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Wednesday, 03/12/08
Posted 03/12/08, 10:36
pm ET |
(Scroll down to see Jim's
comments below) |
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Today's date:
Wednesday, 03/12/08 |
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Dow Jones: |
12,110 |
- 46 |
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NASDAQ: |
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2,243 |
- 11 |
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S&P 500: |
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1,308 |
- 11 |
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Opening Segment 1
Title: |
'Hog Topic'
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Featured Stock(s): |
Hormel Foods Corp.
(HRL)
See HRL's official
website
here.
See the Yahoo!
Finance profile for
HRL
here.
See Opening Segment 2,
below...
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After this segment, you
can see Jim's Lightning
Round picks
here... |
JJC: Get ready
to love the other white
meat... We don't
have to eat pork, but I'd
recommend the pork
stocks... Hormel
Foods Corp. (HRL),
the proud producer of
Spam...
Smithfield Foods Inc. (SFD)..
they're in great
position... and I think
you want a piece of the
action...
Why are we so high on the
hogs here?...
A couple of things have
happened that make the
pork business very
attractive... let's
call them the hog glut,
and the beef tradedown...
. . . .
.
Now, the hog glut is easy
to understand...
We're producing a lot
more... a lot more
than anyone expected...
and it's driving prices
lower. The USDA
expected a 4.4% increase
in the number of hogs
slaughtered in the fourth
quarter of 2007...
The real number turned out
to be 9.6%... prolific,
aren't they?...
Why do we have too much
hog on our hands?...
Well, imports from Canada
are a big factor.
Also, a lack of
significant exports to
China. Because
grain prices are so high,
hogs should be getting
more expensive...
But, thanks to the hog
glut, prices are
declining.
Back in September, the
expected price for a
hundred-weight of hog in
2008, was $48 smackers,
according to the USDA...
But, by February 15th, the
expected price had come
down to $42.50 per
hundred-weight, so any
company that buys hogs and
turns them into food is a
big winner here.
. . . .
.
Hormel (HRL)
buys 90% of its hogs
(rather than raising the
hogs themselves), while Smithfield (SFD)
only buys 50% of its hogs.
That makes HRL the better
play on... hogs.
. . . .
.
What about the beef
tradedown?...
Simply put, beef has
gotten astronomically
expensive. It takes
a whole lot of grain -
grain that's been getting
pricier and pricier - to
produce not very much
steak... which is why beef
is so expensive.
Throw in some food, and
the fact that our economy
is in bad shape, and
people have less money in
their pockets...
and you get what I call
the beef tradedown...
Remember, this is a show
that is cautious...
we acknowledge the
recession on this show.
Instead of paying up for
beef, people are buying
the other white meat...
or, they really trade
down, and you know what
they do?... They pop
open a can of Spam!
But since we're not snobs
about our stock picks on
this show, I'm
recommending HRL as my top
pork play...
. . . .
.
Don't get me wrong...
Smithfield (SFD)
is good too. In
fact, I think it's the
better company. But
SFD is the whole hog, a
vertically-integrated
producer of pork
products... and
right now, we don't want
the hog production side of
the business, because half
the point is that hogs are
very cheap.
. . . .
.
So let's talk HRL...
HRL gets about 60% of its
sales from pork so, while
it's not a pure play, it's
still heavily exposed to
the hog glut and the beef
tradedown...
Aside from Spam, they've
also got the Jennie-O
Turkey, Chi-Chi's and
Valley Fresh brands, just
to give you a sense of
HRL...
. . . .
.
The last quarter was
strong for HRL...
HRL beat on earnings per
share by 6 cents.
The Street expected 58
cents. HRL delivered
64 cents. Profits
were up in every business,
especially refrigerated,
which is the most exposed
to pork products...
. . . .
.
Aside from the pork glut
and beef tradedown, how's
HRL look?...
It's got a great balance
sheet.
Debt-to-capitalization
ratio of 15%, meaning
its total debt is equal to
15% of its market cap.
SFD, on the other hand,
has a lot more debt... 50%
of the market cap...
With so little debt, HRL
can do more acquisitions
or add to its
already-generous
buyback... The
company has a repurchase
authorization for 3% of
the shares... that's
5% of the float. I
call that better than a
sharp stick in the eye...
but not a slab of nice,
crispy bacon...
. . . .
.
What else?...
If you read the Wall
Street Journal today, you
might have seen that the
consumer staple stocks had
more insider buying in
January and February, than
any other group. SFD
was actually the company
with the most insider
buying. HRL doesn't
have that much.
That's fine.
