Wednesday, 01/16/08
Posted 01/16/08,  9:41 am

(Scroll down to see Jim's comments below)

 
 
Today's date:  Wednesday, 01/16/08

  Dow Jones: 12,466     - 34
  NASDAQ:   2,394     - 23
  S&P 500:   1,373       - 7
 
 
 
 
 
First Segment
 
 
Opening Segment 1 Title: 'Where There's Smoke'

.  .  .  .  .

Featured Stock(s): Altria Group Inc. (MO*)

See MO*'s website here.

Yahoo! Finance profile for MO* here.


See Opening Segment 2, below...

        
JJC:   The worst temptation in an exceedingly-difficult arbitrary and capricious market - like this one, where one day, we're down huge on recession fears; and the next day, we attempt a rally on the hope of a hundred... - is to believe that the worst is over... is to see bottoms where they don't exist.

Today was a bad day for the recession stocks, like Coca-Cola (KO) and Pepsi (PEP) and  Altria (MO*)... They all got hurt.

You can't predict the future from one day's action, which makes me want to circle back to those recession proofers...

.  .  .  .  .

I'm still convinced that this market is among the most treacherous markets I have ever seen in 29 years of trading.  I think that any market that opens hideously lower on Intel (INTC), then rallies, then gives up the rally, can only lead you to think that it's impossible to make money...

I believe we've reached a point where the Fed is almost irrelevant... where there's so much damage done that Bernanke may have missed his chance...  and, even if we could rely on the Fed to deliver a big rate cut, it would be too late to make a big enough difference for many of the companies that we like.

.  .  .  .  .

So, how do we survive?...

What's the only way to survive in this incredible crossfire economy?...

The only way to profit is to get defensive, and stay defensive...  until the Fed acts to save what's left of the economy...

You want stocks that are immunized against a slowdown - a recession - because that's what we're in... and that means companies that sell their goods, no bad how bad the environment gets...  But you also need stocks that are immunized against out-of-control raw costs, like grain, like oil...  You want dividends and buybacks to protect yourself against the downside... and you want real catalysts that should drive your stocks higher...

.  .  .  .  .

Very few stocks meet all these standards, but Altria (MO*) is the best of them.

It's down today, and so I'm focused on it.  And you should seriously consider buying... the stock...   I like it so much that it's owned by my charitable trust...

.  .  .  .  .

This is a stock that I've talked about endlessly.  You know about the 3.8% dividend yield that's better than 10-year treasuries, even before taking the lower tax rate on dividends into account...

[See a list of all previous recommendation comments by Jim about Altria (MO*) here...]

.  .  .  .  .

So how about I tell you something you didn't know?... Some stuff I've been working on behind the scenes...  Some stuff I know that will take this stock higher...

How about two of them?...

Okay, I have learned that, in 14 days, MO* will announce plans for the breakup...  14 days... that's all that's left...

It's a huge event... probably the biggest for a Dow Jones stock in years.  Just a fortnight away... 

I'm predicting that the breakup will probably happen as early as the end of this quarter.

Bigger than that, MO* has a hidden and undervalued asset, that few are talking about, even though it's worth billions... and could fund a massive buyback, allow MO* to put more debt on the buy - even more stock back - and an acquisition spree, or maybe even a huge special dividend for shareholders...

You want to know about that?...

MO* owns, underneath all of this tobacco, a 28.6% stake in SAB Miller... and their plans for it will likely come out at the end of the month, when they explain their splitup.

That's why I'm telling you this is new information... January 30th, you're going to find out how much of this you're going to get...

Not many investors are factoring the value of this investment into the potential for a splitup of MO* to reward shareholders and send itself higher...

These guys are motivated.

It's time to shine a light on SAB Miller, because the beer stocks are suddenly booming, because of potential beer price increases and because they go up in a recession!

If we value it the way Merrill Lynch valued Molson Coors (TAP), in a great and timely upgrade today - and there's no reason not to give them at least parity - then SAB Miller gets an 18.4% multiple on 2008 earnings...  Listen to me... that means $12.8 billion.

.  .  .  .  .

There's a lot of money that MO* could use for a number of value-enhancing moves, but this is completely being ignored.  Investors are totally focused on the breakup of international and domestic.  I bet we find out in that fortnight (i.e., in the next two weeks) how MO* is going to monetize this terrific worldwide brewer, and it's going to put more money in your pocket...

.  .  .  .  .

