Jim Cramer Watch: Tracking 5 'Mad Money' Picks
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Stock market specialist Jim Cramer recommended that you buy these five stocks recently on his January 3rd 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.
Allot Communications (NASDAQ: ALLT): Jim Cramer recommended this stock about a month ago when it was at $15.82 per share after climbing over $17 per share the stock has recently settled back to the $16 level. Allot Communications designs and develops broadband service optimization solutions and is based in Hod-Hasharon, Israel. The company's plug and play products feature easy to use graphic interfaces that allow their customers to efficiently manage and optimize their networks. In recent news, Allot Communications' distributor in Denmark, RanTek A/S, apparently sold the company's products to Iran and an Israeli lawmaker called for an investigation. Israel bans all trade with Iran, one of the country's top adversaries in the region. Allot Communications denies any knowledge of the transaction and will conduct its own investigation into the matter. The incident caused the stock to come off an advance that was taking it to its 52 week high of $19.15 and a doubling of the stock price from its October level of around $9 per share. Although the matter will probably take some time to clear up it does present a buying opportunity in the stock. The company's two top competitors are Blue Coat Systems Inc (BCSI) and Cisco Systems, Inc. (CSCO). Blue Coat Systems currently has a PEG ratio of 2.85 and a five year earnings growth forecast of 14.8% and Cisco has a PEG ratio of 1.4 with a five year earnings growth forecast of 9%. Allot currently has a mid to low PEG ratio of 1.53 by comparison, with a significantly better five year earnings growth forecast of 28%.
Alnylam Pharmaceuticals (NASDAQ: ALNY): About a month ago, when Jim Cramer recommended this stock it was at $8.66 per share. Since then it has shot up to over $10 per share on an increase in volume. The volume increase represents substantial interest in the stock, possibly from institutional buyers as it comes out of its single digit range. If insider trading is any indicator of what this company has in the pipeline the company's Chief Executive Officer is putting his money where his mouth is. John Maraganore has picked up over 6 thousand shares over the past 4 months bringing his total holding to over 55 thousand shares. Alnylam Pharmaceuticals is a biopharmaceutical company that pioneered the discovery of RNAi (RNA interference). RNAi is a breakthrough in biology that inhibits the ability of cells to make proteins from DNA. The drugs that can be manufacture from this process involve treatment of Parkinson's disease (PD), respiratory syncytial virus (RSV), cystic fibrosis (CF), and spinal cord injury to name a few. As a comparison to two of the company's much larger competitors Merck & Company, Inc (MRK) and Pfizer, (PFE): Merck has a market capitalization of 119.4 billion and a 5 year estimated PEG ratio of 2.28, Pfizer has a market capitalization of 168.3 billion and a 5 year estimated PEG ratio of 3.14, Alnylam has a market capitalization of only 441.7 million (and has yet to turn a profit) with a 5 year estimated PEG ratio of -5.68. Alnylam Pharmaceuticals is still speculative in nature and should be positioned as such in your portfolio.
Cabot Oil & Gas (NYSE: COG): Mr. Cramer may have gotten this one wrong. When he recommended the stock about a month ago it was $76.80 per share and it has fallen down to the $61 level since then. Although oil is a volatile commodity in general it has recently fallen below the physiological magic number of $100 per barrel in futures trading and this has done a number on most oil stocks. Natural gas prices are also volatile in nature and are currently at ten year lows with storage levels at five year highs. This affects Cabot to a further extent because the company derives about 80% of its revenue from natural gas. The decline in the commodity prices are due to several factors coming into play at the same time. An increase in stock piles and lower demand have weighed heavily on the commodities while tensions over Iran have largely gone unnoticed. Putting tunnel vision on the back burner for now, the company's main competitors are Petroleum Development (PETD) and Anadarko Petroleum (APC). Petroleum Development currently has a PEG ratio of 11.32 and forecast earnings growth of 127% in 2012 and 59% in 2013. Anadarko Petroleum has a PEG ratio of .9 and forecast earnings growth of 4.5% in 2012 and 33% in 2013. Cabot Oil & Gas appears relatively fair priced by comparison with a PEG ratio of 1.65 and forecast earnings growth of 83.5% in 2012 and 71% in 2013.
SandRidge Energy (NYSE: SD): This is another recommendation Jim Cramer may regret in the short term. When he endorsed the stock it was at $8.35 per share and it has since fallen to $7.61 per share. SandRidge Energy is an exploration and production company in the oil and natural gas sectors with operations in Arkansas, Oklahoma, Texas, New Mexico, Louisiana, and Kentucky. Recent commodity prices have took their toll on SandRidge Energy's stock price along with most other companies in the sector but in my opinion, the sector is oversold mainly due to investors not looking at the big picture. On one hand a couple of data points do not reflect a long term trend in global economic growth and on the other, developments in the Iran situation are not priced in to the commodities yet. This will probably become more of a factor as November and the election in the United States draws near. Politics aside, the company's two main competitors are Apache Corporation (APA) and Anadarko Petroleum (APC). Apache currently has a PEG ratio of .9 and forecast earnings growth of 3.3% in 2012 and 14% in 2013. Anadarko has a PEG ratio of .9 and forecast earnings growth of 4.5% in 2012 and 33.3% in 2013. SandRidge Energy is extremely cheap by comparison with a PEG ratio of -10.63 and forecast earnings growth of 222% in 2012 and 548% in 2013.
J.B. Hunt Transport Services (NASDAQ: JBHT): Jim Cramer recommended J.B. Hunt Transport Services about a month ago when the stock was at $45.26 per share and since then it has had a steep rise to close today at $48.81 per share. The stock is approaching its 52 week high of 49.12 but the volume behind the momentum is not as high as it has been in the past. J.B. Hunt Transport Services is the third largest trucking company in the United States. The company also has close ties through its intermodal division with railroad companies like Burlington Northern Santa Fe (BNI) and Norfolk Southern (NSC). The company basically does well when the economy is good and poorly during a downturn. This is the main theses behind the dow theory. Transportation companies usually lead an economic upturn because businesses start shipping more. Following that logic as the economy starts heating up again transportation companies like J.B. Hunt Transport and the railroads will enjoy stronger profits. Two of the company's main competitors are Landstar System, Inc. (LSTR) and Swift Transportation Company Cl (SWFT). Landstar System currently has a PEG ratio of 1.36 and forecast earnings growth of 13% in 2012 and 14% in 2013. Swift Transportation has a PEG ratio of .42 with forecast earnings growth of 21% in 2012 and 17.6% in 2013. J.B. Hunt Transport has a PEG ratio of 1.28 with forecast earnings growth of 17.4% in 2012 and 15.3% in 2013. This indicates that J.B. Hunt is fairly priced in terms of growth on a comparative basis.
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