Analysis of Cramer's Lightning Round Picks: July 14

by: Efsinvestment

I have been investigating Cramer’s picks on his TV show Lightning Round for a while. I truly enjoy analyzing his stock picks, because they are usually bulls-eyes for portfolios. He remunerates his fame, so it is worth investigating his picks further. This time, he mentioned so many companies that I had to use tables to let you provide the information. Here, is a fundamental analysis of Cramer’s Lightning Round mentions from July 14:

Ares Capital Corp. (ARCC): Cramer prefers Solar Capital (SLRC) over Ares when it comes to private equity. Both are tremendous companies capable of beating the market, and capable of returning serious profits. Here is a small comparison between the two companies:

Current as of July 15 close.

Ares Capital

Solar Capital




Forward P/E



Estimated EPS growth for the next 5 years



Dividend yield



Profit margin



Gross margin



Upside movement potential



Ares is trading 10.17% lower than 52-week high, whereas Solar is trading 3.54% lower. Ares returned 12.5% in a year, while Solar returned 22.2%. It is a tough decision to make, but I would choose Solar over Ares. Hovewer, as I said before, both are excellent companies with magnificent profits.

Lululemon (LULU): Cramer believes that this consumer goods company will go higher in the long term, but recommends Philips Van Heusen (PVH) as it comes with lower risk. LULU returned 203% in a year, while PVH returned 54%. As of July 15, according to MorningStar, Lululemon shows a trailing ratio of 63 and a forward P/E ratio of 22.3. On the other hand, PVH was trading at a P/E of 39.35, and a forward P/E of 12.88 today. Analysts estimate a 25.82% EPS growth in the next five years for LULU, which is quite conservative given the 141.41% EPS growth of last 5 years. PVH is expected to have an EPS growth of 14.49% in the next five years. LULU’s target price implies a 66% upside potential, whereas PVH’s target price implies 6.3%. LULU pays no dividend, while PVH pays 0.21%. LULU’s profit margin is 17.91%, while PVH’s profit margin is 2.58%. LULU is trading 4.96% lower than 52-week high, while PVH is trading 0.71% lower. LULU has zero debt for the last four years, while PVH’s debts are increasing immensely. Moreover, LULU’s ROA is 31.31%, and ROE is 37.70%. I do not like stocks with extremely high P/E ratios, and I would rather avoid them both until earnings confirm high growth expectations.

Lumber Liquidators (LL): According to Cramer, LL returned serious profits for a while, but he would prefer Lowe’s (LOW) instead. Lowe’s has been more steady in the last year. As of July 15, LL had a 19.65 P/E, and a 13.77 forward P/E, while Lowe’s had a 16.27 P/E, and a 12.23 forward P/E. Analysts estimate an 18.90% EPS growth for LL, and 14.30% for Lowe’s. LL has a 30% upside potential, while LOW has 21%. LL has a 3.99% profit margin with no dividend policy. Lowe’s, on the other hand, has a 4.08% profit margin with a 2.42% dividend yield. $1000 invested in LL one year ago is about $746 now, whereas the same amount invested in Lowe’s one year ago is about $1137 now. LL is trading 38.88% lower than the 52-week high, while Lowe’s is trading 16.57% lower. LL has no debts for the last four years, while Lowe’s debt-to assets ratio is around 20%. Moreover, Lowe’s is relatively less volatile. Lowe’s is a better pick to go long.

Motorola Mobility (MMI): Cramer says that he “didn't like this split-up”, and is bearish on MMI, along with most of the tech stocks. As of the July 15 close, MMI was trading at a terrible P/E of 136.4, and a forward P/E of 13.29. Analysts expect the company to have an EPS growth of 13.00% in the next five years, whereas earnings increased by 93.59% this year. Insider transactions for the last six months have increased by 113.62%. SMA50 is -11.24%, and SMA200 is -20.84%. MMI pays no dividend yield, and profit margin is razor thin (0.42%). $1000 invested in MMI six months ago is about $581 now. The earning expectations are high, but I would rather wait until earnings confirm the expectations.

Mosaic Company (MOS): Although Mosaic returned 53% in a year, Cramer recommends Potash Corp. of Saskatchewan (POT) and Agrium, Inc. (AGU) instead. Here is a small comparison between these three:

Current as of July 15 close.








Forward P/E




Estimated EPS growth for the next 5 years




Dividend yield




Profit margin




Gross margin




Upside movement potential




Agrium returned 48% in a year, while Potash returned 80%. Potash is suffering the worst in terms of debts in these three. I believe that MOS and AGU are profitable stocks to buy.

North American Palladium (PAL): "You don't want to be in PAL.", according to Cramer. The company is trading 40.30% lower than 52-week high, with a forward P/E ratio of 15.59, as of July 15. Analysts expect the company to have a 825.00% EPS growth next year. On the other hand, the profit margin is -13.95%(Finviz:-13.95, Morningstar:-21.7), and SMA200 is -14.79%. ROA, ROE, and ROI are awful. The company had a significant downfall in May 2011. I guess it will take some time for the company to heal itself. Staying neutral until then should do okay.

Public Service Enterprise (PEG): Cramer likes PEG, but he prefers Southern Company (SO) anyway. As of July 15, PEG was trading at a trailing ratio of 10.67, and a forward P/E of 12.70. Southern, however, has a P/E of 17.74, and a forward P/E of 14.85. Analysts estimate a 2.56% 5-year EPS growth for PEG, and 5.60% for SO. With a 13.14% profit margin, PEG pays a 4.28% yield. SO, on the other hand, pays a 4.71% dividend yield with a profit margin of 11.36%. PEG’s target price indicates an 11% upside potential, whereas SO’s indicates 1%. Nevertheless, Southern Company is a slow, but steady upside mover. It has been, and I think it will continue to be a good choice for long-term investors.

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