Four Picks from Cramer's Nov. 26 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.
First aired in 2005, CNBC's “Mad Money” is one of the most popular finance shows on air. Jim Cramer, the host and best-selling author, presents investing opportunities in a unique style. He has one goal: to help stock traders make some “mad money.” During the Lightning Round, he accepts callers' challenges and comments on several stocks. He only needs a few seconds to make a call. However, it is worthwhile taking some time to examine his rates. Here, I review five stocks discussed on the Nov. 26 Lightning Round.
Cramer was bullish on American Tower Corporation (NYSE: AMT). He specifically said “If it pulls back, I'd buy. It is one of the best stories out there.” I totally agree. American Tower is one of the largest independent owners and operators of wireless and broadcast communication sites. It holds a wide product portfolio, which includes approximately 50,000 owned or managed sites. Through is Distributed Antenna Systems (DAS), American Tower also provides customized collocation solutions.
Throughout 2012, the stock performed strongly by returning more than 20%. American Tower makes for a compelling investment because of its superior margins, its diversified model, and its relatively low leverage. It has a debt-to-equity ratio much lower than the industry's average of 3.8. For the third quarter of 2013, the company reported solid financial results. It experienced robust performance across all of its core business segments. Total revenue increased by 17.7% on a year-to-date basis. Also, cash flow provided form operating activities followed an accelerating pace of more than 30% compared to last year. Overall, I believe it is worth watching primary because of its aggressive growth strategy that allows it to remain at the forefront of the industry. However, at current price levels, it seems a little bit pricey. It is trading 42 times trailing earnings and 10 times sales. Thus, now might not be the right time to place a bet on this stock.
Cramer made a bullish call on Sprint Nextel Corp. (NYSE: S). I have mixed feelings about this stock. Founded in 1899, Sprint Nextel is one of the largest carriers in the U.S. It offers a comprehensive range of wireless and wireline communications services to more than 50 million customers in the U.S. Based on the American Customer Satisfaction Index, Sprint holds the top spot among major national carriers for customer satisfaction.
At the moment, Sprint is trading at bottom-low levels. It is down almost five-fold from its 2006 high of $25 per share. However, over the last six months the stock has been on an upward rally. It seems as if it is breaking out of a long-term downtrend. Also, its valuation metrics could indicate a possible value opportunity. Sprint is trading with a 50% discount to sales. Also, EPS for 2013 is estimated to grow by more than 40%, suggesting a rewarding outlook for shareholders. Overall, I believe Sprint to be a rather risky investment mainly due to its huge debt load. As of Sept. 30, 2012 the company had approximately $20,994 million in long-term debt, financing and capital leasing obligations. Nevertheless, recently Softbank, a Japanese telecom giant, agreed to acquire 70% of Sprint Nextel for $20 billion. I expect this deal to help Sprint bolster its financial flexibility and hold its competitive position within the industry.
When a caller mentioned Phillips 66 (NYSE: PSX), Cramer pushed a button and a bull appeared on the screen. He clearly likes this stock, and I like it, too. Phillips 66 was created through the repositioning of ConocoPhillips and began trading on NYSE on May 1, 2012. Since then, the stock returned more than 50%. Phillips 66 is an independent downstream energy company. It refines, markets and transports petroleum products and crude oil. It also holds interests in midstream and chemical assets that enhance its earnings stability and differentiate the company from its peers.
Fundamentally, Phillips 66 has many positives. EPS grew almost six fold this year. However, for 2013, EPS estimations are quite low, signaling a bearish momentum. Despite next year's estimations, EPS for the next five years is expected to increase at an annual rate of over 7%. Overall, the company reveals financial discipline and solid operating efficiencies. ROE figures stand well above the industry's average same variable suggesting a rewarding investment. Also, the stock is trading with a P/E ratio of less than six and a PEG ratio below the norm. Thus, at current price levels, Phillips 66 could offer a meaningful bargain.
Last on the list is NVIDIA Corporation (NASDAQ: NVDA). Cramer made a bearish call on this one, but I disagree. NVIDIA is in the middle of a transformation process seeking to reach alternative avenues of expansion. Founded in 1993, NVIDIA is a leading designer of graphic chips that are used in PCs, handsets, and game consoles. With the invention of GPU, one of the most complex processors, NVIDIA revolutionized the computer graphics industry back in 1999. The firm has 5,000 patents and employs 7,500 people worldwide.
The stock is trading near its 52-week low of $11.08. Since the beginning of the year, it has performed poorly, losing about 18%. Nevertheless, I think there might still be value for investors. Despite tough macroeconomic conditions, NVDIA reported record revenues for the third quarter of 2012. It achieved a 13% increase in revenues and a 17.3% increase in net income on a year-to-date basis. This robust performance was primarily attributed to the strong demand for its Tegra 3 processors, and its energy-efficient Kepler architecture. The firm holds an impressively clean balance sheet with almost $3.5 billion in cash, cash equivalents, and marketable securities. Overall, weakness in the PC market might impose some risk to the company's future profit prospects. Nonetheless, NVIDIA's growing shift towards the mobile computing arena could counterbalance the negative impact of decreased PC shipments. In addition, after acquiring Icera, the firm has been focusing on developing its 4G LTE application processor. This way it will gain deeper penetration into the smart phone market.
ecofinstat has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend American Tower and NVIDIA. 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!