Cramer Picks: 3 Buys and 1 Sell

by: Efsinvestment

Jim Cramer is one of the most entertaining stock pickers of all time.. He is the host of the program “Mad Money” on CNBC, and the co-founder of I have been writing about his stock picks for a long time. While it is a good idea to take suggestions from him, investors should always do their own research before blindly imitating what Cramer says. In September’s latest Mad Mail program, there were four stocks on Cramer’s mailbox. Although I usually agree with Cramer, my indicators mostly told the opposite this time.

I have examined all of his stock mentions from a fundamental perspective, and added my opinion about them. I haveapplied my O-Metrix Grading System where possible, as well. Here is a fundamental analysis of these stocks from Cramer's September 30 Mad Mail:

Stock Name


Cramer's Suggestion

O-Metrix Score

My Take

Illumina, Inc.


Buy on Dip



Opko Health


Risky Buy



BRF- Brasil Foods


Buy After Pullback



Harry Winston Diamond Corp.





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

Cramer thinks that Illumina is likely to get cheaper, and its “too early to come in right now.” Illumina shows a trailing P/E ratio of 47.6, and a forward P/E ratio of 22.5, as of September 30. Analysts estimate a 26.8% annual EPS growth for the next five years, which sounds reasonable given the 31.12% EPS growth of past five years. It has no dividend policy, while the profit margin (11.7%) is slightly lower than the industry average of 13.6%.

Target price implies a 78.7% upside potential, and it returned -17.8% in a year. O-Metrix score is 3.82. Insiders own 1.20% of the stock. It is trading 48.46% lower than its 52-week high. Debts are increasing for the last three quarters, and cash flow is not doing good. P/E ratio, P/B (4.4), and P/S (5.7) are hopeless red flags. ROA, ROE, and ROI are 6.60%, 11.67% and 6.34%, respectively. Insiders have been exercising options and selling stocks for a while. I wouldn’t trust this stock.

Gilead Sciences (GILD) is a much better biotechnology play, as its indicators are great. As of September 30, Gilead was trading at a low P/E ratio of 11.8, and a forward P/E ratio of 8.7. Five-year annualized EPS growth forecast is 16.2%. Profit margin (34.2%) more than triples the industry average of 11.3%, while it pays no dividend. O-Metrix score of Gilead is 7.90, and it returned 9.7% in a year. With a low beta of 0.39, Gilead is relatively less volatile, and it will be a wise decision to choose it over Illumina.

Cramer blessed Opko Health’s management team, but he thinks that this stock is too risky. Opko has a P/E ratio of -61.3, as of the September 30 close. It pays no dividend, while the profit margin (-54.7%) is crushed by the industry average of 13.4%.

Target price is $6.00, indicating an about 38.5% increase potential. The stock is trading 13.92% lower than its 52-week high, but is almost 100% above its 52-week low. Thus, it is a pure speculative play. P/B is 11.2, and P/S is 28.4, both of which are way above their industry averages. Operating margin is -44.4%. While ROE is -27.34%, ROA is -19.29%. ROI is -24.23%. The debt-to assets ratio is unstable, and cash flow is alarming. Just avoid this stock.

Cramer likes Brasil Foods’ future prospects, although it has no dividend policy. However, he wants homegamers to wait for a pullback before buying. It shows a trailing P/E ratio of 19.5, and a forward P/E ratio of 13.7, as of September 30. Analysts estimate a 1.3% annual EPS growth for the next five years. Profit margin (5.4%) is better than the industry average of 3.7%, while it has no dividend policy.

Based on these indicators, Brasil Foods has an O-Metrix score of 0.39. Target price is $18.22, implying a 3.9% upside movement potential. The stock is trading 16.00% lower than its 52-week high, whereas it returned 11.2% in a year. Both the debt-to assets ratio and cash flow are not doing so good. P/E ratio, P/B (2.0), and P/S (1.1) ratios are strong red flags. While operating margin is 7.5%, gross margin is 22.3%. ROA and ROE are 7.44% and 10.56%, respectively. Brasil Foods has an awful PEG value of 10.8. I wouldn’t put any money on Brasil Foods under these circumstances.

Even though Cramer likes Harry Winston as a speculative play, he thinks that its too dangerous, and that it will keep going south. Harry Winston was trading at a P/E ratio of 43.9, and a forward P/E ratio of 10.6, as of Friday’s close. Five-year annual EPS growth forecast is -9.50%. Profit margin (2.8%) is totally crushed by the industry average of 34.1%, and it lacks a dividend yield.

Earnings decreased by 30.71% this quarter, while it returned -11.9% in the last twelve months. Debts keep increasing for the last five quarters, and assets are nearly stable. SMA20, SMA50, and SMA200 are -20.93%, -27.13% and -29.13%, respectively. Target price implies a 95.4% increase potential, whereas it is currently trading 44.38% lower than its 52-week high. While ROA is 1.22%, ROE is 2.69%. Operating margin is 8.3%. P/E ratio, operating margin, profit margin, and ROE are solid red flags. Harry Winston has a very high beta value of 2.23. Avoidance should do all right.

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