By Larry Gellar
Today we’ll be taking a look at 5 stocks recommended by CNBC’s Jim Cramer on September 19th. Was Cramer able to beat the market?
Deere & Company (DE) – Recommended at $77.19. Deere & Company has fallen since then, and some dealers for the company are reporting that less combines will be delivered going forward. This sounds right because farmers have already bought quite a bit of equipment. On the other hand, tractors and planters are expected to do much better. Machines that work on handling and tilling should also see increased demand. In fact, a lot of Deere’s future demand will depend on whether farmers can get by with used equipment.
Deere has also been in the news for its operations in Brazil. In fact, the company plans to build two new factories there, which will supplement an already strong presence. These could be crucial for Deere’s emerging market strategy, so investors should definitely keep an eye on them. Important competitors for Deere include Caterpillar (CAT), CNH Global (CNH), and Kubota (KUB). While ratios like price to earnings, price/earnings to growth, and price to sales are about average, margins for Deere are quite strong – those numbers are 29.32% gross and 13.48% operating. As for cash flows, $861 million flowed out during fiscal year 2010 and $172 million flowed out in the 9 months after that. Cramer's prediction on this name has fallen short of expectations; however, we think it is still a great ag stock to own.
International Paper (IP) – Recommended at $27.61; International Paper has fallen a bit since then, although many investors are excited about a big deal it just made. The company is buying a 75 percent stake in Andhra Pradesh Paper Mills, which is located in India. The shares will be paid for using $388 million of cash, so the financing is simple. Here’s what CEO John Faraci had to say:
“As we complete this phase of the process and move into majority ownership, International Paper is well-positioned to help serve a rapidly growing Indian market. We look forward to building on Andhra Paper's tradition of excellence while introducing the global best practices that make International Paper an industry leader.”
International Paper also recently declared its dividend for the quarter. $0.2625 per share will be paid on December 15th to shareholders of record on November 16th. Important competitors for International Paper include MeadWestvaco (MWV) and Weyerhaeuser (WY). International Paper has the lowest price to sales ratio, while price to earnings and price/earnings to growth are closer to average. Operating margin is about average, but gross margin is rather strong at 27.59%. Cramer is wrong on IP for now, but we think the Andhra Pradesh deal could vindicate his call.
Juniper Networks (JNPR) – Recommended at $19.90; Juniper is up a bit since the company reported strong earnings. Net income actually fell, but higher revenue points to strong demand for the company’s networking hardware. Additionally, the lower net income was mostly due to research and development expenses, which should certainly help Juniper going forward. On the other hand, outlook for the next quarter was lower than expected, and many investors are worried about a variety of Chinese companies that are also putting out some good equipment. Management was also quick to point out that macroeconomics concerns are weighing down on the company.
In other news, Juniper’s MX960 router recently won an award for “Best Carrier Ethernet Core Product.” One of Juniper’s vice presidents, Luc Ceuppens said, “The MX960 delivers a high-performance network infrastructure with fast, secure and reliable delivery of mission-critical applications.” Important competitors for Juniper include Alcatel-Lucent (ALU) and Cisco (CSCO). Those stocks are cheaper using price to earnings and price to sales but more expensive using price/earnings to growth. Furthermore, margins for Juniper are pretty good, with gross margin at 66.23% and operating margin at 17.79%. Quarterly revenue growth (year over year) of 14.5% is also quite impressive. Cramer was right on this one.
Sanofi-Aventis (SNY) – Recommended at $32.90. SNY is trading a bit higher now, and the company’s Genzyme subsidiary is working on some exciting new drugs to treat multiple sclerosis. Here’s what Genzyme chief operating officer David Meeker had to say:
“Genzyme is committed to transforming the landscape of MS treatment through novel research and development aimed at addressing significant unmet needs for patients with MS. With Lemtrada TM and Aubagio TM – two unique, promising investigational treatments – we hope to deliver advancement in MS treatment across the patient spectrum.”
Sanofi-Aventis is also having some limited success with its Multaq drug. Multaq is an anti-arrhythmic treatment, which the European Medicines Agency could work well for a small segment of patients. While Multaq might not be as useful as originally thought, it could still bring in some more revenue for SNY. Important competitors include GlaxoSmithKline (GSK), Merck (MRK), and Pfizer (PFE). Those stocks have higher price to earnings ratios but SNY has the highest price/earnings to growth ratio by far. As for cash flows, SNY brought in 1.807 billions euros during 2010 and 73 million euros during the first half of 2011. Potential investors should note that recent cash inflow has been boosted by taking on more debt. Cramer was right about this market beating dividend payer we recommended recently.
Whole Foods Market (WFM) – Recommended at $72.10; now trading a little lower. The company recently announced an interesting new strategy to help customers get ready for flu season, and a variety of new products are being put in stores. Jeremiah McElwee, executive Whole Body coordinator for the company, had this to say:
“As the seasons begin to change, there's no better time of year to strengthen the body's defenses. In the Whole Body department, shoppers will find natural options to gear up for cold and flu season, including products that can help nourish, strengthen and support the body's defenses.”
Specifically, vitamins, mineral, cough-related medicine, and even some more alternative choices will be found on Whole Foods shelves across the nation. In other news, the next earnings report will be released on November 2nd, and this one could have some crucial information that investors are looking for. Important competitors for Whole Foods include Kroger (KR) and Safeway (SWY). Those stocks are much cheaper using price to earnings, price/earnings to growth, and price to sales, but they also have much lower margins. In fact, Whole Foods has gross margin of 35.02% and operating margin of 5.48%. Two more interesting statistics are the dividend yield of 0.60% and beta of 1.18. Cramer was wrong about this name as it remains overvalued, but at lower prices when we recommended it, WFM could make you money.