Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program Monday November 14.
SuperValu (NYSE:SVU), Whole Foods (NASDAQ:WFM), Wendy's (NASDAQ:WEN), Dunkin' Brands (NASDAQ:DNKN), Starbucks (NASDAQ:SBUX), Kraft (KFT)
It may seem easy to tell whether a stock is cheap or not, but Cramer suggested looking beyond the dollar value. SuperValu (SVU) is an $8 stock with a low 6.5 multiple. Whole Foods (WFM) looks rich in comparison, since it is a $68 stock with a multiple of 26. The way to tell the true value of a stock is not just to look at the multiple, but to compare it to the growth rate. To find the PEG ratio, divide the multiple by the growth rate. A good PEG ratio is 1, 2 is getting pricey and 3 is expensive. Supervalu's growth rate is just 1.8%, and taken with its multiple, its PEG ratio is 3.4, which means the stock is too costly. WFM's growth rate is 18%, giving it a PEG ratio of 1.44, WFM is cheaper than SVU.
Whole Foods can triple its store count and still not be saturated. SVU already is built out and its best days are behind it. The company reported falling revenues and lackluster same store sales. In addition, competition in the supermarket space is fierce, and SVU is losing market share. WFM, on the other hand, is not as much a supermarket stock as it is a play on healthy eating, and customers are willing to pay up for WFM items.
Cramer took some calls:
Wendy's (WEN) is "finally getting it together," but the stock has moved up 25% and Cramer would wait for it to pull back before buying.
Kraft (KFT) is splitting into two companies. Investors need to make a choice whether to buy one or the other; "maybe you want to hold onto both."
MagnaChip Semiconductor (NYSE:MX), Samsung (OTC:SSNLF), Skyworks Solutions (NASDAQ:SWKS), Broadcom (NASDAQ:BRCM)
Samsung (OTC:SSNLF) has finally come out with a tablet that may give the iPad a run for its money. The Galaxy tablet is selling quite well, as indicated by Skyworks Solutions (SWKS) on its recent conference call. Broadcom (BRCM) management said the Galaxy is "a very powerful product at a very attractive price." Should investors buy Samsung? Since the company is huge, with many products, even the Galaxy might not be enough to move the needle in the stock price. A better way to play the Galaxy is with an under the radar chip stock: MagnaChip Semiconductor (MX). Since this Korean company is small, Galaxy sales will have a greater impact on the stock. The company makes chips for all kinds of devices, and has three segments: MX manufactures chips designed by others, creates chips for display products and chips for power solutions. MX recently emerged from bankruptcy, but has a clean balance sheet and sells at a multiple of 5, a 40% discount to other leading chipmakers. MX is buying back its stock, 12% of the company's value and it is an "orphan stock," covered by only 3 analysts. Cramer emphasized patience when buying MX, urged viewers not to chase the stock in the aftermarket and to wait a few days before buying. Currently, MX trades at $7.47, and it is best to wait for a decline before buying. As with all speculative stocks, caution is the name of the game.
CEO Andrew Littlefair, Clean Energy (NASDAQ:CLNE)
Environmentalism and money making don't often go hand in hand. Pure "green" sectors like solar energy have not been performing well. However, when combining profits with sustainability, Cramer prefers to think in terms of "greener" rather than green. While natural gas might still be a fossil fuel and may not be flawless in terms of the environment, it is still 50% cleaner than coal and 30% cleaner than gasoline. It is cheaper, at $1.50 less a gallon than gasoline and the U.S. has enough natural gas to create leverage against OPEC. Clean Energy (CLNE), which builds natural gas fueling stations, is creating jobs and creating a greener energy solution. The company reported a strong quarter, but the stock is down 15% for the year.
CEO Andrew Littlefair discussed contracts the company has signed with shippers who want to save on energy costs. While he says the company doesn't need the Natural Gas Act to pass in order to make profits, if signed into law, the legislation would make the transition to natural gas quicker and easier. The legislation would give tax incentives to truckers switching to natural gas. Littlefair spoke to the House Ways and Means Committee. "The House is on board...I don't think the President will veto it."
CLNE plans to have a total of 150 natural gas filling stations by 2012, and has acquired a construction company to reach this goal. While some complain that Honda's natural gas cars have tanks in the trunk, Littlefair said that most cars will have the tanks underneath the vehicle. Concerning the transition to natural gas, Littlefair said, "We have to do it...it is going to happen. It is happening."
"This was a breakout quarter," Cramer said. "It's risky, but I like it."
Jim Cramer was up 31% in 2009. Click here now to trade alongside him.
Get Cramer's Picks by email - it's free and takes only a few seconds to sign up.