A Deeper Look Into Cramer's Nov. 12th 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.
Do-it-yourself investors get investment ideas just by watching CNBC's Mad Money. Jim Cramer, the host and former hedge fund manager, presents market insights and offers all manner of investing advice. I think the “Lightning Round” is the most enjoyable part of the show. During this segment, Cramer accepts viewers' challenges and comments on several stocks. It takes him just a few seconds to decide on a “buy” or a “sell” rating. I believe it is worthwhile taking some time digging deeper into his rates. Here, I review five stocks discussed on Nov. 12 Lightning Round:
First on the list is Toro Company (NYSE: TTC). Cramer was bullish on this one, but I would suggest a “hold” rating.
Established in 1914, Toro carries a long tradition. The company engages in outdoor landscaping services, including garden maintenance, as well as irrigation system installation services. Toro operates through a wide network of more than 30 U.S. distributors, and 135 international distributors spread around 140 countries.
Throughout 2012, the stock performed remarkably by returning more than 40%. At the moment, Toro is trading close to its 52-high range of $43.37. Fundamentally, the company has some positives. Its debt-to-equity ratio is much lower than the industry's same variable. Also, ROE figures indicate a strong profit-generating capacity. However, its valuation metrics suggest that now might not be the right time to place a bet on this stock.
When a viewer mentioned Stratasys (NASDAQ: SSYS) Cramer immediately rejected it. He is probably right.
Stratasys is a provider of three-dimensional printers and rapid prototyping systems. The company's products are used in the automotive, medical, defense, aerospace, architecture, and consumer-products markets.
For the third quarter of 2012, Stratasys reported revenue of $49.7 million, up by 24% compared to last year. Throughout 2012, the company achieved upward growth rates across all of its core businesses. Also, analysts are positive about Stratasys's future growth prospects. Nevertheless, Stratasys is trading with a P/E ratio of 74, which indicates a rather expensive stock. Since the beginning of 2012, the stock has followed an upward trail and has gained more than 100%. Perhaps there is no room left for further gains.
Cramer made a bearish call on Marvell Technology (NASDAQ: MRVL). I have mixed feelings about this stock.
Founded in 1995, Marvell is a leading chip maker with over one billion shipments a year. Over the past five years, Marvell's sales grew by a moderate rate of around 9%. However, its last earnings report was quite disappointing. EPS declined sharply to $0.20 marking an almost 38%negative change compared to last year. Also, for the same period, the firm's net income dropped by 73%. On the other hand, the balance sheet shows an over $2 billion differential between current assets and current liabilities. This means that Marvell has enough cash to pursue a high-growth strategy. Most importantly, Marvell is trading with considerably attractive valuations, which might indicate a unique value opportunity. According to analysts' average mean target price, Marvell has at least 34% upside potential.
Next on the list is Alcoa (NYSE: AA). Cramer suggested that it might have a rebound in 2013. Alcoa's year-to-date stock chart is not encouraging at all. Nonetheless, I think Alcoa could be considered a compelling bargain.
The firm is one of the top players within the aluminum industry. It produces about 10% of the world's aluminum. It employs approximately 61,000 people in 31 countries across the globe.
In general, aluminum, like all commodity industries, is certainly a challenging business. Alcoa's profitability prospects are directly linked to cyclical demand trends, as well as volatile price movements. However, for patient value investors Alcoa could be considered an intriguing investment. The stock is trading at bottom-low levels with a 36%discount to book value and just 0.37 times sales. In addition, for 2013, EPS projections suggest an increase of over 160%, indicating a positive outlook for shareholders.
The last stock mentioned in the Nov. 12 Lightning Round was MarkWest Energy (NYSE: MWE). Cramer was bearish on this one, calling it a tough group to own. I agree.
MarkWest is a midstream master limited partnership focused on the gathering, processing, and transportation of natural gas.
At the moment, it is considered to be a risky investment. Recently, MarkWest announced that it priced a public offering of 8.5 million common units at $46.50 per common unit. It also granted the underwriters with an option to purchase a maximum of 1.275 million additional common units. MarkWest intends to use the funds raised primary for its capital expenditure program.
Overall, I think it was not a good time for this deal. Over the last month, the stock lost more than 10%, causing investor sentiment to deteriorate. I expect this downward pace to continue for the next few months. However, over the last three years, MarkWest has rewarded its shareholders with high returns. Also, I believe that there are market indications signaling a possible rebound for the stock in the long-term. Thus, I suggest it is worth watching for upside trends.
ecofinstat has no positions in the stocks mentioned above. The Motley Fool owns shares of Stratasys. Motley Fool newsletter services recommend Stratasys. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!