4 Sell, 3 Buy Ideas From Jim Cramer

 |  Includes: BAC, DMND, DOW, ESV, GILD, HAL, SLB
by: Efsinvestment

The global markets cheerfully responded to the coordinated Central Bank actions to reduce borrowing costs. All markets experienced a great rally at the beginning of the week. Investors can make great profits in this optimistic environment if they play the right card. However, in November 29’s Lightning Round segment, Jim Cramer preserved his bearish attitude. He made seven calls, three bullish and four bearish. 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 these stocks from Cramer's November 29 Lightning Round:

Stock Name


Cramer's Suggestion

O-Metrix Score

My Take
















Diamond Foods




Hold for Now

Bank of America




Hold for Now

Dow Chemical





Gilead Sciences





Click to enlarge

(Data obtained from Finviz/Morningstar, and is current as of December 2. You can download the O-Metrix calculator here.)

Halliburton vs. Schlumberger – Ensco

Cramer rather prefers Schlumberger or Ensco instead of Halliburton. Here is a brief comparison of these three stocks:

Current as of December 2.




P/E ratio




Forward P/E ratio




Estimated EPS growth for the next 5 years




Dividend yield




Profit margin




Gross margin




Upside movement potential




Click to enlarge

All of these three companies are suffering from the global recession, but if you want stocks that can carry you out of this crisis, these oil companies will do great. Halliburton and Ensco are going ex-dividend this quarter, but Schlumberger reported a 25% drop in its Q3 profit. However, I keep my faith ihn these companies. They will keep winning as long as they reserve their momentum in oil-field activities. The O-Metrix scores of Halliburton, Schlumberger, and Ensco are 10.29, 6.40 and 6.83, respectively. Cash flows are tidy. Count on these three, and they will reward you in the long term.

Diamond Foods

Cramer made the following remarks on Diamond Foods:

This is too hard to analyze. We don't have any information and we don't have answers. I can't recommend it.

The company is trading at a P/E ratio of 13.2, and a forward P/E ratio of 8.3. Estimated annualized EPS growth is 17.8% for the next five years. It has a symbolic dividend of 0.61%, while the profit margin (5.2%) is lower than the industry average of 6.7%. Based on these numbers, Diamond Foods has an O-Metrix score of 9.27.

Although the company has been paying the same dividend since October 2007, it had been doing great until September of this year. However, things have reversed after that. Moreover, debt-to assets ratio has risen from 10% to 45% since 2008. The company has lost 70% of its value within just two months. It is obvious that Diamond Foods is in a serious recession. Plus, the company is suffering from some legal problems. It seems that the Pringles deal will be a milestone in Diamond’s performance. Hold onto this stock until this pending acquisition comes to a solution.

Bank of America

The Mad Money host defines Bank of America as the “worst bank stock he has ever seen,” making a bearish call on it. The bank shows a trailing P/E ratio of -28.7, and a forward P/E ratio of 5.7. Five-year annual EPS growth forecast is 9.1%. Dividend yield is 0.71%, and profit margin is -3.4%, below the industry average of 4.3%.

Although the stock returned 9.3% in the last week, it has suffered from massive sell-offs throughout the year. Even the Warren Buffett factor didn’t work on the bank. If the Europe troubles continue, investors will miss even the $5 levels. Bank of America has reached the lower boundary of its 52-week range, so it will try to keep itself above $5. If you want to risk it, wait for some time to see in which direction the bank will go. If it breaks through $7, buy some more. If it gets under $5, think twice before buying.

Dow Chemical

Cramer likes Dow Chemical as it offers a dividend around 4%. The Michigan-based company has a P/E ratio of 11.4, and a forward P/E ratio of 9.6. Analysts expect the company to have a 6.7% annual EPS growth in the next five years. It sports a juicy dividend of 3.6%, and the profit margin is 4.8%, lower than the industry average of 7.5%.

Dow Chemical has fended off its downward trend at the beginning of October, rising by 26.8% since then. Assets are in a good shape, as well as cash flow. Debt-to equity ratio (0.9) is also impressive, which crushes the industry average of 4.7. The company has an average O-Metrix score of 5.75. Dow Chemical announced a joint venture in Saudi Arabia with Saudi Aramco Company, which will clearly boom Dow’s profits. It’s time to get on board.

Gilead Sciences

No. That's another company that's lost its way. I'm a seller, Cramer commented on Gilead.

The healthcare company has a P/E ratio of 11.4, and a forward P/E ratio of 9.2. Analysts estimate a 13.6% annualized EPS growth for the next five years, which is conservative given Gilead’s past performance. Profit margin (33.8%) nearly triples the industry average of 11.5%, while it offers no dividend. Based on these indicators, the stock has an O-Metrix score of 6.57.

A Beta value of 0.43 is truly respectable, and cash flow is doing awesome. The company received approval for its Eviplera tablet sales in Europe, and its volume is at extremely high levels. Moreover, Gilead is expected to acquire Pharmasset, Inc. (VRUS). Gilead is doing admirable in spite of the global crisis, and the field performance will keep pushing revenue higher. Moreover, PEG value (0.7) and debt-to equity ratio (0.6) are also convincing numbers. I believed Gilead will be a winner for the long-term investors.

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