Jim Cramer is the host of the wildly popular Mad Money show on CNBC. He is famous for making big bold calls, liking momentum stocks and preferring dividend yielding stocks. On his November 14 show, Cramer discussed several stocks. Here are three that he recommended to sell. Before blindly following Cramer’s recommendations, you should hear what we have to say about them.
Barnes & Noble (NYSE:BKS), the bookstore and media company has a $891.92M market cap and a forward P/E ratio of 59.23. BKS has a beta of 1.01 and pays a $1 dividend. Cramer said that despite rumors of a possible takeover, he doesn’t like the company’s fundamentals and is not a fan of the stock. BKS’s earnings have grown by 30.39% over the last five years. They are expected to shrink -85.40% over the next five years per annum, compared to industry growth estimates of 14.46%. On August 30, BKS announced its fiscal first quarter results, ending July 30, 2011. Total sales were $1.4 billion, 2% higher than the same period last year. Its online sales increased 37% while store sales decreased 3%. Its closest competitor right now is Amazon Inc (NASDAQ:AMZN). AMZN has the higher forward P/E ratio at 106.80, but AMZON has much higher quarterly growth (43.90% to BKS’s 1.60%) and higher revenue ($43.59B vs BKS’s $7.02B). Peter J. Eichler Jr.’s Aletheia Research And Management had a large position in BKS at the start of the second quarter but decreased its stake by 78% by the end of June, bringing its total position to $25.7 million. We agree with Cramer on this one. BKS is not likely to gain much more. It is trading at $15.40 a share and has a one year target estimate of just $16.00. We are much more enthusiastic about AMZN. It has introduced so many features to secure its Kindle customers, like free two-day shipping, access to a free lending library and streaming video content, that even if its latest Kindle (Kindle Fire) flops, it has created enough of an ecosystem that its earnings will likely stay strong. We can’t say anything close about BKS. In many ways, the ecosystems seen on AMZN’s products and tablets like Apple’s iPad are making a tablet that is only for books and limited media/Internet access obsolete.
SuperValu (NYSE:SVU) is a retail food store chain, operating such names Acme, Albertsons, Cub Foods, Farm Fresh, Hornbachers, Jewel-Osco, Lucky, Shaws, Shop n Save, Shoppers Food & Pharmacy, and Star Market banners, as well as in-store pharmacies under the Osco and Sav-on banners. SVU has a $1.74B market cap and is trading at 61.80 times its earnings. The company’s earnings have shrank 15.96% per annum for the last five years. They are expected to grow 8.77% over the next five years, compared to industry growth estimates of 15.26%. SVU reported third quarter revenue of $8.4B, down from $11.1B the previous quarter. Compared to competitor Whole Foods Market (NASDAQ:WFM), SVU is much more expensive. WFM may have the higher forward P/E ratio at 26 times its forward earnings compared to SVU’s 12 times earnings, but it also has a higher long-term growth rate (18% to SVU’s 1.8%) and the lower PEG (1.44 to SVU’s 3.48). Cramer said:
Remember, we don't care about the dollar amount of a stock price. In this business it's perfectly reasonable that an $8 stock is much more expensive than a $68 stock, especially when the latters' growing and the former's just stuck in the mud.
Of the 300+ hedge funds we track, 35 had positions in the company at the start of the second quarter. Of those, 5 reduced their positions in the company and 5 sold out completely, including Israel Englander’s Millennium Management, Richard Perry’s Perry Capital and Charles Davidson’s Wexford Capital. We think Cramer called this one right as well. SVU is trading at $8.19 a share, down from a 52-week high of $11.77, and carries a one-year estimate of $9.04. It isn’t quite as bad as BKS, but, for the money, why bother with a dud stock? SVU recovering is highly unlikely.
Overseas Shipholding Group (NYSE:OSG) is a tanker company specializing in the transportation of crude oil and petroleum products. OSG has a $432.66M market cap and has been losing money. OSG’s share price has fallen 57.19% since the first of the year. Its sales growth is expected to be down 21.10% for this year, and its earnings growth is expected to fall 2.5% per annum over the next five years, compared to industry growth estimates of 7.34%. It is currently trading at $14.12, down from a 52-week high of $38.32, with a one year estimate of $13.19. OSG reported third quarter earnings of $256M, down from $271M the previous quarter. Of the 300+ hedge funds we track, 19 had positions in the company at the start of the second quarter. Of those, 4 reduced their positions, while 4 sold out completely, including D. E. Shaw and Clint Carlson. We think Cramer is absolutely correct on this stock. It does not appear to be recovering, and its forecasts are poor. Looking at the numbers, we can’t find any reason to be bullish on this stock, even as a takeover target. Cramer says he prefers Nordic American Tankers (NYSE:NAT). We don't think this is a good time to invest in any shipping companies.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.