Jim Cramer, the most colorful stock picker in the market, is making calls on the viewer's stocks in his program Lightning Round program. When he is asked about the stocks he is not familiar with, Cramer wants some time to do some research before making a call. He gathers these stocks in his program Mad Mail, explaining his opinions about them. I investigated these picks from a fundamental perspective, using my O-Metrix Grading System and FED+ (Future Earnings Discounted Plus Equity) Model where necessary. Here is a fundamental analysis of these stocks from Cramer's Mad Mail (data obtained from Finviz/Morningstar and is current as of Aug 3):
|Stock Name||Ticker||Cramer's Suggestion||O-Metrix Score||My Take|
|Fifth Street Finance Corp.||FSC||Avoid||7.90||Cautious Buy|
|Solar Capital||SLRC||Buy||10.14||Cautious Buy|
|Energy Transfer Partners||ETP||Buy||4.46||Hold|
|Current as of Aug 3 close.||Fifth Street Finance||Solar Capital|
|Forward P/E ratio||8.63||9.37|
|Estimated EPS growth for the next 5 years||6.83%||6.00%|
|Upside movement potential||32.5%||15.7%|
O-Metrix scores of Fifth Street and Solar Capital are 7.90 and 10.14, respectively. Fifth Street is trading 24.88% lower than its 52-week high, while Solar Capital is trading 8.51% lower. Fifth Street returned -8.7% in a year, whereas Solar Capital returned 14.4%. Average analyst rating is 2.00 for Fifth Street, and 1.70 for Solar Capital (1=Buy, 5=Sell). There is no doubt that Fifth Street is no match for Solar Capital. Moreover, Fifth Street is highly volatile, and Solar Capital recently double topped. If you are willing to take the risk of capital management companies, both Fifth Street and Solar Capital can be profitable picks for the long-term.
Yahoo! Inc. (YHOO): Cramer is bullish on this stock, believing that it will beat the market in the long run. The Internet company, as of the Aug 3 close, has a P/E ratio of 15.3, and a forward P/E ratio of 14.7. Analysts expect the company to have an 12.88% annualized EPS growth in the next five years. The California-based Yahoo has a profit margin of 19.3% with no dividend policy. Earnings increased by 113.29% this year. Target price implies a 45.9% increase potential, while the stock is trading 34.45% lower than its 52-week high. It returned -12.5% in the last twelve months, and debt-to assets ratio is strolling around 1% for the last five quarters. Institutions own 78.72% of the stock. I believe the recent pullback is temporary and the stock will recover at some point. Do not participate in the panic sells.
Apple (AAPL): "This is Apple's game to win," says Cramer, since Samsung is not strong enough to deal with Apple. The company shows a trailing P/E ratio of 15.54 and a forward P/E ratio of 12.29, as of the Aug 3 close. Analysts estimate a 20.85% annualized EPS growth for the next five years, which sounds conservative when its 57.78% EPS growth of last 5 years is considered. Its profit margin (23.5%) nearly doubles the industry average (12.2%), while it has no dividend policy. Apple had a 122.15% EPS growth this quarter, and 66.91% this year. SMA50 and SMA200 are 9.38% and 13.70%, recently. While gross margin is 39.82%, operating margin is 30.43%. ROE, ROA, and ROI are 27.53%, 41.99%, and 41.99%, respectively. PEG value is 0.7. Target price implies a 27.5% upside movement potential, whereas the stock is trading 4.84% lower than its 52-week high. Apple returned about 46.6% in the last twelve months, and it has zero debts for the last five years. My fair value estimate for Apple is $430 per share (full analysis here). Although the momentum is a little bit slower for the time being, I believe it will not fade away until the end of Q3.
Energy Transfer Partners (ETP): Cramer recommends "buy, buy, buy," and he believes that ETP is one of the best MLPS. As of Aug 3, Energy Transfer was trading at a P/E ratio of 14.1, and a forward P/E ratio of 17.7. Estimated annual EPS growth for the next five years is 6.50%, which sounds utopic given the -8.22% EPS growth of past 5 years. Profit margin in 2010 was 4.0%, while shareholders enjoyed a 7.71% dividend. Insider transactions for the last six months have increased by 41.41%. The stock is trading 16.88% lower than its 52-week high, and target price indicates a 19.5% increase potential. Earnings decreased by 52.75% this year, and 3.84% this quarter. It returned -13.2% in a year. Debt-to assets ratio is hovering around 50%s, and O-Metrix score of the stock is 4.46. I do not expect ETP to show a remarkable performance in the long-term, but it has a nifty yield which is much better than bonds. It is a safe stock to hold on.
Disclosure: I am long AAPL.