Hot Chile - Cramer's In-Depth (5/15/08)

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Includes: AUY, BSAC, CAA, ENIA, IDMCQ
by: Miriam Metzinger

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Thursday May 15.

Banco Santander (NYSE:SAN)

Even though Chile’s economy is cooling off, it is still hotter than that of the U.S., commented Cramer who is bullish on SAN, the Chilean bank which smart money uses as a proxy for exposure to Chile. Cramer called SAN a stealth play in China, and as China grows, so will Chile. SAN has the highest credit rating of any South American company and is the most successful bank in Chile. SAN saw an asset growth of 24% in 2007, the stock is up 20% and offers a 4.5 % dividend. Regulation works in SAN’s favor, because the high barriers to entry reduce competition and allow Chile’s five largest banks to control 80% of the market. Cramer says the stock is cheap at 11 times next year’s earnings and a 13% growth rate.

Enersis (ENI)

While ENI is a safer play than SAN, this utility stock is hardly boring, but is a solid growth play. ENI is also a green stock with two-thirds of its power from hydro-electric sources, and the company plans to spend $5 billion on environmental projects. As Chile expands economically, there will be more demand for ENI’s energy and the company is diversified with a power generation and distribution businesses. Cramer says the stock, which trades at just 19 times next year’s earnings, is undervalued and should be sitting in the mid-20s rather than at $17.

Sell Block: IndyMac Bancorp (IMB), Standard Pacific (SPF)

Cramer decried the practice of dollar speculation by pointing out that an investor can lose a lot of money even on a $2 stock. Once upon a time, mortgage companies IMB and SPF were trading at around $30, but now they are about a couple of bucks apiece. Both companies continue to offer bad loans, IMB admits it will not make a profit this year and 50% of its loans go to the troubled California housing sector. SPF would have had negative gross margins if it weren’t for its writedowns and the charts of both companies look terrible.

Mad Mail: Yamana (NYSE:AUY)

Cramer reiterated his bullishness on gold stock AUY and told a viewer that he removes his watch before every Lightning Round segment to avoid breaking it amid his wild gesticulations.

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