. Philip Morris is relatively less volatile, and I agree with Cramer on this call.

Cramer commented the following on Inergy:

I've turned sour on propane. It's viciously competitive.

Inergy shows a trailing P/E ratio of 40.7, and a forward P/E ratio of 25.7, as of October 10. Analysts expect the company to have a 1.5% annualized EPS growth in the next five years. It offers a gorgeous dividend of 12.05%, while the profit margin (3.3%) is below the industry average of 5.4%.

Earnings decreased by 222.64% this quarter, and 139.48% this year. Target price is $34.00, implying a 45.2% upside movement potential. Inergy has an O-Metrix score of 2.04. The stock is trading 42.57% lower than its 52-week high, whereas it returned -43.1% in a year. Debts are starting to become a pain, and cash flow is struggling. SMA50 and SMA200 are -13.78% and -32.39%, respectively. Inergy has a horrible PEG value of 17.1. Operating margin is 7.4%, and ROA is 2.31%. There is no green flag in Inergy’s key statistics, so avoid this stock. I don’t think that the dividend is sustainable.

Cramer will make his call on Entertainment Properties after doing some research. As of October 10, the REIT owns a market cap of $2.0 billion. It is trading at a P/E ratio of 21.0, while the current price is $38.07. The 52-week range is $35.71- $50.44. Dividend yield is 7.04%, and P/B is 1.2, below the industry average of 2.2.

Entertainment Properties reported total revenue of $74.4 million in Q2, 2011, which is better than the total revenue of $70.92 million in Q2, 2010. The REIT is paying quarterly dividends since December 1997. It is currently trading 19.69% lower than its 52-week high. There are better alternatives, but holding on to this stock is okay with me.

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

Continue to Part 2 >>

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