A Deeper Look Into Cramer's Nov. 9 Lightning Round
Dr. Osman is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Jim Cramer's Mad Money show is exactly what the title implies: a Mad show. Jim Cramer, the host and former hedge fund manager, offers investment advice using a unique style. During the show, Cramer accepts viewers' challenges and makes a call on several stocks. This part of the show is called “The Lightning Round”. It takes him just a few seconds to make a call. On November 9th Lightning Round, Cramer commented on almost 10 stocks in less than two minutes. I believe it is worthwhile spending some time digging deeper into his rates. I decided to break the last Lightning Round session into two parts. Here, I review the first 5 stocks:
First on the list is Nordstrom, Inc. (NYSE: JWN). Nordstrom is involved in the department store business. Based in the U.S., the company operates a network of 240 stores spread around 31 states. Cramer expects Nordstrom to provide high returns. I am positive about it, too. For the third quarter of 2012, the company reported strong top line growth. Earnings and net sales showed an increase of 15 percent and 11.5 percent, respectively, compared to last year. Gross profit as a percentage of net sales dropped signaling a setback to the overall solid performance. Nevertheless, this decrease was attributed mainly to costs associated with initiatives in driving deeper customer relationships. The company counterbalanced the gross profit loss by lowering general and administrative expenses. At the moment, the stock is trading 0.94 times sales and about 7 percent below its 52-week range of $58.44. Based on analysts' average estimations, Nordstrom has at least 12 percent upside potential.
Cramer suggested a “buy” rating for Harley-Davidson (NYSE: HOG). I would suggest a “hold” rating. Harley-Davidson, one of the most popular motorcycle manufacturers, faces some difficulties due to the market's tight demand. The company is applying a restructuring process hoping to enhance its operational efficiency. I expect Harley-Davidson to benefit from this process in the long-term. For the third quarter of 2012, the company posted solid financial results marking a promising outlook for its transformation efforts. However, at the moment, its valuation and fundamental metrics are relatively flat. Its P/E ratio of 17.16 exceeds the industry's average same ratio. Moreover, debt-to-equity ratio of 2.17 is a bit concerning. Overall, I suggest it is worth watching for upside trends.
Cramer responded to a viewer's question about Facebook (NASDAQ: FB) by saying $18 is the right price for that one. Facebook's year-to-date stock chart is the definition of a falling knife. Throughout 2012, the stock performed poorly by losing about 50 percent. Its latest market close was 22 percent below the SMA200, and 7.40 percent below the SMA50. Facebook is trading with 58 percent distance from its 52-week high of $45. Even if, one could suggest a rebound for the stock I do not think it is a good buy. Its metrics do not indicate a value opportunity, at all. The only positive thing I could say about the company is its financial discipline. Facebook has a current ratio of over 11, and a very low long-term debt-to-equity ratio. This way the company can gain extra time until it improves its advertising metrics and boosts its profit prospects.
Next is Microsoft (NASDAQ: MSFT). Cramer says it is boring. Well, I like it. For 2011, Microsoft was the largest software company in the world based on revenues. Also, it is number five in the chart with the most valuable companies. Morningstar gives it four stars.
Over the past five years, sales were slow. Also, EPS this year followed a downward trail. However, the company's margin figures reveal sound control of expenses and satisfactory profit-generating ability. Throughout 2012, the stock's performance was decent. Microsoft year-to-date stock returns stand at around 10 percent. Also, its valuations are relatively attractive and might indicate a bargain. Analysts' average mean target price for Microsoft shows a 25 percent upside potential.
Microsoft diversified its already wide portfolio by making a bold move into the smart phone market. I am very interested in seeing how this goes. Also, there are rumors going on about the company making its own smart phone. Currently, the firm's Windows Phone 7 handsets hold a 2 percent market share. Microsoft is aiming to increase its smart phone market penetration with its recently launched Windows Phone 8 operating system. In addition, recently Microsoft revealed plans to integrate Yammer with its SharePoint collaboration platform. Yammer is an enterprise social network vendor that Microsoft bought for $1.2 billion in June, 2012. Microsoft keeps growing its portfolio making it exciting for investors to watch what its next step is going to be.
Cramer was bullish on Bristol-Myers Squibb Co. (NYSE: BMY). Well, I am not. At least, not for now. Bristol-Myers is a global biopharmaceutical company. Since 2002, it has delivered 13 new medicines for various indications, such as cancer, psychiatric disorders and infectious diseases.
On the positive side, Bristol offers a comparably high dividend yield. Its last cash distribution indicated a yield of 4.22 percent. On the negative side, several patent expirations caused its sales volumes to deteriorate. For the third quarter of 2012, sales plummeted about 30 percent compared to the same period in 2011. Also, Bristol missed analysts' predictions by reporting a loss of $711 million for the quarter. Year-to-date stock returns are negative. The company aims to counterbalance its patent losses though new partnership deals. I think the next two quarters will be decisive about Bristol's growth prospects.
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ecofinstat has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook and Microsoft and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Facebook and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.