Jim Cramer Blog

Bullish calls:
Rite Aid (NYSE: RAD - News): 'One of the known communists on Wall Street downgraded RAD last week... I reiterate - at $5.80, RAD remains one of my favorite speculations. Take that bears!'China Mobile (NYSE: CHL - News): 'If you want to go to China, and you want to do phone, you've got to do CHL. I would actually recommend you swap out of CHU and go into CHL. Even as CHL is at its 52-week high, I think that's a better buy.'Genentech (NYSE: DNA - News): 'If we want to be in pharma, we're going to be in DNA, or we're going to be in AMGN, and CELG!... 'Amgen (NASDAQ: AMGN - News)Celgene (NASDAQ: CELG - News)Flir Systems (NASDAQ: FLIR - News)Nice Systems (NASDAQ: NICE - News): ' If you want to be in defense, remember, we like FLIR or NICE, because we like homeland security!'Google (NASDAQ: GOOG - News): 'I think that's one of the few techs that I want to own. My friend, Anthony Notto, at Goldman Sachs, recently raised estimates ... I think the stock will get to $600.'Melco PBL Entertainment (NASDAQ: MPEL - News): 'People are starting to doubt me on that call... We're fine. (buzzer rings)... MPEL is not as good as LVS, and not as good as WYNN, but it should be bought here.'SkyWest (NASDAQ: SKYW - News): 'You know that I'm a liker of the airlines, but let's be careful. After the close of the market, AMR announced an offering of 13 million shares. That's going to cause some pressure in the group. SKYW should trade down a dollar on that, and then you could pull the trigger and buy more, but don't overstay your welcome.'Under Armour (NYSE: UA - News): 'Some publication... had this really negative article ... If you don't know Kevin Plank, then you don't know one of the best CEOs in America. I think UA is in a major bull-market mode. I think the shorts planted that story ... I like UA and I want you to stay with it.'
Bearish calls:
China Unicom (NYSE: CHU - News): 'No. No. I'm not a fan of CHU ... I would actually recommend you swap out of CHU and go into CHL.'Flextronics International (NASDAQ: FLEX - News): 'Maybe you're shorting it, because you're not going to make any money being long that. You need to be out of the contract manufacturing ... this is a bearish group!'Nektar Therapeutics (NASDAQ: NKTR - News): ' ... What is that, the 470th restructuring they announced today? Most of their restructuring just involves firing people... Heaven forbid they actually try to improve the company... No, we don't want to be anywhere near NKTR.'Pfizer (NYSE: PFE - News): ' ... another bear.'Force Protection (NASDAQ: FRPT - News): ' ... not for me. 'Imergent (AMEX: IIG - News): ' Electronic services to small businesses... to me, it's the definition of tech (bear sound)... No! This is a stock that is too darn hard. Sell, sell, sell!'
Published by SeekingAlpha

Labels: AMGN, CELG, CHL, CHU, DNA, FLEX, FLIR, FRPT, GOOG, IIG, Jim Cramer, Mad Money, MPEL, NICE, NKTR, pfe, RAD, SKYW, UA