The breakup into a fast-growing international stock will soon be propelled by... they're going to have big Chinese sales...  The slower, domestic growth company has a dividend that could be more like Reynolds (RAI)...  That's a little bit higher than MO*'s current dividend.  That's going to be huge.  But SAB Miller is our ace in the hole...

And, don't forget, MO* should go higher as more investors become convinced of the recession thesis, and switch to defense...

You want to get in before then, and well before they outline their plans at the end of the month.

Who knows?... You have to figure that Bernanke's causing more people to smoke, right?... 
 

.  .  .  .  .

The Bottom Line!:     Finding money-making stocks in this retched market isn't easy.  But Altria (MO*) is the closest thing I can find to a slam dunk, that's left in this tape.  I think you need to be in this stock, before management goes on the road...  remember, I just told you, you only have 14 days... to promote this.  Uncle Ben, no.  Joe Camel, yes!  The breakup's big.  The big buyback's big.  Don't forget, they've had money in escrow forever, because of litigation.  That's now out.  The monetization of SAB Miller is big.  The hidden asset could be... well, along with a major buyback... I think, what will propel the stock... are you ready, skee-daddy... to $90 a share, before the breakup!


[See Jim's 2nd Opening Segment stock picks below... ]

 

 

 



See all of tonight's stocks' latest quotes on Yahoo! Finance


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Stock Snapshots - Includes all stocks mentioned above

 

 

 

Jim
Cramer's
rating on
this stock

STOCK
SYMBOL

Closing
price
that
day

Opening
price
next
day

Full Company Name/Comments
(see comments above for each)

MO*

77.91

79.00

Altria Group Inc. (MO*)


       
         

 


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Second Segment
 
 
Final Segment 1 Title: 'Broadband Appeal'

.  .  .  .  .

Featured Stock(s): ADC Telecommunications Inc. (ADCT)

See ADCT's website here.

Yahoo! Finance profile for ADCT here.


2nd segment picks below...



After IBM (IBM) reported great results on Monday, everyone decided that tech was making a big comeback...

Oh, but then we got today's big disappointment from Intel (INTC) which, by the way, wasn't all that bad.  PCs weren't that bad, but there were certain parts of INTC's business that were terrible...

But I got it wrong, and I'm the first to admit it.

But INTC going down, after IBM going up, reinforces what I've been saying about tech all week, in my series on tech stocks that have become way too cheap, and are now worth buying...

Repeat after me... tech is not a monolith.  And, even though tech stocks often trade together as a group, tech companies - which, on occasion, have something in common with their stocks - sink or swim, not together, but based on separate product cycles they happen to be tied to.

Remember how Microsoft (MSFT)'s doing?...  Because they brought out a new operating system, Vista...  It didn't matter what else happened.  That's a product cycle, okay?...

Adobe Systems (ADBE) has a product cycle...  Hey, even Electronic Arts (ERTS) has a product cycle...

.  .  .  .  .

One look at the fabulous action today in BEA Systems (BEAS), a software company Carl Icahn succeeded in getting sold to Oracle Corp. (ORCL) for a huge premium tells you that looking for down and out tech, like BEAS, can make you some big money!

.  .  .  .  .

So, it's definitely time to get back to the well, and find some more stocks...  I think there could be more stocks like BEAS, that are heading up...

That's why my next under-priced, undervalued tech stock that I think will have a big comeback is... ADC Telecommunications (ADCT).

I recommended the stock back on December 18th, at $17.72 and, today, it closed at $13.52, and that was after a big gain, thanks to an upgrade by Morgan Keenan, that I agreed with...

Even ADCT jumped 3% today, it's still less than a point above its 52-week low.

I thought it was cheap then, and now, to tell you the truth, it looks absurdly cheap now.  I would double down, but that doesn't mean you can't take advantage of this relentless bear market in tech, and wait for the stock to come in some, so you can buy it even cheaper.


[See Jim's complete recommendation and comments describing ADCT from 12/18/07 here.]

.  .  .  .  .

The Bottom Line!:     ADC Telecommunications (ADCT) has become too cheap.  It doesn't even need to blow out expectations the way I expect it will, in order to go much higher.  It just needs to deliver the quarter, and I think you should have a big win.




Jim
Cramer's
rating on
this stock

STOCK
SYMBOL

Closing
price
that
day

Opening
price
next
day

Full Company Name/Comments
(see comments above for each)

ADCT

13.52

14.20

ADC Telecommunications Inc. (ADCT)