Cramer's 'Buy' List to Ride Out the Storm

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Includes: ANH, CAT, CVX, ORLY, TRTN, XOM
by: Efsinvestment

In last week’s last "Lightning Round" program, Jim Cramer, the Mad Money host, made calls on five companies, all of which were bullish ones this time. He recommended one better alternative to one of them. He mentioned outstanding companies like Caterpillar (CAT), Chevron (CVX), and Exxon (XOM) in this program. I have investigated these stocks from a fundamental perspective, adding my O-Metrix Grading System where applicable. Here is a fundamental analysis of these stocks from Cramer's Lightning Round (data obtained from Finviz/Morningstar and is current as of Aug.5).

Stock Name

Ticker

Cramer's Suggestion

O-Metrix Score

My Take

Exxon Mobil

XOM

Buy, but alternative is better

4.45

Buy, but alternative is better

Chevron Corp.

CVX

Buy

5.15

Buy

Anworth Mortgage

ANH

Buy

13.2

Buy at Your Risk

O’Reilly Automotive

ORLY

Buy

5

Neutral

TAL International

TAL

Cautious Buy

12.8

Buy

Caterpillar Inc.

CAT

Top Pick

5.02

Buy

While Cramer thinks that Exxon will be an outperformer, he would rather go with Chevron Corp. Exxon is the largest company in the world, but Chevron might be a better alternative. Here is a brief comparison between these two companies:

Current as of Aug.5 close.

Exxon Mobil

Chevron

P/E ratio

10.6

8.5

Forward P/E ratio

8.5

7.4

Estimated EPS growth for the next 5 years

6.0%

5.0%

Dividend yield

2.51%

3.20%

Profit margin

8.6%

9.9%

Gross margin

31.6%

42.6%

Upside movement potential

25.82%

19.5%

Exxon returned 20.7% in the last 12 months, while Chevron returned 23.9%. O-Metrix scores of Exxon and Chevron are 4.45 and 5.15, respectively. Exxon is trading 14.72% lower than its 52-week high, while Chevron is trading 11.06% lower. Exxon has a five-star rating from Morningstar, whereas Chevron has a four-star rating. Both of the companies have no problems with their debt. However, the stocks have been facing a serious downfall since mid-July. While both are excellent picks for a profitable portfolio, Chevron is slightly better in terms of P/E- forward P/E ratios, dividend yield, profit margin, gross margin, and O-Metrix score. Moreover, Chevron just multiple topped.

Cramer believes that Anworth Mortgage is a “survivor” over the short term funding worries. The California-based REIT shows a trailing P/E ratio of 7.5 and a forward P/E ratio of 7.31, as of Aug. 5. Analysts estimate a 5.00% annualized EPS growth for the next five years. With a dividend yield of 14.56%, Anworth Mortgage is a terrific stock for dividend lovers. Its O-Metrix score is 13.2. Target price indicates a 12.5% increase potential, while the stock is trading 9.01% lower than its 52-week high. ANH returned -2.7% in the last 12 months, and it has almost zero debts for the last five years. Institutions own 55.95% of the stock. ROE is 12.4%, slightly better than the industry average of 11.9%. Anworth is an outstanding pick, yet slightly overpriced compared to other REITs. It can be added to portfolios after a pullback.

O’Reilly Automotive: “Auto part names are what you buy in this environment,” Cramer comments. O’Reilly increased its net income to $0.97 per share, which marks a 34.3% rise from the year-ago quarter. As of Friday’s close, the stock was trading at a P/E ratio of 19.6, and a forward P/E ratio of 14.2. Analysts expect the company to have a 17.3% annual EPS growth in the next five years, which sounds reasonable when its 15.31% EPS growth of the past five years is considered. Profit margin is 7.7%, while the Missouri-based company has no dividend policy. Earnings increased by 32.44% this year, and 35.66% this quarter. Target price is $66.56, which implies an about 14% upside movement potential. The company returned 23.7% in a year, and debt-to assets ratio is going down for the last two years. It is currently trading 12.28% lower than its 52-week high, while institutions own 92.55% of the stock. Average analyst recommendation for O-Reilly is 2.40 (1=Buy, 5=Sell). Insiders have been mostly selling stocks for a while. Although this is a healthy stock, I would pick more profitable ones instead.

TAL International: Cramer does not want any relations with an intermodal container business right now, and he recommends not going too big if you want to buy it anyway. TAL has a P/E ratio of 8.20, and a forward P/E ratio of 7.0 as of the Aug. 5 close. Estimated annualized EPS growth for the next five years is 11.8%. With a profit margin of 23.16% and a dividend yield of 7.73%, TAL International is a charming stock for dividend lovers. Earnings increased by 359.23% this quarter, whereas the stock is trading 28.95% lower than its 52-week high. PEG value is 0.6. Insider transactions for the last six months have decreased by 64.16%, and target price indicates a 48.6% upside potential. Operating margin is 56.72%, whereas gross margin is 86.16%. It has a remarkable O-Metrix score of 12.8. The company is in serious debt, while it returned 3.1% in a year. Institutions own 84.20% of the stock, and analysts give a 1.90 recommendation for it. Although TAL is a pretty undervalued stock with strong upside potential, it is highly volatile. If you accept the risk, then this is your stock.

Cramer is a “buyer” of Caterpillar, and he is “willing to buy more if it goes lower.” The Illinois-based Caterpillar shows a trailing P/E ratio of 15.04 and a forward P/E ratio of 9.5, as of Aug. 5. Analysts expect the company to have an annual EPS growth of 10.3% in the next five years. With a profit margin of 7.8%, shareholders enjoyed a 2.02% dividend last year. Caterpillar increased its earnings by 190.36% this year and 39.22% this quarter. ROE is 35.4% and the stock is trading 21.6% lower than its 52-week high. Target price implies a 47% upside potential, while its O-Metrix score is 5.02. The stock returned 27.1% in the last 12 months. Debts are decreasing for the last three years, while assets are unstable. Yields are okay. Caterpillar is one of the best industrial dividends for the next five years. The company has had strong momentum since March 2009. However, the stock was down by 10% last week. A current price offers a good entry point.

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