Return to the Limelight
Jay Weinstein, of Oak Forest Investment Management, in Bethesda, Md., my guru for undervalued, ultra-small companies, in 2005 picked Atrion (ATRI), a medical-products company, and it jumped 57%. For 2006, he chose Astronics (ATRO), only one letter away, and it rose 60%. Now, for 2007, he's back to Atrion. "Chief executive Emile Battat and his chief financial officer, Jeff Strickland, have done a phenomenal job building shareholder value," Weinstein tells me. He sees Atrion ending 2007 with no debt and $6 a share in earnings. So at current prices you are paying a multiple of 13 times earnings -- puny for a company growing at better than 15% annually. Weinstein reveals that his clients own a big chunk of the stock. But with a market capitalization (shares outstanding times the stock price) of just $145 million, the share price is apt to be volatile.
Last year, I said Tom Brown "is probably the best financial-stock analyst in the business." After the performance of First Marblehead (FMD), which returned 152% (best on my list for 2006) and which, by the way, Brown still likes, I am going to drop the "probably." For the year ahead, one of the holdings of Brown's hedge fund jumps out: CompuCredit (CCRT). The company focuses on the subprime lending market, issuing credit cards, auto loans, and small "payday" advances to people without the best creditworthiness. CompuCredit is a smart operator in a tough business. "Earnings growth and profitability have been strong -- and figure to stay that way," writes Brown, but "CompuCredit's stock trades at an extremely low valuation" -- just eight times the $4.60 in earnings per share that Brown expects in 2007.
I have rhapsodized over Hennessy Cornerstone Growth, a mutual fund that follows a stock-picking formula that screens for rising earnings, a low price-to-sales ratio and above-average stock-price increases. The fund has returned an annualized 17% over the past five years. Its low price-to-sales criterion means that an abundance of retailers and energy companies qualify for the portfolio, so I prefer to look for stocks in other sectors. One of the best is Emcor Group (EME), which designs, operates and maintains sophisticated electrical and mechanical systems for factories, utilities and office buildings. The stock is pricey, but growth is impressive, with profits expected to rise by one-third in 2007.
A Health-care Pick
As I write this column, Fidelity Equity-Income fund is on track to beat the S&P 500 for the seventh year in a row, at risk levels well below the benchmark. Managed by Stephen Petersen for the past 13 years, the fund owns large-company stocks that pay nice dividends. Petersen is adding to the fund's holdings of Johnson & Johnson (JNJ), maker of drugs, medical devices and consumer health products. Although the business could be under the gun of a Democratic Congress, shares trade at a modest valuation of 16 times expected 2007 earnings, with a dividend that's rising at a consistent, double-digit rate.
Value Line Investment Survey has a great record for picking stocks. As of December 1, only two of the roughly 2,000 stocks that Value Line covers received top ratings for both timeliness and safety: Lockheed Martin and Du Pont. It's a tough choice, but I slightly prefer Lockheed Martin (LMT), the aerospace company. Its stock has doubled since early 2004 but still trades at a price-earnings ratio of 16, based on estimated 2007 earnings. Plus, its volatility is well below the market as a whole.
Magazines and More
I'm a fan of money manager Joel Greenblatt, author of The Little Book That Beats the Market, which sensibly advocates a stock-picking strategy that combines both growth and value elements. Greenblatt operates a free stock screener at www.magicformulainvesting.com. When I tried it last year, the screener produced 25 attractive selections, of which I picked American Eagle Outfitters. It returned a juicy 121%. Facing another 25 choices, I am drawn to Meredith (MDP), publisher of Better Homes & Gardens and other magazines and owner of 14 television stations. At a time when traditional media are out of favor, Meredith has been increasing its profits at a rapid pace. Nevertheless, it carries a modest valuation.
Ric Prentiss, the top telecom analyst at Raymond James & Associates, a brokerage with an exceptional track record for stock picking, tells me his best idea right now is a small company with an unwieldy name -- Ntelos (NTLS). It sells wireless phone and Internet service to customers in Virginia and West Virginia. Also, Ntelos sells wholesale wireless service to Sprint and, says Prentiss, it should benefit as Sprint moves its newly acquired Nextel customers to the CDMA technology that Ntelos provides. A big attraction of the stock, says Prentiss, is that it's cheap compared with similar businesses. Why? The company, founded in 1897, is "still not very well known." That's what we like in a stock: market inefficiency.
Friess Associates, which manages $12 billion in assets through vehicles such as the wonderful Brandywine fund, has kind words for SkyWest (SKYW), a regional airline that, in the words of the Friess newsletter, Looking Forward, "receives payment [from Delta and United] for each completed departure rather than on a percentage-of-revenue basis, minimizing the effects of load factors and fuel price hikes." Considering its rate of profit growth, the stock trades at a low valuation of nine times expected 2007 profits.
After two big losers in a row, the Prudent Speculator newsletter has been placed in my penalty box, and I'm returning to an old favorite among newsletters, Dow Theory Forecasts, for a selection. We need an energy company for 2007, and highly rated on the Dow Theory buy list is ConocoPhillips (COP), which has been rearranging its portfolio in a way that appears perspicacious. For example, Conoco's purchase of Burlington Resources in March 2006 made it the largest natural-gas producer in North America -- a smart move in a tight market. Based on expected 2007 earnings, shares trade at a P/E of just 8 and yield 2.1%.
Unloved and Little Known
Now, here's a contrarian stock. Universal Forest Products (UFPI) makes wood and plastic building products, such as roof trusses, for the construction and do-it-yourself sectors. With the decline in the housing market, the stock skidded 40% between May and December. It is, however, a selection of one of my favorite analysts, Cleveland-based Elliott Schlang, of Great Lakes Review, who focuses on midwestern stocks in boring industries. He likes companies with heavy insider ownership, strong cash flow and solid balance sheets. Universal meets the criteria and, trading at a P/E of 12 based on estimated 2007 earnings, it looks awfully cheap. That's the list. Just remember warning number three.
By James K. GlassmanKiplinger's Personal Finance

Labels: ATRI, ATRO, CCRT, COP, EME, FMD, JNJ, LMT, MDP, NTLS, SKYW, UFPI