Seeking Alpha
Profile| Send Message|
( followers)  

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday December 7.

U.S. Bancorp (NYSE:USB)

Cramer has repeated the mantra of avoiding bank stocks, but there is one bank stock he would recommend buying. Financials to avoid include large international banks or those exposed to mortgages and banking regulation. Most of the regional banks don't have sufficient earnings growth and are vulnerable to investigations and borrowers defaulting on loans. The only bank that has almost no exposure to these problems is U.S. Bancorp (USB), which has reported the best quarter of any bank thanks to its conservative management and its business model. USB gets 46% of its revenue from fees and 54% from net interest income; as a result, USB saw the strongest revenue growth in its history, with loan growth up 4.5% from last quarter. The company has a strong balance sheet and reiterated its targets which are the highest in the industry. It offers a 1.9% dividend, which it is expected to raise. While USB trades at a premium to its peers, it is still selling at a low multiple of 10 compared to its historical multiple of 12. "If you have to own a bank, the one to own is U.S Bancorp," Cramer said.

Wednesday's Double Recovery. Stock mentioned: Krispy Kreme (NYSE:KKD)

Stocks have been rallying consistently, dipping down on Wednesday twice only to rally back into strength. One reason for this optimism is the cessation of fears of a European bank collapse, which Fed Chairman Ben Bernanke has helped take off the table. Growth initiatives in Europe are moving the markets. Still, Cramer once again urged viewers to avoid complacency and to stick with solid stocks with strong dividends.

Cramer took a call:

Krispy Kreme Doughnuts (KKD) has numbers that aren't that bad, and Cramer would recommend selling half a position, rather than all of it, following its recent gain.

Chipotle Mexican Grill (NYSE:CMG), Buffalo Wild Wings (NASDAQ:BWLD), Panera Bread (NASDAQ:PNRA), Darden Restaurants (NYSE:DRI), Pizza Inn (NASDAQ:PZZI), Domino's Pizza (NYSE:DPZ)

You can learn more about a stock than by just looking at its growth rate. Cramer took three restaurant stocks with similar growth rates -- Chipotle Mexican Grill (CMG) at 20%, Buffalo Wild Wings (BWLD) at 21% and Panera Bread (PNRA) at 18% -- and compared which of them has the most sustainable, long-term story. While the growth rates are similar, the multiples vary; CMG's is 38, BWLD is 19 and PNRA is 26. While these numbers might at first glance make BWLD seem like the best value, Cramer prefers the other two stocks, which are in the hard to replicate healthy food niche, while BWLD's bar and grill model faces plenty of local competition. CMG's same store sales, an important metric in the industry, is 11.3%, PNRA's same store sales increased 6% and BWLD's is 4.6%. The latter is not bad, but is not what investors should expect from a young company with opportunities to grow lying ahead of it. CMG could triple its store count and not be saturated, and its units are growing at a 14% clip. PNRA's store count is growing 7.5%, and although BWLD is increasing its stores by 12%, the company's management can only support 1,400 locations, so its upside is much more limited than the other two restaurants. CMG owns 100% of its stores, 50% of Panera's stores are franchises and BWLD owns only 35% of its locations; the high number of franchises further limits upside potential. Since PNRA and CMG have niche items, they can afford to raise prices to deal with commodity inflation much more effectively than BWLD, which faces stiff competition. Cramer likes all three stocks, but prefers CMG and PNRA.

Cramer took some calls:
Darden (DRI) looks like a value trap, since it is not growing enough. The Olive Garden declined 5%, and Cramer wants to hear more about the future of this chain before he would buy the stock.
Pizza Inn (PZZI) is not worth buying when there is Domino's Pizza (DPZ), "one of my absolute favorite companies."

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

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.

Source: Cramer's Mad Money - The Only Bank Stock Worth Owning (12/7/11)