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Weekly Roundup

已有 1358 次阅读  2011-04-22 20:20


Due to the holiday-shortened week, we are running a brief version of the Weekly Roundup. We will be back with a full report, including market commentary, next week.

New folks, welcome aboard! You will see many of the same disciplines at work, in real time, that are in "Jim Cramer's Mad Money: Watch TV, Get Rich," "Jim Cramer's Real Money: Sane Investing in an Insane World," "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich" and my newest book "Jim Cramer's Getting Back to Even."

I also want to be sure you're not confused about the terminology I use on my "Mad Money" television show: When you hear me refer to my "charitable trust" on "Mad Money," I am talking about the trust that holds my Action Alerts PLUS portfolio. My winnings from Action Alerts PLUS go to charity after the close of each trading year.

Here's the quick guide to my rating system, too: Ones are stocks I would buy right now, Twos are stocks that I would buy on a pullback, Threes are stocks I would sell on strength and Fours are stocks I want to unload as soon as my trading restrictions allow.

ONES:

Accenture (ACN:NYSE, $56.81, 1,600 shares, 2.86%) INDUSTRY SECTOR -- TECHNOLOGY: The company announced that it is collaborating with Anheuser-Busch InBev (BUD:NYSE) on a digital merchandising pilot program aimed at enhancing the efficiency of merchandising activities at the point of sale. Strong enterprise demand helped Accenture beat expectations on earnings, revenue and bookings in its most recent quarter. Management reiterated expectations for double-digit earnings growth for both 2011 and 2012 and remained optimistic about the recent strong growth trends in cloud initiatives, analytics, ERP, mobility and geographic expansion (driven by its global distribution network). Trading at 15x forward estimates, shares are cheap relative to the 19x average.

Alcoa (AA:NYSE, $16.97, 5,300 shares, 2.83%): INDUSTRY SECTOR -- BASIC MATERIALS: The Aluminum Association said March aluminum orders for North America rose 3.6% from February. Excluding can sheet, orders jumped 9.2%. The company posted first-quarter earnings per share of $0.28, up 20% on a year-over-year basis and beating expectations by a penny. Revenue was up 22% at $5.96 billion. The fundamentals remains strong as end market demand was encouraging: auto rose 30% on a quarter-over-quarter basis, aerospace demand grew by 7%, packaging increased 14%, industrial gas turbines rose 13% and trucks/transportation increased 12%. This stock remains a Buy and my target is $22.

American Express (AXP:NYSE, $47.11, 2,700 shares, 4.00%) INDUSTRY SECTOR -- FINANCIALS: The topnotch credit card company announced solid first-quarter results, with earnings of $1.2 billion, or $0.97 a share, up 33% from $885 million, or $0.73 a share in the year-ago period. Revenue increased 7% to $7 billion, beating estimates on higher card-member spending and higher travel commissions and fees. Loss provisions plunged to $97 million from $943 million in the same period last year, signaling that credit quality continues to improve. Total revenue grew at the healthiest pace since before the recession, the firm's lending portfolio leveled off and card-member spending jumped 17%. On the downside, expenses increased 19% to $5.2 billion, up from $4.4 billion in the same period last year. The jump in expenses can be attributed to heavy investments in online commerce, the next-generation digital payments system and merchant relationships. In the long run, these investments will make the company stronger and more competitive. But, for now, these expenses create a negative headline, and investors are disappointed with the quarter. This stock remains attractive at current levels given its globally-recognized franchise, strong balance sheet and above-peer-group growth. Considering the fact that the stock carries a long-term average multiple of 17x, shares are attractive at current levels, trading at 13x estimates. My target is $50.

