Tracking Jim Cramer: A Look At 5 New Picks

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 |  Includes: CSCO, DIS, GM, SBUX, VZ
by: Investment Underground

By Larry Gellar

Today we’ll be taking a look at some recent picks from CNBC’s Jim Cramer. This group was a mixed bag for Cramer - while Cisco (NYSE:CSC)), Disney (NYSE:DIS), and Verizon (NYSE:VZ) went up, General Motors (NYSE:GM) and Starbucks (NASDAQ:SBUX) didn’t perform as well. General Motors is having battery problems in some of its cars, and Starbucks’ newest expansion plans seem a bit ambitious considering the current economy. Let’s see what specifically has been happening with these companies:

Cisco Systems – Recommended at $18.03; now trading at $18.55. A good summary of Cisco’s recent history can be found here, and now the company is trying to make headway with its data center business. Here’s what John Chambers said at the Q1 conference call: “As we focus on this market transition with the convergence of server, processing capabilities, networking and storage into the cloud, the UCS in the data center grew year-over-year at 122% in terms of orders and 116% in terms of revenues, and is now at a $1 billion annualized revenue run rate.” Cisco is starting a new project to invest in the Middle East. The company, along with the European Investment Bank and Riyada Enterprise Development, is creating a $50 million fund for Lebanese businesses. Meanwhile, some resellers of Cisco hardware are noting that demand is staying strong despite a weak economy. That news comes from Michael Genovese of MKM Partners. Important competitors for Cisco are Alcatel-Lucent (ALU), Hewlett-Packard (NYSE:HPQ), and Juniper Networks (NYSE:JNPR). Ratios like price to earnings, price/earnings to growth, and price to sales are all greater than average for Cisco. In fact, that fits well with Cisco’s superior margins – those numbers are 61.43% gross and 20.14% operating.

Walt Disney – Recommended at $34.76; now trading at $36.61. Investors have been keeping an eye on Disney’s latest Muppets movie, and that film brought in $11.2 million this past weekend. Summit Entertainment was the big winner though with its Twilight movie. Investors have also been talking about Disney’s dividend increase. Disney’s dividend yield is still somewhat low, but the important thing is that it signals management’s confidence. In fact, that dividend increase comes after a very strong earnings report. Both revenue and profit increased significantly, and the company stands to benefit from the end of the NBA lockout because of its ownership of the ESPN networks. More information about Disney can be found here. That article gives some great background about Disney, important for investors considering making a purchase. Disney’s biggest competitors include News Corp. (NASDAQ:NWSA) and Time Warner (NYSE:TWX). Disney has the highest price-to-sales ratio, although the price-to-earnings ratio is closer to average. Operating margin too is about at the middle of the pack. As for cash flows, Disney brought in $463 million during the past 12 months. High amounts of cash from operating activities were the primary cause of the inflows. Investors should note that this stock has a beta of 1.37.

General Motors – Recommended at $23.61; now trading at $21.28. Recent news for General Motors has included questions about the battery for its Chevrolet Volt electric car. Here’s what Mary Barra, global product development chief for General Motors, had to say: “We are looking to say, ‘Are there some design changes we can make, something even more robust in this location or that location or with this component.’ If we have to do something, we will.” For the time being, the problem seems to be that battery fires can start in the days following a crash. General Motors has also offered to buy Volts back from owners who are worried about the car’s safety. Meanwhile, General Motors’ November U.S. sales did quite well. Those were up 7 percent, with the Chevrolet Cruze in particular selling quite a bit. It’s also worth noting that U.S. sales were strong for most of the major manufacturers in November. Important competitors for General Motors include Ford (NYSE:F) and Toyota (NYSE:TM). In fact, both Ford and Toyota have higher price-to-earnings ratios, price/earnings-to-growth ratios, and price-to-sales ratios than General Motors. Margins for General Motors are about average though – those numbers are 12.18% gross and 3.92% operating.

Starbucks – Recommended at $44.19; now trading at $43.91. Recent news for Starbucks has included a large expansion in the United Kingdom, especially in the northern part of that country. Here’s what Kris Engskov, managing director for the U.K. and Ireland, had to say: “Customers told us that they now expect the best possible coffee wherever they are, and the success of our first drive-through stores shows that this is a huge opportunity.” Regardless, some investors are bearish on this stock, and a good report can be found here. Specifically, Starbuck’s plans for expansion in China, and later India and Vietnam, have some analysts concerned. As for action here in the U.S., Starbucks plans to raise the price of its coffee. While some believe that this is due to punishment the company received in Massachusetts, the company has denied this. Important competitors for Starbucks include Dunkin’ (NASDAQ:DNKN), McDonald’s (NYSE:MCD), and Nestle (OTCPK:NSRGY). Starbucks has the lowest price/earnings-to-growth ratio at 1.32, although price-to-earnings and price-to-sales ratios are higher. Starbucks margins are about average – those numbers are 57.70% gross and 13.27% operating. As for cash flows, $15 millon has flowed out during the past 12 months.

Verizon (VZ) – Recommended at $37.17; now trading at $37.85. One analyst at JP Morgan sees Verizon getting a boost in subscriptions this quarter, as iPhone users continue to switch from AT&T (NYSE:T). Verizon has also been seeing an increase in data usage on its network. In other news, Lowell McAdam will become Verizon’s chairman of the board in January. Sandra Moose, presiding board director, had this to say: “The board's decision to name Lowell as chairman is a reflection of his comprehensive understanding of Verizon's operations and the fast-moving and ever-evolving communications industry.” Verizon is also teaming up with cable operators in a big way. A $3.6 billion deal with Time Warner Cable (TWC), Comcast (NASDAQ:CMCSA), and Bright House Networks should help the company compete with AT&T. This is an especially interesting move because Verizon already has its FiOS cable business, although the deal still needs FCC approval. Besides AT&T, Sprint (NYSE:S) is another big competitor for Verizon. Sprint currently has negative net income, while Verizon’s price-to-earnings ratio is only slightly higher than AT&T’s. Verizon margins are quite strong – those numbers are 61.14% gross and 22.35% operating. Quarterly revenue growth of 5.40% is also solid.

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