Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday November 15.
Cramer gave investors a surefire way to lose money: to mindlessly buy stocks based on the federal filings of the greatest minds in investing. While John Paulson was right about the decline in housing a few years ago, he, along with other great investors, bought Bank of America (BAC), the worst stock in the worst cohort. Paulson is still buying BAC and even bought Agnico Eagle Mines (AEM) right before it fell apart. While Warren Buffett is an investing genius, it doesn't pay to piggyback on his purchases. He bought IBM (IBM), a stock Cramer likes, but there is no indication of when he actually bought. Investors need to wait to see the filings. While Buffett also bought Bank of America, he bought preferred stock; "He has a better piece of paper than you will ever get with those preferred shares." Buffett recently sold $2.5 million worth of shares of Johnson & Johnson (JNJ). Does that mean he no longer likes the stock or is it just a trim? Who knows. The Oracle of Omaha was critical of Kraft's (KFT) acquisition of Cadbury, but he approves of the recent split of the company, made possible by the acquisition of the candy company. Is Buffett being inconsistent? He is allowed to change his mind, but that makes piggybacking off of his picks without doing homework treacherous. The best way to benefit from Buffett's wisdom is to buy stock in his company, Berkshire Hathaway (BRK.A, BRK.B).
While stocks in the same sector often seem to trade in lockstep, the beer industry is showing wide divergence. Molson Coors (TAP) is a few points off its 52 week low, while Boston Beer (SAM) is a few points off its 52 week high. Anheuser Busch (BUD) moved up nicely, but not as hard and fast as SAM. Cramer suggested looking at the charts to find the reason for the difference in performance.
Molson Coors has "the single worst chart we have ever looked at on Mad Money." The daily action shows the stock trapped in a downward movement of lower highs and lower lows, selloffs at high volume and rallies on low volume. The stock is stuck under its 200 day moving average, and the Relative Strength Index [RSI] shows it is not oversold and is likely to go lower.
Boston Beer reported a great quarter two weeks ago, and has been gapping up, with a ceiling at $100. However, it looks due for a pullback, and might be a buy at a lower level. BUD's daily chart shows the stock in the "sweet spot" after hitting its 3 month high. While there is some resistance at $60, major resistance shouldn't happen until $64. The RSI indicates BUD is neither oversold nor overbought. Cramer recommends buying at a pullback to $56, or even at its current level.
SAM has been benefiting from the trend toward specialty craft beers, but with a multiple of 24, it is too rich. TAP is losing the battle with SAM, but BUD has been holding up nicely with its higher end brands like Stella Artois and Hoegarden. BUD also has a fabulous Brazilian business, and while it trades at 14, a multiple higher than TAP's multiple of 11, BUD is a better stock.
One of the most crucial elements of investing is determining which stocks are actually cheap and which are expensive. AT&T (T) trades at $29 while CenturyLink's (CTL) stock is at $37. With the multiple for AT&T at 12 and CTL's multiple at 14, the two stocks seem relatively similar. However, on closer examination, CTL is actually 7 times more expensive than AT&T. Some investors are satisfied to look at the multiple to determine the value of stocks, but Cramer thinks the PEG ratio, found by dividing the price to earnings multiple by the growth rate is a clearer indication of value. CTL's growth rate is 1.1% giving it a peg ratio of 12.4, which is stratospheric, given that Cramer considers any stock whose PEG ratio is above 2 to be expensive. With a 6.9% growth rate, AT&T's PEG ratio is only 1.7. While CTL's dividend of 7.8% is higher than AT&T's yield of 5.9%, CTL is in a no growth area of landlines, and may not be able to sustain its dividend if it fails to make money. Slowness in AT&T's landline business is offset by its aggressive expansion into wireless. If the acquisition with T-Mobile (OTC:DTEGF) goes through, AT&T will be an unstoppable wireless powerhouse, and if the deal isn't made, AT&T still has powerful growth and plenty of cash.
Cramer took some calls:
Cisco (CSCO) has gone from being a loser to a winner and is "one of the better situations out there."
ShoreTel (SHOR) might be acquired by IBM, but Cramer thinks the stock is far too speculative; "I'd rather not own it."
CEO Alan McKim, Clean Harbors (CLH)
Continuing his series on "greener stocks," Cramer spoke with Alan McKim, CEO of Clean Harbors (CLH), which is the largest hazardous waste disposal company in North America. The stock has seen a 70% gain since Cramer got behind it in 2010, and CLH limits damage and pollution from refineries, chemical plants and oil and gas fields. The company reported one of the most impressive beats of earnings season, exceeding estimates by 19 cents with a 14% increase in revenues. The revenues were up 41% yoy and all of its businesses are seeing double digit growth.
With the increase in natural gas and oil drilling, CLH is seeing an upswing in demand. The company has 70% of the incinerator business in North America; it runs 9 of its own and manages incinerators for other companies, which are increasingly closing down their own incinerators and outsourcing their waste disposal to CLH. When asked about the alleged contamination caused by natural gas drilling, McKim says he has seen no incidents that justify the concern, and the fracing water is easily recycled, treated or disposed of. Dealing with frac water "has been a natural part of gas exploration for dozens of years."
Cramer commented, "This story remains a great multi-year business. It's been a huge winner and is in its early innings."
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