Apple (AAPL:Nasdaq, $350.70, 150 shares, 1.66%) INDUSTRY SECTOR -- TECHNOLOGY: The tech giant posted stellar fiscal second quarter results this week with revenue surging 83% to $24.67 billion. Profit grew 95% to $5.99 billion, or $6.40 a share. iPhone sales were the clear standout, growing 155% in the U.S., aided by the Verizon (VZ:NYSE) deal, and China iPhone sales grew 255%. In the year-ago period, the company earned $3.07 billion, or $3.33 per share, on $13.50 billion in revenue. Gross margins came in at 41.4% compared to 41.7% in the same period last year. Apple sold 3.76 million Macs, 28% more than it sold a year ago. The company saw 18.65 million iPhones fly off the shelves, a 113% jump from last year's mark. The company also sold 9.02 million iPods, a 17% drop from the same period last year. Mac sales grew 77% in Asia and 25% in the Americas, with North American growth slightly more than 25%. Management said the disaster in Japan would not affect supply channels in second or third quarters, but warned that third-quarter revenue would be down by about $200 million due to lost sales related to the catastrophe. Steve Jobs remains on medical leave, but I was pleased to hear that he is still involved in decision making at the upper level. The remarkable results reiterate my belief that this is one of the best consumer products companies in the world. Shares are still trading at an attractive price, and my target remains $400.

Deere (DE:NYSE, $95.25, 1,400 shares, 4.20%) INDUSTRY SECTOR -- INDUSTRIALS: The U.S. Architecture Billings Index (ABI) was flat in March (down 0.1 point at 50.5), suggesting the recovery remains sluggish. The ABI, a leading indicator of U.S. nonresidential construction, also revealed that the New Projects Inquiry Index was up 2.3 points to 58.7. However, Deere's business environment remains strong. North America agriculture equipment sales in March were positive, with combine sales growing 31% on a year-over-year basis. I remain bullish on Deere given its strength in China and Brazil, the momentum in its construction and forestry division, its leverage to the global economic recovery and the turnaround in North America. My target is $110.

Emerson Electric (EMR:NYSE, $59.14, 700 shares, 1.30%): INDUSTRY SECTOR -- TECHNOLOGY: I added this diversified industrial name to the portfolio last week given its late- cycle businesses, attractive valuation (lagged the group 9% year to date), 34% exposure to emerging markets, leverage to oil prices, exposure to IP traffic growth and recovering HVAC markets. This week, Emerson announced that it is partnering with Sanmina-SCI to build Emerson solar power inverters at the company's Ottawa, Ontario manufacturing facility. The company should benefit as comps ease in the second half of 2011 in Network Power, the China tightening cycle ends and backlog growth in Network Power rolls into 2011. Shares are trading at a 5% premium to the group, which provides room for upside given that shares typically trade at a 10% to 15% premium. My target is $66.

Ensco (ESV:NYSE, $58.27, 1,000 shares, 1.83%): INDUSTRY SECTOR -- ENERGY: I added shares after the company reported in-line first-quarter results. Earnings per share came in at $0.45, $0.02 below Wall Street expectations, due to SG&A for its Pride International acquisition and a higher tax rate. Revenue came in at $362 million, beating analysts' forecast of $356 million. Sales of deepwater rigs and jackups were in-line at $98 million and $263 million, respectively. Contract drilling margins came in ahead of expectations at 47%. As expected, shares didn't react much to the earnings report. This is because the most significant part of the story is the Pride acquisition and its related synergies, which could be as high as $200 million by the time the deal closes in the second quarter. Ensco is the largest offshore jackup oil-and-gas-well drilling company, and it's the most levered to the recovery in the Gulf of Mexico. After lagging the group 17% year to date, I believe that, when the Pride deal closes in June, investors will bid shares higher on the additional $6.5 billion backlog, synergies and excellent growth prospects as deep-water drilling recovers. My target is $65.

Express Scripts (ESRX:Nasdaq, $56.17, 1,400 shares, 2.48%) INDUSTRY SECTOR -- HEALTH CARE: The company renewed a five- year agreement with Automated Benefits, a claims-processing software provider to TPAs in Canada. The deal is not meaningful from a revenue standpoint since Express Scripts' Canadian business represents just 2% of sales, but it locks in a relatively large profit stream over a long-term timeframe. Express Scripts will report first-quarter earnings after the close on April 25. I expect earnings-per- share growth of 24%, volume growth of 2% and margin expansion of 65 basis points. Express Scripts is clearly the winner in the industry, and I like its focus on generating strong cash flow, increasing its buyback in order to return cash to shareholders and improving its mix of mail and retail distribution. My target is $70.

