3 Sell and 2 Buy Ideas by Cramer

Includes: CLH, CMLP, HCA, LNG, LO, PM
by: Efsinvestment

As the debt-deal problems are storming the United States, markets and stocks are being affected, too. For stocks such as HCA Holdings (NYSE:HCA) and Cheniere Energy (NYSEMKT:LNG), this is a matter of life and death. In August 2’s Lightning Round program, Cramer made calls to six stocks, including these two companies. His calls were mostly bearish this time. I have investigated these stocks from a fundamental perspective, using my O-Metrix Grading System where necessary. Here, is a fundamental analysis of these stocks from Cramer’s Lightning Round (Data obtained from Finviz/Morningstar and is current as of Aug 3):

HCA Holdings: HCA had a horrible downfall after Barack Obama said that a debt-agreement might lead to Medicare cuts. The Tennessee-based company, as of Aug 3, was trading at a P/E ratio of 10.3. Analysts estimate a 12.40% annual EPS growth for the next five years. HCA has a profit margin of 3.4% with no dividend policy. The company returned -21% in a year, and the debt-to assets ratio is at alarming rates. Earnings decreased by 36.57% this quarter. The stock is trading 30.36% lower than its 52-week high, while its target price indicates a 48.7% upside potential. SMA50 is -24.86%, and SMA200 is -25.10%. In just three days, between July 22-25, HCA fell from $34.61 to $27.97. Based on double digit EPS growth estimations, the stock looks like a great deal. However, a cut in Medicare might significantly reduce HCA’s profits. Like Cramer, I think that this is not the time to own this stock.

Inergy LP (NRGY): Cramer says that “Propane is not working.” Inergy has a P/E ratio of 26.2, and a forward P/E ratio of 28.6, as of the Aug 3 close. Estimated annualized EPS growth for the next five years is 4.00%. Profit margin is 5.9%, above the industry average of 5.4%. Earnings decreased by 32.24% this quarter, and 139.48% this year. SMA50 and SMA200 are -14.08% and -20.57%, respectively. It has a very low O-Metrix Score of 2.36, but offers a nifty yield of 8.96%. Inergy returned -31.2% in a year. Debt-to assets ratio is increasing for the last five quarters, while the stock is trading -27.94% lower than its 52-week high. Insiders have been both selling stocks and exercising options for a while. The stock is relatively less volatile, and I think this downward trend will continue for a while. I admire the dividend yield, but I would not keep this stock just for its dividend. The dividends may not be sustainable.

Lorillard, Inc. (NYSE:LO): Although Lorillard has a healthy dividend yield, Cramer rather prefers growth in yield. So, he recommends Philip Morris Int’l (NYSE:PM) instead. Here is a brief comparison between these two stocks:

Current as of Aug 3 close.


Philip Morris

P/E ratio



Forward P/E ratio



Estimated EPS growth for the next 5 years



Dividend yield



Profit margin



Gross margin



Upside movement potential



O-Metrix scores of Lorillard and Philip Morris are 5.37 and 4.97, respectively. Lorillard is trading 8.55% lower than its 52-week high, while Philip Morris is trading 4.33% lower than its 52 week high. Lorillard returned 41.1% in a year, and Philip Morris returned 33.9%. Debt-to assets ratio of Lorillard is increasing like crazy for the last three years. Analysts give a 2.50 rating for Lorillard, and 2.20 for Philip Morris (1=Buy, 5=Sell). Lorillard seems to be a better choice, but the company has some serious debt problems. My FED+ Fair Value estimates are $96 for Lorillard, and $60 for Phillip Morris.

Cheniere Energy: Cramer says that if Obama wins the next election, or if you think that he will win, then you should not own Cheniere. Cheniere wants to export natural gas, which the current administration is reluctant to allow. The company shows a trailing P/E ratio of -7.1, as of Aug 3. Analysts expect the company to have a -4.60% EPS growth next year, while earnings increased by 56.34% this year. Insider transactions for the last six months have decreased by 43.18%. Although its gross margin is admirable (79.34%), profit margin is not that impressive (-27.8%). Target price is $15.50, which indicates a 63.5% upside movement potential. Cheniere returned 226% in a year, and debts crush assets. Debt-to assets ratio is strolling around 120%. Insiders have been selling stocks for a long time. I would never consider buying this stock as long as these indicators stay the same.

Clean Harbors (NYSE:CLH): “Buy it tomorrow ... wait another quarter and buy it again." Cramer comments.

As of the Aug 3 close, the Massachusetts-based company was trading at a P/E ratio of 19.49, and a forward P/E ratio of 24.3. Analysts expect the company to have an 11.93% annual EPS growth in the next five years, which sounds conservative given the 27.25% EPS growth of past 5 years. Clean Harbors has a 7.9% profit margin with no dividend policy. Earnings increased by 124.44% this quarter, and 241.36% this year. Target price is $228.83, which implies a whopping 303.2% upside movement potential. SMA20 is 4.28%, and SMA50 is 10.54%. The stock is trading only 0.53% lower than its 52-week high, whereas it returned 82.2% in the last twelve months. Debts are increasing sharply, while assets are hardly increasing. The stock seems fairly overpriced, and I would not trust such a company that has gone this high.

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