30 Days Later: Tracking 5 Jim Cramer Stock Picks
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Stock market specialist Jim Cramer recommended that you buy these five stocks one month ago on his December 20 and 21 episodes of Mad Money. In this article, I analyze his picks on a relative value basis and analyze each stock's performance since Cramer's recommendation.
Bristol-Myers Squibb Company (NYSE: BMY): Since Jim Cramer recommended Bristol-Myers Squibb a month ago it has hit a new 52 week high of $35.44 and then retraced a bit on profit taking. The stock was $34.27 per share at the time. In terms of total sales Bristol-Myers Squibb Company is one of the world's leading pharmaceutical companies. Cancer treatments, both on the market and in the pipeline, have been the main component of the company's revenue and represent the best prospect for future growth. However, the company has a strong portfolio of other blockbuster drugs for treatment of cardiovascular disease, HIV/AIDS, hepatitis and rheumatoid arthritis. Not only does the stock show signs of strong capital appreciation, the company has consistently raised its dividend over the years. Even with the stock hitting 52 week highs the dividend yield is at a respectable 4.00%. The company's two closest competitors are Amgen (NASDAQ: AMGN) and Sanofi-Aventis SA (NYSE: SNY). Amgen currently has a PEG ratio of 1.42 with a price to earnings ratio of 11.40 in 2012 and 10.48 in 2013. Sanofi-Aventis SA has a PEG ratio of 7.94 with a price to earnings ratio of 8.87 in 2012 and 8.25 in 2013. Bristol-Myers Squibb Company is a little pricy with a PEG ratio of 9.80 but its price to earnings ratio of 16.90 in 2012 and 16.98 in 2013, along with a stable dividend, may justify this premium.
Paychex (NASDAQ: PAYX): Since Jim Cramer recommended this stock 30 days ago it has gone from $29.00 per share to over $31.00 per share. The stock is coming off a 52 week low it fell to in September to form a short term trend. Momentum may take the stock over its 52 week high of $33.91 which it reached in March of 2011. Paychex is the second largest third-party provider of payroll processing and human resource services in the United States. Most of its clients are small or medium-sized businesses with fewer than 100 employees, in contrast to the largest company in the sector Automatic Data Processing (ADP). Paychex is better equipped to handle small to medium-sized businesses and this gives it a potential growth advantage that its larger rival does not enjoy. Currently, only 15% to 20% of small to mid-size businesses outsource their payroll processing but this was a growing trend before the unemployment rise and logically it will resume as unemployment decreases-- especially as a cost saving measure. There are numerous other small local payroll service providers that compete with these companies. Automatic Data Processing (NYSE: ADP) currently has a PEG ratio of 1.96 and five year earnings growth forecast of 10.25%. Similarly, Paychex has a PEG ratio of 2.16 and five year earnings growth forecast of 9.50%.
U.S. Bancorp (NYSE: USB): Since Jim Cramer suggested that you buy shares of U.S. Bancorp one month ago the stock has continued its upward trend from the $20.10 per share bottom of September to reach its new 52 week high of $28.77 per share today. The stock was at $26.50 per share when Jim recommended it. U.S. Bancorp is the nation's 5th largest bank and one of the few banks that came out of the banking crisis in fairly good shape. The company's third quarter results showed a 42% increase in earnings per share from a year ago and marked the sixth consecutive earnings surprise for the bank. The consensus estimate was for $.61 per share or a 40% rise and the company reported $.64 per share. U.S. Bancorp also beat the consensus on their revenue figures coming in at $4.795 billion (up 5%) when the estimate was for $4.745 billion. Two of the bank's main competitors are Bank of America (NYSE: BAC) and Regions Financial Corporation (NYSE: RF). Bank of America currently has a PEG ratio of 14.12 with earnings growth over the next five years forecast to be 7.80%. Regions Financial Corporation has a PEG ratio of 3.60 with earnings growth over the next five years forecast to be 7.00%. U.S. Bancorp has a PEG ratio of only 1.40, making it relatively cheap, with earnings growth over the next five years forecast to be 8.63%.
Kinder Morgan Energy Partners, L.P. (NYSE: KMP): Since Jim Cramer reiterated his buy recommendation on Kinder Morgan Energy Partners a month ago the stock has gone up to the $85.00 watermark and new 52 week highs. If you bought the stock when Mr. Cramer first recommended it you would have made around $20.00 per share already. The news that got this upward trend going was the company's announcement that it intended to acquire El Paso (EP) for $21 billion. The purchase will create the largest natural gas pipeline network in the country. The most recent catalyst driving this stock is the company's intention to add to its holdings through the purchase of a 98% stake in Battleground Oil Specialty Terminal Company and a 50% stake in TransMontaigne Partners L.P. (NYSE: TLP). Although the BOSTCO purchase won't be value accretive till the third quarter of 2013 it significantly adds to Kinder Morgan's growth prospects. Two of the company's main competitors in the sector are Spectra Energy (NYSE: SE) and Questar (NYSE: STR). Spectra Energy currently has a PEG ratio of 3.13 with forecast earnings growth of 5.43% this year and Questar has a PEG ratio of 3.07 with forecast earnings growth of 4.72%. Kinder Morgan Energy Partners, L.P. has an expensive looking PEG ratio of 10.33 but with forecast earnings growth of 29.71% this year a premium is probably justified.
Merck (NYSE: MRK): When Jim Cramer endorsed Merck & Co. Inc. 30 days ago the stock was at $37.33 per share. Today it closed just short of its 52 week high of $39.00 per share. Merck & Co. is one of the three largest pharmaceutical companies in the world. The company also manufactures an established line of brand name consumer health products such as Coppertone sunscreen products and Dr. Scholl's line of foot care products to name a few. Of the 30 dow components Merck & Co. Inc. is the top company in terms of growth with revenue increasing at a rate of 16.4% over the last five years. The company also recently raised its dividend 10.5% to $0.42, bringing the dividend yield up to 4.4%. This is the first increase in the dividend since 2004 and reflects management's confidence in the company's prospects going forward. Two of the company's main competitors are Pfizer (NYSE: PFE) and Novartis AG (NYSE: NVS). Pfizer currently has a PEG ratio of 2.01 with forecast earnings growth of 0.98% and Novartis AG also has a PEG ratio of 2.01 with forecast earnings growth of 1.87%. Merck & Co. Inc. is slightly more expensive with a PEG ratio of 3.01% but has better growth prospects going forward with forecast earnings growth of 2.10%.
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