Gassing Up: XTO Energy (XTO), Southwestern Energy (SWN), El Paso (EP), Ultra Petroleum (UPL), Apache (APA), Anadarko (APC), Chesapeake Energy (CHK)
One mystery on The Street is that big oil names like Exxon have made only paltry gains while oil has risen from $100 to $130 in a heartbeat. Oil companies either are not able to drill more oil or were hedged on the prediction oil would go lower and lost, explained Cramer. But natural gas names, such as XTO Energy, Southwestern Energy, El Paso Ultra Petroleum, Apache, Andarko and Chesapeake are winning as they ramp up production. Cramer noted an historical six to one ratio between oil and natural gas; with oil sitting at $136, natural gas should be at $23 rather than $13. Cramer notes Chesapeake CEO, Aubrey McClendon has bought back $34 million of the company’s shares since May 30th, and if he believes in natural gas, so should investors.
Cramer briefly discussed “twice-blessed” fertilizer stocks which have made substantial gains on global food shortages and ethanol demands. Although Mosaic is up 1120%, Agrium is up 419%, and Potash is up 773% since his October 2005 recommendation, Cramer predicts continued highs in the stocks.
CEO Interview: Paul Varga, Brown-Forman (BFB)
While its competitors, Fortune and Constellation Brands have dropped so far this year, Brown-Forman had a gain of 7% until bearish analysts brought down the stock. Varga conceded it hasn’t been an easy year for Brown-Forman, but the company has been focusing on its stellar brands, such as Jack Daniels which people “ask for by name.” Varga is confident about overseas expansion; “but we’re at such small levels of market share that the upside is still very, very large.” Because of global growth potential, Cramer would buy best-of-breed Brown-Forman.
Cramer told one viewer that concern over housing is a greater threat to consumer confidence than inflation fears. A viewer praised Baldor Electric’s motors and Cramer reiterated his buy recommendation. Cramer agreed with a viewer who said Legacy Reserves may be a better choice than Mad Money Pick Permian Basin. Costco’s decision to sell 10% ethanol at its pumps should not affect earnings, said Cramer.
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