General Motors (GM:NYSE, $30.95, 2,700 shares, 2.63%) INDUSTRY SECTOR -- INDUSTRIALS: Reports out this week suggest that the U.S. Treasury could sell a large part of its 33% stake in the company this summer or fall. Separately, the company announced that Chevrolet sold 1.1 million vehicles in the first quarter of 2011, a 15% year- over-year increase and the brand's best first-quarter results ever. I believe the turnaround at GM is underway because the company has improved its pricing/incentives strategy, and its balance sheet is much healthier to finance growth with its slate of new products. I added to my GM position this week given that shares are 20% off the highs. My target is $38.

Juniper Networks (JNPR:NYSE, $40.08, 2,900 shares, 3.66%) INDUSTRY SECTOR -- TECHNOLOGY: The networking leader posted first-quarter numbers that were in-line with expectations but better than the whisper numbers. Juniper performed well, even in the face of Japan exposure, weak government spending and the rollout of several new products (MobileNext, QFabric and QFX3500). Shares are down 15% from the recent highs, and I believe they are well positioned to recover after this week's strong report and guidance. Revenue grew 21% year over year (ahead of the 20% guidance), driven by both strong enterprise demand (up 13% year over year) and service provider revenue (up 25% year over year). The company saw notable strength in its routing products, good pipeline growth for security and switches and record deferred revenue growth. The results show that the company is benefiting from the need for more bandwidth associated with tablets, smartphones and video apps, along with the massive growth in global IP network traffic. These factors position the company for revenue growth, market- share gains and upside to its long-term forecasts of 20% earnings growth and 25% margin growth. My target is $50.

Kellogg (K:NYSE, $55.38, 1,800 shares, 3.14%): INDUSTRY SECTOR -- STAPLES: The company was named the official sponsor of U.S. Olympic and Paralympic teams through 2016. Kellogg is now in turnaround mode and I expect it to gain momentum as it focuses on driving revenue growth through innovation, brand-building and price mix. Kellogg is stronger than ever, armed with the best product lineup it's had in five years, and I expect sales growth and market share gains. My target is $58.

Kohl's (KSS:NYSE, $52.03, 1,900 shares, 3.11%): INDUSTRY SECTOR -- RETAIL: The company has $2.3 billion in cash on its books, and it expects to generate $1.2 billion in free cash flow in 2011 (which will lead to further buybacks and dividends). As the company's solid momentum continues, I expect further market share gains, margin upside and additional store openings. After years of lagging the market in terms of stock returns, Kohl's is primed to play catch-up. My target is $60.

Lowe's (LOW:NYSE, $26.67, 2,100 shares, 1.76%): INDUSTRY SECTOR -- CONSUMER DISCRETIONARY: U.S. Census Bureau retail sales data for home improvement stores in March rose 5% from the year ago period. That represents declaration from February's 9% growth and January's 11% growth. The lack of new building, cheap valuations, better affordability and low interest rates are reasons to have some exposure to the housing group, and I like the home-improvement group, particularly Lowe's. Management is focused on the company's expense structure and product positioning, and that will lead to higher margins. I added to this position given that it trades at a 10% discount to Home Depot (HD:NYSE). My target is $34.

Oracle (ORCL:Nasdaq, $34.75, 3,400 shares, 3.72%) INDUSTRY SECTOR -- TECHNOLOGY: Rumors surfaced this week that Oracle is interested in buying Manhattan Associates (MANH:Nasdaq), but I believe this is simply speculation. Management indicated that the database business remains solid and said that new products such as Exadata and Exalogic should accelerate in growth and that margins would continue to expand. The company's differentiated solutions, particularly the high-end server market, will fuel revenue growth. Shares trade at 13x forward estimates, well below the long-term average, making valuation very compelling. My target is $42.

