Two Picks from Cramer's Nov. 27th 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.
CNBC's Mad Money show takes do-it-yourself investors into the mind of one of Wall Street's most respected money managers, Jim Cramer. Cramer presents market insights and offers useful investing ideas in an effort to help stock traders make some “mad money.” During the “Lightning Round,” he accepts callers' challenges and rates several stocks. While it takes him a few seconds to make a call, I think we should take some time digging deeper into his rates. Here, I review two picks form the Nov. 27 Lightning Round.
First on the list is Research in Motion (NASDAQ: BBRY). Cramer thinks that, at current price levels, the stock is overvalued. I do not think so. The firm's valuation metrics are significantly attractive. RIM is trading with a 60% discount to sales and a 40% discount to book value. Even though EPS this year followed a downward trend, for 2013 EPS is expected to increase by more than 50%. This suggests a rewarding outlook for shareholders. Out of 23 analysts tracked by Morningstar, fifteen suggest a hold rating while only two indicate a buy rating. Overall, I think RIM is worth watching for upside trends.
In general, analysts have been quite bearish on the company's future growth prospects, and not without reason. The innovator that revolutionized the mobile industry back in the early 2000s is now swimming in turbulent waters. In the smartphone business arena, it seems as if the company has lost the battle. At the moment, Google's Android and Apple's iOS operating systems are dominating the market with a combined share of around 90%.
Nevertheless, I still believe there is a chance RIM could achieve a turnaround. The company's latest financial results show a modest rebound. I do not suggest that RIM managed to become profitable overnight. However, it did manage to beat analysts' average benchmark on revenues and somehow slow down its bleeding. As the release date of its new and improved BB10 is getting closer, all eyes are focused on the firm. An important catalyst, which I expect it to help differentiate RIM from its peers, is the QNX technology component.
QNX is a leading software maker that Research in Motion acquired in 2010. QNX's operating system is deployed across various sectors including industrial, medical, automotive, telecommunications, aerospace and defense. The new BB10 handset embeds the best features form QNX's operating system and is expected to offer a reliable shift away from “monolithic” designs.
When a viewer mentioned Pfizer (NYSE: PFE), Cramer referred to it as a “fine stock.” Well, I think it is an intriguing investment. Throughout 2012, the stock performed strongly and returned more than 25%. Based on analysts' mean target price of $27.77, it has at least 14% upside potential.
Founded in 1849, Pfizer is a pioneer research-based biopharmaceutical company. It holds a diverse product portfolio, including consumer healthcare and nutritional solutions, as well as human and animal drugs. Recently, the firm announced its planned acquisition of NextWave Pharmaceuticals, a producer of an ADHD drug that was approved by the FDA. The drug is expected to hit the pharmacies in January, 2013.
Pfizer is one of the top dividend paying stocks within the Drug Manufacturers industry. It has been rewarding its shareholders with juicy dividends for over a decade. At the moment, Pfizer offers a yield of 3.63% with a payout ratio of almost 70%. Its current payout ratio stands below its historical levels, suggesting that there is room for dividend growth.
Another pharmaceutical company that I think it is worth adding to your watchlist is Bristol-Myers Squibb (NYSE: BMY). Bristol-Myers could also be considered for a dividend-oriented investment portfolio. Over the past three years, the firm's net income has shown mixed trends, while in 2009 Bristol's net income stood at more than $11 billion, it dropped by about 60% the next year. Nevertheless, the company had strong operations, which helped manage a slight improvement. Over the same period, cash flow provided form operating activities demonstrated an impressive growth. In addition, capital expenditures remained significantly low leading to fruitful free cash flows. Since the beginning of 2012, free cash flows increased by almost 61%. In other words, over the last three years, Bristol doubled its free cash flows from $3.3 billion to $7.2 billion. The current dividend yield of 4.20% is perfectly sustainable. In addition, Bristol holds a competitive product portfolio and solid pipeline that could substantially boost its revenues.
ecofinstat has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. 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!