Seeking Alpha
Long only, contrarian, event-driven
Profile| Send Message|
( followers)  

Jim Cramer, host of CNBC's Mad Money, reviewed the performance of the Dow Jones Industrial average. His 2012 outlook for the 30 companies in the index were mostly bullish: Cramer has 16 "buys," 10 "neutral" and 4 "sells" for the companies.

A summary of his calls is listed as follows:

NAME

Cramer Rank

2012 Return

3M Company (NYSE:MMM)

Buy

up to 10%

Alcoa Inc. (NYSE:AA)

Sell

N/A

American Express Company (NYSE:AXP)

Buy

5.66%

AT&T Inc. (NYSE:T)

Neutral

5.50%

Bank of America Corporation (NYSE:BAC)

Sell

N/A

Boeing Company (NYSE:BA)

Buy

13.71%

Caterpillar, Inc. (NYSE:CAT)

Sell

N/A

Chevron Corporation (NYSE:CVX)

Sell

-6.40%

Cisco Systems, Inc. (NASDAQ:CSCO)

Buy

13.90%

Coca-Cola Company (NYSE:KO)

Buy

0.04%

E.I. du Pont de Nemours (NYSE:DD)

Neutral

-14.45%

Exxon Mobil Corporation (NYSE:XOM)

Neutral

0.28%

General Electric Company (NYSE:GE)

Buy

10.45%

Hewlett-Packard Company (NYSE:HPQ)

Neutral

14.13%

Home Depot, Inc. (NYSE:HD)

Buy

10.00%

Intel Corporation (NASDAQ:INTC)

Neutral

N/A

IBM (NYSE:IBM)

Buy

12.44%

Johnson & Johnson (NYSE:JNJ)

Buy

6.31%

JP Morgan Chase & Co. (NYSE:JPM)

Neutral

N/A

Kraft Foods Inc. (KFT)

Buy

N/A

McDonald's Corporation (NYSE:MCD)

Buy

10.00%

Merck & Company, Inc. (NYSE:MRK)

Buy

10.24%

Microsoft Corporation (NASDAQ:MSFT)

Neutral

-3.84%

Pfizer, Inc. (NYSE:PFE)

Buy

9.83%

Procter & Gamble Company (NYSE:PG)

Buy

4.70%

The Travelers Co., Inc. (NYSE:TRV)

Neutral

1.38%

United Technologies Corp. (NYSE:UTX)

Buy

8.64%

Verizon Communications Inc. (NYSE:VZ)

Neutral

-0.30%

Wal-Mart (NYSE:WMT)

Neutral

5.00%

Walt Disney Company (NYSE:DIS)

Buy

6.25%

Cramer is especially bearish on 3 DOW components: [1] Alcoa, [2] Bank of America (down 58.32%), and [3] Chevron.

[1] Alcoa (AA) - Sell

Alcoa is competent and competitive, but there is a glut in aluminum that will extend well into 2012. Alcoa returned -43.79% in 2011.

The LME (London Metal Exchange) contract price for aluminum rose steadily in 2009-2010, but declined in 2011. The price peaked in May, but as quantitative easing ended, it was apparent that prices would not hold:

Analysts on average lowered Q1 2012 earnings estimates for Alcoa by 25% to $0.03 (from $0.04). Alcoa closed at $8.65, below the $9 support level tested 3 times since October. The stock price will be correlated to metal prices, which in turn will be determined by growth forecasts for China and the global economy.

[2] Bank of America (BAC) - Sell

Bank of America was the worst performing stock on the Dow Jones, returning -58.32% in 2011. Cramer thinks Bank of America is a "sell." If Europe implodes, he thinks the stock can drop to $3. The $7 price (where Warren Buffett may exercise his warrants) is unlikely to be reached.

Quantitative analysis suggests the shares should be trading well above its $5.56 closing price. Shares trade in the $5-range because the liabilities from Countrywide Financial remain a big unknown for shareholders.

[3] Chevron (CVX) - Sell

Cramer said Chevron's peak stock price at $100 is due to oil prices not breaking past $100 in a convincing manner. Chevron rose 16.60% in 2011. The stock is more attractive if it's $90. At current prices, Chevron pays a yield of 3.1% on its $3.24 per share dividend. Similarly, Exxon Mobil Corporation (XOM) is not seen to be offering much upside. Exxon exposes investors to natural gas. On December 30, the Nymex Henry Hub Future closed at $2.99, down $0.04 or 1.26%.

There is a $10.6B lawsuit against Chevron and Transocean (RIG). Chevron accepted blame for the spill in Brazil, and while the amount sounds high, it outlines the political challenges for developing in the region.

The collapse in natural gas is also hurting related energy companies like Chesapeake Energy (CHK). Chesapeake closed recently at $22.29. Its shares are under pressure from higher debt arising from additional asset purchases made in 2011.

[4] Cisco Systems (CSCO) - Buy

On the technology front, Cramer is bullish with Cisco Systems for 2012. The two strong quarters suggests Cisco can trade to $21. Cisco lost 10.63% for investors in 2011.

Cisco failed to break the $19 level in November and in December. With VMWare (VMW) capitalizing on the virtualization trend, Cisco must ensure that its loyal customers will include Cisco in the growth of virtualization.

Bearishness declined for Cisco by December 15, as the short position declined around 5M shares to 67.3M.

[5] Hewlett Packard (HPQ) - Buy

Cramer was bearish on HP in 2011, but thinks CEO Meg Whitman can meet lowered expectations. He has a $30 price target on HP. HP was the 3rd-worst performer on the Dow, dropping 38.81% in 2011.

HP reversed its decision to exit the PC business. The company took a massive write-down for its Palm WebOS tablet play. In December, HP "reinvented" itself by making WebOS open-source. Given HP's tablet was a version "1.0" when it was released, any enhancements to the operating system will increase the value of the unit. HP is searching for a buyer for its mobile unit.

[6] General Electric Company (GE) - Buy

Cramer sees widely-held GE as having 14% upside for investors in 2012. It traded nearly flat (down 2.08%) in 2011. GE pays 3.8% in dividends and is transitioning itself from being a financial company to being a manufacturing company with financial experience. GE tested the $14.50 - $15.00 level on more than 5 occasions in 2011. It closed at $17.91 on December 30. GE returned 2.08% for investors in 2011.

Source: Jim Cramer Offers Up 3 Buys And 3 Sells For 2012