Prudential (PRU:NYSE, $61.73, 2,100 shares, 4.08%) INDUSTRY SECTOR -- FINANCIALS: The company announced that, following approval from Chinese officials, it was granted final approval for the purchase of a 12% stake in Everbright Pramerica Fund Management from Everbright Securities. Separately, the U.S. life insurance sector was positively mentioned by analysts, noting improving fundamentals and attractive valuation. This will remain of core holding given its exceptional international assets, dominant market share and low capital intensive U.S. businesses (asset management and annuities). With shares trading at 8x earnings, valuation is compelling. My target is $75.

Sanofi-Aventis (SNY:NYSE, 38.02, 1,800 shares, 2.15%): INDUSTRY SECTOR -- HEALTH CARE: The company has entered into a multi-year agreement with Stanford University's Bio- X program to support, organize and facilitate research projects that are in the early phases of development. Coverage of the company was initiated at a research firm this week with an Outperform rating and $60 price target. I added shares this week because I remain bullish on the completion of the Genzyme acquisition, the cheap valuation (trading at 8x 2011 earnings vs. the group at 10x) and the fact that it is poised to experience above-average growth after its trough earnings year in 2012. Long term, the world's fourth-largest pharmaceutical company expects emerging markets to make up 35% of sales, driving higher margins and growth.

Starwood Hotels (HOT:NYSE, 60.79, 800 shares, 1.53%): INDUSTRY SECTOR -- SERVICES: Due to the fact that Starwood has been outperforming the industry by about 100 basis points over the past few weeks, I expect strong results when the company reports on April 28, and that's why I've been buying shares this week. Starwood is one of the world's largest hotel companies and it is benefitting from tight supply and improving demand. With 60% of its assets outside of the U.S., its broad-based global portfolio and brands make it the most levered to the global travel/lodging recovery. As business and consumer occupancy trends improve, its mix of owned and franchised assets will lead to strong operating leverage and strong margins. I believe Starwood will outperform the group given its attractive valuation, strong international exposure, large metropolitan market penetration and high-end position.

Wabco Holdings (WBC:NYSE, $69.16, 1,500 shares, 3.27%) INDUSTRY SECTOR -- INDUSTRIALS: Recent industry data points support the notion of a continued recovery that's backed by demand from improved truck profitability, the replacement cycle (trucks are old, at 20-year highs) and the switch to engines with higher emission standards. I'll buy more below $58 given that production levels are increasing, margins are expanding, volumes are improving and shares trade at a 10% discount to the group. Wabco remains the best way to play the truck cycle. My target is $68.

TWOS:

Apache (APA:NYSE, $123.32, 1,000 shares, 3.88%): INDUSTRY SECTOR -- ENERGY: I'll be listening for confirmation of an accelerated growth trajectory and margin expansion when the company reports first-quarter earnings on April 28. This is one of the most sensitive companies to the price of oil, and I expect it to benefit greatly from the higher commodity price. The combination of Apache's top-notch management team, strong balance sheet and global exposure leads me to believe that this is one of the best exploration-and-production (E&P) plays in the industry. I added shares this week, and my target remains $150.

Boeing (BA:NYSE, $75.44, 1,500 shares, 3.56%) INDUSTRY SECTOR -- INDUSTRIALS: The company was selected by Pratt & Whitney Rocketdyne, a United Technologies (UTX:NYSE) company, to help mature the designs of its service module and integrated launch abort propulsion system for the Crew Space Transportation (CST-100) spacecraft. In other news, Boeing has been selected for the second round of NASA's Commercial Crew Development program under a $92.3 million contract. I added shares this week because the increased production rates in the 777 and 737 suggest that demand continues to improve. I remain bullish on this story given the 787 Dreamliner launch and the aerospace recovery, which is in its early innings. My target is $77.

Caterpillar (CAT:NYSE, $109.42, 1,000 shares, 3.44%) INDUSTRY SECTOR -- INDUSTRIALS: Fitch Ratings affirmed the company's IDRs and long-term debt ratings at 'A,' confirming that the company's financials remain very healthy. This will remain a core position given its growing presence in emerging markets, the revenue and cost synergies from the Bucyrus deal, the strong replacement demand and the company's solid balance sheet. Shares remain attractively valued at 13x mid-cycle earnings and should be bought here. My target is $120.

