Cramer's Black List: 3 Stocks To Avoid

Includes: GS, S, UEC
by: Efsinvestment

Jim Cramer is one of the most joyful stock pickers on the street. As the global recession worries have settled down a bit, he is giving some tips to increase your profits. He recommended owning at least one high-yielding stock, saying:

You absolutely must own a high-yielder. Dividends protect your stocks, and they’re also a terrific way to make money.

Cramer also gave names of three stocks that you should avoid, like Uranium Energy (UEC) and Sprint Nextel (S). I have investigated these stocks from a fundamental perspective, adding my O-Metrix Grading System where necessary. Here is a fundamental analysis of these stocks from Cramer’s Mad Money:

Stock Name


Cramer's Suggestion

O-Metrix Score

My Take

Sprint Nextel





Uranium Energy





Goldman Sachs


Sell after uplift



Cramer thinks that no one “wants to own this (Sprint Nextel) stock,” as it has to raise a lot of money. As of the Aug 29 close, the company was trading at a P/E ratio of -3.3, and a forward P/E ratio of -5.0. Estimated annualized EPS growth for the next five years is 5.5%, whereas it had an EPS growth of -57.81% in the last five years. With a horrible profit margin of -9.5%, Sprint offers no dividend yield.

Earnings decreased by 11.22% this quarter, and 37.39% this quarter. Target price is $5.54, indicating an about 60.1% upside potential. Institutions own 88.78% of the stock, while it is trading 46.36% lower than its 52-week high. Insider transactions have increased by 74.15% in the last six months. ROE is -20.97%, while ROA is -6.11%. ROI is -9.11%. Operating margin is -0.04%, crushed by the industry average of 15.9%. The company returned -11.3% in the last twelve months, and debt-to assets ratio is increasing for the last five years. Sprint stopped paying dividends in Nov, 2007. Just get rid of this stock.

Cramer believes that nuclear stocks are not “worth buying,” therefore he made a bearish call on Uranium Energy. The Texas-based company, as of Aug 29, shows a trailing P/E ratio of -7.6. The company had an EPS growth of -43.33% this year, and 0.56% this quarter. Institutions hold 45.57% of the stock, and it has no dividend policy. Target price is $5.65, which implies a 68.6% upside movement potential. P/B is 4.0, far higher than the industry average of 2.1. ROA, ROE, and ROI are -49.45%, -53.21% and -53.21%, respectively. The stock returned 32.4% in a year, and it is currently trading 55.21% lower than its 52-week high. SMA200 is -23.88%. Uranium Energy is in a downwards trend since Mar, 2011. I would stay away from this company until it makes some serious profits.

Cramer recommends holding Goldman Sachs for the time being, especially after Buffet’s investment in Bank of America (BAC). Goldman Sachs has a P/E ratio of 8.3, and a forward P/E ratio of 7.0, as of the Aug 29 close. Analysts estimate a 13.0% annual EPS growth for the next five years, which sounds utopic when its -16.27% EPS growth of past five years is considered. Profit margin (16.1%) is higher than the industry average of 6.7%, while it offered a 1.21% dividend last year.

The company has a remarkable O-Metrix score of 9.28, and it is trading 33.49% lower than its 52-week high. Target price is $170.29, which indicates a 46.7% increase potential. The stock is currently trading 33.49% lower than its 52-week high, whereas it returned -15.1% in the last 12 months. On the other hand, Goldman Sachs is yielding the same amount of dividend since April 2006. Earnings decreased by 40.46% this year, and 9.26% this quarter. SMA50 is -8.71%, whereas SMA200 is -22.59%. Debt-to assets ratio is slightly increasing for the last five quarters. P/S is 1.8, and debt-to equity ratio is 2.5, both of which are far higher than their industry averages. Hold if you own it, but I do not think buying would be wise for the time being.

Find more information on O-Metrix Grading System here.

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

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