I have tracked the August 4 buy calls of Jim Cramer. Given the current volatility of global markets, the outperformers were defensive stocks like REITs, master limited partnership stocks and utility stocks. Investors flock to stocks that pay stable dividends in a low interest rate environment.
Apple Inc. (NASDAQ:AAPL)
This is an August 4 Jim Cramer call. Since then, the stock has gained 3.50%. On a month on month basis, the stock is slightly up by 0.6%. Despite the departure of ex-CEO Steve Jobs, investors are convinced that the investment appeal of the company is based on the brand AAPL carries. Over the last few weeks, health issues surrounding Steve Jobs have weighed on the stock. Investors are now focused on the direction of the in the company post-Jobs era. For the year, the company has posted revenue growth of 75% and earnings per share of 90%. This is higher than historical growth of the company and also better than its peers.
The recent launch of Amazon.com, Inc. (NASDAQ:AMZN)’s Kindle Fire to compete in the tablet industry will not kill AAPL’s Ipad. In fact, analysts believe that the Kindle Fire will dominate the low-priced tablet niche. This will definitely not make AAPL lower the price of Ipad. At the current price of $390.57, the AAPL shares are valued at 12 times next year’s earnings. This is higher than Dell Inc. (DELL)’s 7.55 times and Hewlett-Packard Company (NYSE:HPQ) 4.97 times earnings. Although Apple is valued higher than its peers, it is still underpriced relative to its future growth. Analysts are forecasting an average of 20-30% over the next 5 years.
Alcoa, Inc. (NYSE:AA)
Alcoa Inc . is a pure play aluminum stock. Around 80% of its revenue comes from aluminum. The company has operations across the globe. It has investments in China, Brazil, Russia, and Saudi Arabia. These are countries that have increased demand in AA’s products. Jim Cramer made a buy call in August 4. For the month, the stock declined by 9.04%. Since the recommendation, the stock has declined further by 22%. Cyclical stocks like AA are the ones punished in a period of a broader stock market decline.
The recent global slowdown will affect the demand of the company’s products. However, the fundamentals of aluminum are still intact. Once the economy stabilizes, industrial activities are set to double from current levels. The stock currently trades at 7.51 times next year’s earnings, 0.72 times book value. It also has a dividend yield of 1.10%. At present, it is currently trading at low historical earnings multiple levels. In contrast, Century Aluminum Company (NASDAQ:CENX) trades at 6.18 times earnings and 0.79 times book value. Also Alumina Limited (AWC) is valued 13 times earnings and 1.07 times book value. Analysts are bearish on the stock in light of the recent developments.
Consolidated Edison Inc. (NYSE:ED)
Consolidated Edison Inc is a holding company with interests in regulated electric, gas and steam delivery businesses. It sells electricity to both wholesale and retail customers. It serves around 3.3 million customers in New York City, and Westchester County. The stock was a Jim Cramer buy call in August 4. The stock gained 9.03% for the month and 12.0% based on current prices. In uncertain times like these, investors usually flock to defensive stocks like this.
The stock is currently valued at 15 times next year’s earnings. It also carries a dividend yield of 4.20%. Historically, the company is trading near its highest earnings multiple. This is also higher than other similar utilities companies. CMS Energy Corp. (NYSE:CMS) trades at 12.72 times next year’s earnings and also carries a 4.30% dividend yield. Another energy stock, Nisource Inc. (NYSE:NI), is valued at 14.94 times and has a dividend yield of 4.30%. For those investors seeking stability of cash flows, this is the right company for you. It has grown its earnings by 7.59% over the last 5 years. Analysts have a neutral rating on the stock as future expectations have already been discounted. For the year, the stock has already increased by 15%. Investors have to wait before they can scoop up shares of this company.
Federal Realty Investment Trust (NYSE:FRT)
Federal Realty Investment Trust is REIT with interests in retail and mixed used properties located in Northeast and Mid-Atlantic regions of the United States and California. It has 85 retail estate projects, which are 18.3 million square feet in size. These projects are 94% leased and 93% occupied. Jim Cramer recommended this stock on August 4. Since then, the stock has gained 1.80% based on current prices. On a month on month basis, the stock has also gained 1.80%.
The stock is currently valued at 19.50 times next year’s earnings and has a dividend yield of 3.30%. In contrast, other REIT stocks are valued lower. Kite Realty Group (NYSE:KRG) trades at 7.79 times earnings and carries a dividend yield of 6.50% and Vornado Realty Trust (NYSE:VNO) is valued at 13.35 times earnings and sports a dividend yield of 3.50%. The premium valuation is based on better financial performance. FRT has better net profit margins of 23.39% and return on equity of 10.74%. This is higher than industry’s net profit margins of 17% and return on equity of 8%. The company has good quality tenants, which provides a good cushion in these uncertain times. This stock should be in conservative investor’s portfolio.
Kinder Morgan Energy Partners LP (NYSE:KMP)
Kinder Morgan Energy Partners is a master limited partnership that owns interests in businesses that operates in product pipelines, natural gas pipelines and terminals. Recently, it has made acquisitions that include natural gas assets of Gas-Chill, Inc., KinderHawk Field Services LLC and Linden, Baltimore, and Euless facilities. This will give investors assurance that the dividend payment will be higher in the future. Since Jim Cramer recommended this stock on August 4, the stock has gained 1.98% based on the last closing price. For the month, it has gained 2.07%.
The stock currently trades at 28 times forward earnings and carries a dividend yield of 6%. This is higher than other master limited partnership stocks. Enterprise Products Partners LP (NYSE:EPD) has a price earnings ratio of 18 times earnings and carries a dividend yield of 5.90%. In terms of financial performance, KMP has the best financial performance among its peers. It has a net profit margin of 16.23% compared with EPD’s 2.69%. It also has a return on equity of 17.66%, higher than EPD’s return on equity of 13.39%. The upside is that it has big exposure on natural gas, which is expected to be the biggest driver in the energy industry in the future.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.