Coca-Cola (KO:NYSE, $67.88, 1,800 shares, 3.85%) INDUSTRY SECTOR -- CONSUMER DISCRETIONARY: This week, the company was surrounded by rumors that it plans to acquire Green Mountain Coffee Roasters (GMCR:Nasdaq) -- though, as of now, this is merely speculation. This remains one of my favorite consumer plays given its positive momentum and strong products and synergies from the CCE bottling deal. With double-digit earnings growth and upper-single-digit revenue growth, Coca-Cola continues to execute better than its peers. My target is $70.

Cummins (CMI:NYSE, $108.94, 1,000 shares, 3.43%) INDUSTRY SECTOR -- INDUSTRIALS: While the truck cycle has provided solid gains for many investors, I believe there is still more upside to come. Backlog for Class 5-8 trucks grew 8% in March and orders outpaced production, suggesting higher future earnings for industry players like Cummins. Demand continues to come from improved truck profitability, the replacement cycle (trucks are old, at 20-year highs) and the switch to engines with higher emission standards. In addition, as global economies recover, its power-generation business (20% of revenue) will see demand pickup. This is my favorite way to play the truck cycle. I see shares reaching $120.

EMC (EMC:NYSE, $28.45, 4,000 shares, 3.58%) INDUSTRY SECTOR -- TECHNOLOGY: The storage leader reported in-line earnings per share of $0.31 while revenue jumped 18% to $4.61 billion, well ahead of expectations. Gross margins and operating margins also beat forecasts, coming in at 60.1% and 21.7%, respectively. Growth of 18% in storage sales and growth of 33% growth at VMware (operating margins grew 200 basis points to 29.9%) offset the softer security and information intelligence segments. Revenue from Symmetrix (a high-end product) was up 25% vs. 23% in the previous quarter. Revenue from mid-tier products such as the VNX line was up 19% and midrange product growth was pegged at 23%. Free cash flow generation of $859 million beat expectations, and the company announced a $1.5 billion share repurchase program, outdoing the $1 billion it spent on share repurchases in 2010. Management issued in-line full-year guidance of $19.6 billion in revenue and earnings per share of $1.46. Trading at 15.6x 2012 estimates and 10x cash, shares remain attractive. My target is $32.

Hess (HES:NYSE, $80.68, 900 shares, 2.29%) INDUSTRY SECTOR - - ENERGY: The company entered into a five-year credit agreement worth $4 billion with JPMorgan as administrate agent. Hess is scheduled to report its quarterly results next Wednesday, and Wall Street expects it to announce earnings per share of $1.85. Hess has multiple assets in the U.S., France and the Middle East that offer many potential catalysts for its stock. This will remain a core position given that it is the cheapest of the oil majors, it's positioned for industry-leading growth and it is the most levered to higher oil prices. My target is $80.

NovaGold Resources (NG:NYSE, $13.29, 4,200 shares, 1.76%) INDUSTRY SECTOR -- PRECIOUS METALS: NovaGold held its quarterly conference call last week and provided updates on the Donlin Creek and Galore Creek projects -- the stock's main growth drivers. In the second quarter, NovaGold will spend $12.7 million on Donlin, $5.3 million on Galore, $3.1 million on Ambler and $2.6 million on Rock Creek -- all roughly in-line with prior guidance and well within the cash available ($129.3 million). Since this is one of the most levered ways to play gold, I'll continue to hold this position. I'll add at around $11 or $12 per share. My long- term target is $20.

PNC Financial (PNC:NYSE, $61.62, 2,100 shares, 4.07%) INDUSTRY SECTOR -- FINANCIALS: The company announced core earnings this morning of $1.50 per share on stronger net interest income, mortgage fees and efficient cost controls. Net interest income, which accounted for 60% of total revenue, and net interest margins, which came in at 3.94%, were both ahead of plan. Credit quality improved, but by a modest 1% in non- performing loans. Loans in the Commercial & Industrial (C&I) segment grew by $1.5 billion but were offset by further commercial real estate and distressed portfolio runoffs. Still, the fact that C&I loans grew by 3% is important, and it's a leading indicator of improving loan demand and activity going forward. PNC continues to be one of the largest positions in the fund given its experienced and proven leadership team, above-average profitability, moderating credit risks and improving capital flexibility. However I am not likely to buy more unless it falls below $60. My target remains $70.

