4 Buy And 2 Sell Ideas From Jim Cramer

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Includes: BA, BRK.A, NFLX, NUE, PRGO, X
by: Efsinvestment

September was a disastrous month for equity investors. Basic materials lost 14.9%, followed by industrial goods (-10.8%), financials (-10.5%), and conglomerates (-9.6%). Amid this horrifying environment, Jim Cramer is trying to help investors shape their portfolios. On September 27’s Mad Money, he made calls on some companies that should be considered carefully. I have examined all of his stock mentions from a fundamental perspective, and added my opinion 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 September 27 Mad Money:

Stock Name

Ticker

Cramer's Suggestion

O-Metrix Score

My Take

Perrigo Co.

(NASDAQ:PRGO)

Buy

3.53

Hold

Berkshire Hathaway

(NYSE:BRK.A)

Buy

3.62

Buy

Netflix

(NASDAQ:NFLX)

Avoid

6.87

Buy

Nucor Corp.

(NYSE:NUE)

Buy

3.04

Hold

U.S. Steel Corp.

(NYSE:X)

Avoid

N/A

Avoid

The Boeing Co.

(NYSE:BA)

Buy

5.93

Buy

Data obtained from Finviz/Morningstar, and is current as of September 30 close. You can download the O-Metrix calculator here.

Cramer thinks that every time analysts are bearish on Perrigo, the stock “bounces back.” Therefore, he made a bullish call on it. Perrigo has a P/E ratio of 27.1, and a forward P/E ratio of 18.9, as of September 30. Analysts estimate a 16.0% annual EPS growth for the next five years. It pays a razor-thin dividend of 0.29%, while the profit margin is 12.3%.

O-Metrix score of Perrigo is 3.54, and it is trading 3.84% lower than its 52-week high. Insiders own 0.26% of the shares, and insider transactions have decreased by 81.40% within the last six months. Target price is $86.83, implying a 10.6% decrease potential. Perrigo returned 50.6% in a year, and it has a two-star rating from Morningstar. Insiders have been selling stocks and exercising options for a while. Perrigo might be worth holding, but not buying.

Buffet didn’t buy Berkshire to buy Berkshire stock; it was the fact that the stock is cheap, according to Cramer.

I think of Berkshire as one of the largest mutual funds in the world. The fund’s manager, Warren Buffett, has an unprecendent success record in the market. Berkshire shows a trailing P/E ratio of 14.6, and a forward P/E ratio of 14.2, as of September 30. Five-year annualized EPS growth for the next five years is 10.45%. It has no dividend policy, while the profit margin(8.5%) is slightly better than the industry average of 7.5%.

Earnings increased by 73.43% this quarter, and 52.67% this year. Institutional transactions have increased by 114.92% within the last three months. Target price is $130,250.00, which implies a 21.9% upside potential. The stock is trading 18.76% lower than its 52-week high, while it returned -13.9% in the last twelve months. O-Metrix score is 3.62. Debts are far from being a threat, and cash flow is doing OK. Moreover, it has a four-star rating from Morningstar. Berkshire can be a huge outperformer if the financial sector starts recovering.

Although Netflix seems to be bottoming, Cramer sees no catalyst to “justify buying the stock.” California-based Netflix, as of September 30, was trading at a P/E ratio of 28.7, and a forward P/E ratio of 17.2. Estimated annual EPS growth is 33.0%. Profit margin (8.0%) more than double the industry average of 3.9%, while it pays no dividend.

O-Metrix score of Netflix is 7.18, whereas it is trading 62.84% lower than its 52-week high. Institutions own 90.30% of the stock. Target price indicates a 87.4% upside movement potential, while it returned -26.8% in a year. ROE and ROI are 83.62% and 43.44%, respectively. The debt-to assets ratio is sharply decreasing for the last five quarters straight. Operating margin (13.8%), profit margin and ROE are solid green flags. Debt-to equity is 0.7, far better than the industry average of 1.2. PEG value is 0.6. Moreover, it has a four-star rating from Morningstar. My fair-value range for Netflix is between $171.70 and $178 per share, which means the stock has a great growth potential. While the bears are in total control for the moment, Netflix is poised for a rebound. Read a full analysis of Netflix here.

Cramer says that Nucor has a bigger dividend than U.S. Steel, and it is a far better-run company. Here is a brief comparison of these two companies:

Current as of September 30 close.

Nucor

U.S. Steel

P/E ratio

21.8

-22.2

Forward P/E ratio

9.3

5.8

Estimated EPS growth for the next 5 years

5.0%

5.0%

Dividend yield

4.58%

0.91%

Profit margin

2.6%

-0.9%

Gross margin

8.0%

6.5%

Upside movement potential

42.9%

100.5%

As you see, U.S. Steel is no match for Nucor. Nucor is currently trading 33.91% lower than its 52-week high, while U.S. Steel is trading 65.54% lower. Nucor returned -18.7% in the last twelve months, whereas U.S. Steel returned -49.6%. However, both of them had to cut their dividends in the previous years. Both of their debt-to assets ratios are climbing up for the last five years. I would rate Nucor as a hold, and U.S. Steel as avoid.

As the long-waited Dreamliner has been released at last, Cramer expects a powerful upwards momentum in Boeing. It shows a trailing P/E ratio of 13.2, and a forward P/E ratio of 11.9, as of September 30. Five-year annual EPS growth forecast is 12.2%. It offers a 2.78% dividend, while the profit margin is 5.4%.

O-Metrix score of the company is 5.96, whereas its target price indicates a 38.8% upside movement potential. The stock is trading 24.07% lower than its 52-week high, and it returned -9.5% in the last twelve months. Yields seem all right. The debt-to assets ratio is slowly decreasing for the last five quarters, while it has a four-star rating from Morningstar. ROE and ROI are 90.35% and 21.79%, respectively. PEG value is 1.0. 19 out of 26 analysts recommend buying Boeing, and my opinion is no different. Full analysis here.

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