Cramer Stock Picks: 5 Buys And 1 Sell

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Includes: EA, GIS, JOY, MDLZ, SNY, UL
by: Efsinvestment

This past week has been one of the worst in the history of the stock markets. While the markets showed some green on Friday, investors made huge losses overall through out the third week of September. Commodity stocks took the most damage, losing 12%, followed by industrials (-10%) and financials (-7.7%). Even the defensive utilities and healthcare stocks lost 4% and 4.5%, respectively.

During this chaotic environment, Jim Cramer talked about six stocks recently, making five bullish and one bearish call. I have examined all of his stock mentions from a fundamental perspective, and added my opinions about them. I have applied my O-Metrix Grading System where possible as well. Here is a fundamental analysis of these stocks from Cramer's Mad Money:

Stock Name

Ticker

Cramer's Suggestion

O-Metrix Score

My Take

Joy Global

(JOYG)

Risky Buy

8.60

Buy

General Mills

(NYSE:GIS)

Buy

3.95

Long-term Buy

Electronic Arts

(ERTS)

Buy

N/A

Avoid

Kraft

(KFT)

Sell

3.50

Hold

Unilever

(NYSE:UL)

Buy

5.60

Long-term Buy

Sanofi-Aventis

(NYSE:SNY)

Buy

2.68

Hold

Data from Finviz/Morningstar and current as of September 23 market close. You can download O-Metrix calculator here.

While Cramer likes both Joy Global and General Mills, he expects a slowdown in Joy Global, and an upwards trend in General Mills. Here is a brief comparison between these two stocks:

As of Sept. 23 close

Joy Global

General Mills

P/E ratio

11.9

14.9

Forward P/E ratio

9.0

13.8

Estimated EPS growth for the next 5 years

16.9%

8.2%

Dividend yield

1.08%

3.14%

Profit margin

14.2%

11.4%

Gross margin

34.2%

38.7%

Upside movement potential

59.5%

5.6%

Joy Global is currently trading 36.89% lower than its 52-week high, while General Mills is trading only 2.34% lower. Joy Global returned -8.2% in a year, whereas General Mills returned 5.7%. O-Metrix scores of Joy Global and General Mills are 8.60 and 3.95, respectively. Morningstar gives a four-star rating to Joy Global, and a three-star rating to General Mills. Joy Global’s debt-to assets ratio is decreasing for the last three years, whereas that of General Mills is stable. Joy Global is a much better buy now. General Mills is a buy for the long-term.

"Electronic Arts is the fastest-growing stock that I follow right now,” Cramer commented recently. It was trading at a P/E ratio of -25.3, and a forward P/E ratio of 18.1, as of September 23. Analysts expect the company to have a 17.1% annual EPS growth in the next five years, which sounds irrational given the -5.85% EPS growth of past five years. It has no dividend policy, while the profit margin is -4.00%.

Institutions hold 0.02% of the shares, whereas insider transactions have decreased by 13.16% within the last six months. SMA20 and SMA50 are -3.97% and -1.78%, respectively. Target price is $25.36, which implies a 19.3% upside potential. The stock is trading 15.19% lower than its 52-week high, whereas it returned 28.2% in the last twelve months. Assets are unstable. While ROA is -5.77%, ROE is -10.43%. PEG value is 1.1. Analysts give a 1.5 recommendation for Electronic Arts (1=Buy, 5=Sell). Insiders have been selling stocks and exercising options for some time. Electronic Arts experienced a deadly downfall between August and December 2008, and it still doesn’t show any signals of a healthy recovery. Avoidance should do all right.

Cramer believes that selling Kraft and buying Unilever is a good idea, as Unilever is “more efficiently managed, cheap and good.” Here is a brief comparison between these two stocks:

As of Sept. 23 close

Kraft

Unilever

P/E ratio

19.3

14.9

Forward P/E ratio

13.3

12.25

Estimated EPS growth for the next 5 years

8.0%

10.85%

Dividend yield

3.44%

4.15%

Profit margin

5.9%

14.6%

Gross margin

35.8%

14.9%

Upside movement potential

16.0%

18.4%

Kraft Foods returned 6.0% in a year, whereas Unilever returned 6.5%. O-Metrix scores of Kraft and Unilever are 3.50 and 5.60, respectively. Kraft Foods is currently trading 7.11% lower than its 52-week high, while Unilever is trading 11.00% lower. Kraft Foods has a four-star rating from Morningstar, while Unilever has a three-star rating. Unilever is a better choice, but it is not a buy right now. I would rate Unilever as a long-term buy, and Kraft as a hold. (Read a more detailed investigation of Kraft Foods here.)

In an interview with the CEO Chris Viehbacher, Cramer stated that Sanofi-Aventis "is exactly the kind of stock you should buy the next time Europe drags it down, because it bounces right back."

The Paris-based pharma giant, as of the Friday close, shows a trailing P/E ratio of 15.9, and a forward P/E ratio of 7.4. Five-year annualized EPS growth forecast for the next five years is 2.1%, which is truly conservative when its 20.04% EPS growth of past five years is considered. With a profit margin of 13.4%, and a dividend of 4.15%, Sanofi-Aventis is a charming stock for dividend lovers.

Target price is $44.22, indicating an about 38.6% upside movement potential. The stock is trading 21.39% lower than its 52-week high, whereas it returned -4.6% in a year. Debt-to equity ratio is 0.3, far better than the industry average of 0.8. It has a remarkable gross margin of 70.5%.

On the other hand, operating margin is 12.9%. O-Metrix score is 2.68, and PEG value is 3.5. ROA, ROE, and ROI are 4.60%, 8.14% and 6.35%, respectively. Earnings decreased by 41.52% this quarter. While SMA50 is -10.65%, SMA200 is -8.90%. Hold if you own it, but buying would not be wise, in my opinion. I would buy it after earnings confirm the growth expectations.

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