Stanley Black & Decker (SWK:NYSE, $76.79, 1,300 shares, 3.14%) INDUSTRY SECTOR -- CONSUMER DISCRETIONARY/INDUSTRIAL: Reports surfaced this week that the company, along with Tyco (TYC:NYSE), United Technologies (UTX:NYSE) and private equity firms are considering bids for Securitas Direct (bids are in the $3 billion range). The company maintains its focus on emerging market penetration, which accounts for 11% of total sales, and is expected to grow at 20%. With revenue and cost synergies from Black & Decker, margin expansion and cash flow generation, this remains a core holding in the fund and a great way to capture the housing theme. My target is $85.

Vale (VALE:Nasdaq, $33.54, 1,000 shares, 1.06%) INDUSTRY SECTOR -- MATERIALS: Brazil's mining giant said that Guinea has halted a railroad upgrade project just a few days after that country's president canceled the contract. Vale has interests in Guinea's iron ore deposits and offered to pay $1 billion to rebuild a railway connecting the interior city of Kankan to the coastal capital Conakry. Vale was betting on Guinea for iron ore output growth, and the project's cancelation could impact relations between the two parties. I will pay close attention to the situation and provide updates as the story develops. Vale is a great long- term mining play with diverse mineral exposure, strong customers and a solid balance sheet that will support buybacks and dividend increases. Shares are cheap, trading at an enterprise-value-to-EBITDA multiple of 4.8x and a 30% discount to the group. My target is $40.

Weatherford International (WFT:NYSE, $20.66, 4,700 shares, 3.06%) INDUSTRY SECTOR -- ENERGY: The company reported disappointing first-quarter results, with earnings coming in below the $0.18-per-share guidance it issued just a few weeks ago. Much of the miss was related to weather and political issues, but this report won't give investors any confidence in management's ability to execute. The company's North America segment had stronger-than-expected revenue of $1.4 billion, up 9% sequentially, and margins rose by 73 basis points to 20.9%. These positives were offset by weak international activity. This is another step back for the company operationally, but the reason to own it is for its massive international exposure. This stock has the most leverage to international markets, and it is bound to see upside when activity abroad increases. That said, I prefer Ensco in the late-cycle energy space. I'll buy more below $20, but I'm a likely seller at $25 to $27.

THREES:

Bank of America (BAC:NYSE, $12.31, 6,000 shares, 2.32%) INDUSTRY SECTOR -- FINANCIALS: I sold a large chunk this week, and used the money to add to the newer names in the fund. Management is doing a good job of turning around several businesses (asset management, capital markets and investment banking) and fixing the balance sheet. But with few near-term catalysts, I think the stock will trade in a range until there is more clarity on the mortgage business and its capital-allocation (dividend) strategy. Shares are very cheap (now trading below tangible book value), but given the continued headwinds in the mortgage segment, I prefer non-bank financials (American Express and Prudential) at this point because they are cleaner stories. So I am leaving Bank of America as a Three and will be selling into strength when I am clear of my restrictions.

WellPoint (WLP:NYSE, $72.27, 1,200 shares, 2.73%) INDUSTRY SECTOR -- HEALTH CARE: The stock continues to be one of my favorites in the group given its scale, which becomes even more important after all the health care reform regulations set in. The company plans to announce its first-quarter results on April 27, with consensus calling for earnings of $1.86 per share. During the call, I'll be listening for comments on rate regulation, MLR minimums and effects of health care reform. WellPoint is one of the cheapest in the group, and it has a very powerful buyback program in place that will keep a floor under the shares. That said, I'm up 17% and it's prudent to take gains in the low $70s. I'll consider buying shares back if they fall into the mid $60s.

Regards,

Jim Cramer, Stephanie Link, and TheStreet.com Research Team

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