CNBC’s Jim Cramer covered the following 5 stocks on the Thursday, December 1 episode of Mad Money. The following is my analysis of his recommendations on a valuation basis. I conclude that Cramer was right on TJX Companies, Nordstrom, Electronic Arts and Windstream, but wrong on Research in Motion.
TJX Companies (NYSE:TJX) - Trading around $62.
TJX Companies, operator of TJ Maxx and Marshall’s stores, is perfectly positioned to benefit from budget-conscious consumers. TJ Maxx and Marshall’s offers quality, designer brand goods for a discounted price. In this market, it’s difficult to find a more perfect retail business model. A long-time favorite of Cramer’s, he reiterated his buy recommendation for TJX Companies. Action Alerts Plus, Cramer’s charitable trust initiated a position of 500 shares.
TJX Companies reported an in-line 3rd quarter, in which it increased year-over-year revenue by 5%. ISI upgraded both TJX Companies and its competitor Ross Stores (NASDAQ:ROST) to Buy, citing an optimistic outlook for the holiday season and strong same-store-sales data. TJX Companies trades at 18 times earnings and yields 1.2%. Its 4.8% quarterly revenue growth is among the highest of its competitors, including Kohl’s Corp.’s (NYSE:KSS) 3.7% QRG. TJX Companies is a good stock to own this holiday season. Cramer was right about TJX Companies.
Nordstrom (NYSE:JWN) - Trading around $47.
This is one of Cramer’s favorite retailers to shop at. He also thinks the company is incredibly well-run and should be bought on a pullback. The stock rose 3.5% after its same-store-sales beat estimates. Same-store-sales for November grew 5.6%. Nordstrom’s preliminary total sales increased 11.6% to $910M. Total retail sales a year ago was $815M. A well-performing retail stock that yields 2% and trades at 14.7 times earnings is too good to overlook. Nordstrom has 13% quarterly revenue growth, 37.28% gross margin and a 6.5% profit margin. With fundamentals that strong from a high-end retailer in this economic climate,the stock is a solid buy. Cramer was right about Nordstrom.
Electronic Arts (ERTS) - Trading around $23.
This game-maker initially fell from grace with many investors because of the industry’s shift to more social and mobile platforms. While Electronic Arts dominates the traditional video game industry, it was light in these areas. Recognizing its weakness, Electronic Arts acquired mobile-gaming behemoth, PopCap games. The company announced it will acquire KlickNation, a developer of social role-playing games. Electronic Arts also saw success with the recent release of a Facebook-compatible version of its popular Sims series.
Electronic Arts has been facing severe competition from Zynga, a company who has a foothold in the social-gaming space. Zynga is in the process of preparing for its IPO. Electronic Arts has 13.3% quarterly revenue growth, 59% gross margin. Cramer said he is sticking by Electronic Arts and he was right to do so.
Research in Motion (RIMM) - Trading around $18.
Research in Motion has experienced its fair share of trouble as the BlackBerry’s market share continues to plummet. The $18 share price reflects those troubles. Cramer switched his usual sell recommendation to a hold recommendation, saying the stock was simply too low to sell. Although Research in Motion was the “original smartphone revolutionary”, both Apple’s (NASDAQ:AAPL) iPhone and Google’s (NASDAQ:GOOG) Android platform has stolen all of BlackBerry’s luster. Cramer said all the negative news emanating from the company is already factored into the stock price.
Although a potential takeover is unlikely, the fact that the company is a potential takeover target makes it too risky to short the stock. Stock prices can always go lower, and if the company makes a game-changing decision, there will be plenty of time to buy shares. Sell the stock if the fundamentals are appalling. Cramer was wrong on Research in Motion.
Windstream (NASDAQ:WIN) - Trading around $11.
This telecommunications company recently acquired Paetec (NASDAQ:PAET) in an effort to build out its network. The broadband provider was purchased for $2.3B. The takeover should enhance its enterprise market and increase its free cash flow per share. However, integration costs could be greater than expected and could lead to large capital expenditures over the next three years. Cramer said Windstream is the highest-yielding growth stock around and that the company is very different from Frontier Communications (NYSE:FTR) and CenturyLink (NYSE:CTL). Cramer gave Windstream a buy recommendation. Windstream yields 8.5% and trades 22.6 times earnings. The company has a PEG ratio of 13.75, which is 3 times higher than any of its competitors. Cramer was right about Windstream.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.