Analyzing 5 New Cramer Buy Ideas
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Stock market specialist Jim Cramer recommended that you buy these five stocks one month ago on his January 9th episode of Mad Money. In this article, I analyze his picks on a relative value basis and analyze each stock's performance since Mr. Cramer's recommendation.
Applied Materials (NASDAQ: AMAT): When Jim Cramer recommended this stock a month ago it was at $11.34 per share and today it's at $12.23 per share. In the same time period the Nasdaq has risen from 2600 to 2816, a gain of 216 points. In addition to the recent capital appreciation the company also pays out a dividend of $.32 per share (annualized) with a current dividend yield of 2.6%. The company has also returned to its pre recession policy of raising the dividend by approximately $.01 per year. Applied Materials is the world's largest producer of tooling and machinery used in the fabrication of semiconductors. Most of the company's competition are much smaller companies that specialize in specific areas of production. Applied Materials is basically the only company that supplies a product for every step of the manufacturing procedure. In the company's most recent earnings report Applied Materials reported a significant increase in cash flow from operations in relation to the previous five years, ensuring the general stability of the company in the foreseeable future. Two of the company's closest competitors are KLA-Tencor Corporation (KLAC) and Lam Research Corporation (LRCX). KLA-Tencor Corporation has a PEG ratio of 1.45 and Lam Research Corporation has a PEG ratio of 2.15. Applied Materials on the other hand, has a PEG ratio of only 1.29; making it the cheaper of the trio in terms of earnings growth.
Broadcom (NASDAQ: BRCM): About a month ago Jim Cramer recommended this stock. At the time it was $30.88 per share and today it's at $35.06 per share. In the same time period the Nasdaq has risen from 2600 to 2816, a gain of 216 points. In addition to the latest capital appreciation the company also pays out a dividend of $.36 per share (annual) with a current dividend yield of 1%. The company only started paying a dividend in 2010 and has raised it $.01 in 2011. It remains to be seen if they will raise it again this year. Broadcom is one of the top ten fabless semiconductor companies in the world. The company designs, develops, and sells system-on-a-chip and software solutions or the placement of various functions on one chip. Broadcom is fabless in that it outsources the actual manufacture and packaging of its semiconductors to other companies, which keeps profit margins up when demand is down but takes away from margins slightly when demand is high. This balances out the company's earnings somewhat in the volatile semiconductor market. The company's two closet competitors are QUALCOMM Incorporated (QCOM) and Texas Instruments Incorporated (TXN). QUALCOMM Incorporated has a PEG ratio of 1.17 and Texas Instruments Incorporated has a PEG ratio of 1.94. Broadcom is moderately priced by comparison with a PEG ratio of 1.51.
CSX (NYSE: CSX): When Jim Cramer recommended this stock about one month ago it was at $23.03 per share and today it's at $22.76 per share. In the same time period the S&P has gone from 1250 to 1316, a gain of 66 points. The stock is somewhat volatile with a beta of 1.4 and is trading in the middle of its 52 week range of $17.69 to $27.06 per share. CSX does however payout a nice dividend of $.48 per share with a yield of 2.1% at the stock's current price. Although this dividend has been reduced substantially over the last couple of years. The volatility, in my opinion, is in large part due to uncertainty. Uncertainty in how the trend away from burning coal to produce electricity in the United States will impinge on the company, as coal makes up a significant portion of the company's total freight shipments. There is also mounting demand to keep other countries from burning the coal that comes out of United States mines and concerns about the health risk of having it pass through individual communities. Coal is considered one of the highest carbon producing fuels when burned to make electricity. CSX is one of the largest transportation companies in the United States with more than 21,000 miles of track, 4,100 locomotives, 216,000 freight cars, and 33,000 intermodal units.
KLA-Tencor (NASDAQ: KLAC): One month ago Jim Cramer recommended this stock. At the time it was $48.18 per share and today it's at $52.33 per share and hitting new 52 week highs. In the same time period the Nasdaq has risen from 2600 to 2816, a gain of 216 points. The stock is bouncing off a low it reached in September of $33.20 per share to form a short term upward trend. In addition to the recent capital appreciation the company also pays out a dividend of $1.40 per share (annually) with a current dividend yield of 2.8%. The company also has a history of raising its dividend appreciably every few years. With microchip design becoming ever smaller and more complex, KLA-Tencor stands to benefit from the growing requirements of quality control. The company produces testing equipment and software that is used during different points in the manufacturing process. Although the company reported a 40% drop in earnings last quarter the stock did not take much of a hit as the earnings were in line with estimates. KLA-Tencor's two top competitors in this market are Lam Research Corporation (LRCX) and Applied Materials (AMAT). Lam Research Corporation has a PEG ratio of 2.15 and a five year earnings growth forecast of 10%. Applied Materials currently has a PEG ratio of 1.29 with a five year earnings growth forecast of 12%. KLA-Tencor is moderately priced by comparison with a PEG ratio of 1.45 for its five year earnings growth forecast of 9.7%.
Texas Instruments (Nasdaq:TXN): When Jim Cramer recommended this stock a month ago it was at $30.16 per share and today it's at $32.61 per share. In the same time period the Nasdaq has risen from 2600 to 2816, a gain of 216 points. In addition to capital appreciation the company also pays out a dividend of $.68 per share on an annual basis that amounts to a dividend yield of 2.1% at the stock's recent price. The company also raises this dividend on a fairly consistent basis and the last two quarters have showed a more significant increase, reflecting more confidence in the company by its directors. The company is also closing some facilities to streamline its operations, completing the integration of its acquisition of National Semiconductor and paying off the debt the company took on in the process. Texas Instruments' chief executive officer Richard Templeton believes the company is at the bottom of the economic cycle and investors were pleased with the overall performance of the company. The company's two closest competitors are QUALCOMM Incorporated (QCOM) and Advanced Micro Devices, Inc. (AMD). QUALCOMM Incorporated currently has a PEG ratio of 1.17 and Advanced Micro Devices has a PEG ratio of 1.11. With its current PEG ratio of 1.94 Texas Instruments is a little pricy by comparison.
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