The point is that HRL is
part of the sector that's
very bullish about
itself... and with
good reason, as these are
the stocks that people buy
during a recession...
. . . .
.
Where does HRL go?...
If hog prices stay low -
and that's what I expect -
then HRL could go to
$48... If hog
prices do the unexpected,
and go higher, I can't see
HRL going down more than 3
points. I call it an
up-7, down-3 great
risk/reward...
. . . .
.
The Bottom Line!:
Hog glut + beef tradedown
= Hormel Foods Corp.
(HRL)
[See Jim's 2nd Opening
Segment stock picks
below... ]
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■ |
Stock Snapshots - Includes
all stocks mentioned above |
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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) |
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HRL |
41.09 |
41.28 |
Hormel Foods Corp.
(HRL)
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Mutual-Fund-Holdings.com
NEW RESOURCE!
See Ken Heebner's CGM
Focus Fund
Top 25 holdings - The No.
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Fund in 2007
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Opening Segment 2
Title: |
'Carnival Ride' |
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. . . .
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Featured Stock(s): |
Carnival Corp.
(CCL)
See CCL's official
website
here.
See the Yahoo!
Finance profile for
CCL
here.
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After this segment, you
can see Jim's Lightning
Round picks
here... |
JJC: The
biggest rally in five
years... Is there
still anything left worth
buying?...
Yeah, I think so...
I'm actually a little
surprised at the kind of
opportunity you have, but
I just want to point out -
and I'm going to be really
blunt about this, okay?...
I am still very cautious.
You know that I said we're
oversold, and we were
going to get a rally, but
it would be a grave
mistake on my part to get
too bullish, because I
know I can hurt you...
Because, while the Fed has
definitely improved
things... we're off the
precipice for the
moment... all our
financial problems are
still out there...
It would be a huge
mistake... a huge mistake
to get really, really
aggressive... but it's
also a little mistake to
miss out on a chance to
make money, now that we're
having that kind of a
pullback from the biggest
day in five years...
Maybe we've got some stuff
to look at on a pullback.
. . . .
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I've got a good - believe
it or not - conservative
consumer spending idea for
you...
This is a stock for where
we are right now, but
first you need to
understand why I am even
willing to talk about
buying any stocks here
that have anything to do
with the consumer,
particularly after the
market went up more than
417 points yesterday.
Here's the situation...
. . . .
.
Even though we're still up
really big, the Street is
even more negative than I
am... the players on Wall
Street... they are
far more negative than I
am.
One of the things I look
at to gauge market
sentiment, comes out
Wednesdays, okay... is
called the Investor's
Intelligence Index... the
II Index... bull, bear
ratio... So, in
other words, how many of
these guys (bulls) are out
there, and how many of
these guys (bears) are out
there?...
And, today, that ratio
shocked me. It was
perhaps among the most
negative that I could
remember... So
many more bears than I
thought...
There just can't be that
many people who are
rightly negative... or, at
least, I've never seen it
that way in my whole
career...
So, the trade, not the
investment, but the trade
is still, as we say in the
trade, to the long side...
so that's how I can talk
about buying something
right now... but,
because we are so
cautious... because we
know this positive action
will not last forever...
not in this market...
we've got to play with a
safety net under us...
And where do we think we
can find what we're
looking for? Where
do we get that safety net?
Well, do you know what I'm
doing? I'm going to
the high seas...
. . . .
.
That's right, I like
Carnival Corp. (CCL)...
I told you it had a
consumer spend tinge to
it...
CCL, the #1 cruise ship
operator, by market share,
in the world...
This one's a dividend
play, plain and simple,
because of the relentless
hammering of its stock,
it's gotten down to where
it's a dividend play.
CCL now belongs to the
high-dividend club!
It's got a 4.2% yield,
because its common stock
has been pushed so low.
That dividend means that,
if you're looking for
income, and the
possibility for some
upside - unlike a bond -
you should consider buying
CCL. You get a
better yield, and there's
some upside (potential).
Remember, bonds don't have
that...
. . . .
.
When interest rates are
falling - and I think the
Fed will cut again next
week - high-yielding
stocks are more attractive
than cash... if you want
upside.
Remember, if you want
safety, forget it...
safety you do not get in
stocks. But,
if you're looking for a
safety tinge, which
dividends provide in the
form of yield support,
CCL's got it.
I can't praise high
dividends enough in this
market, as long as they're
safe... CCL makes
more money than it needs
to pay its... dividend.
. . . .
.
Still, there are plenty of
stocks with big, stable
dividends... that's not
why I've singled out this
one. I'm backing CCL
because, frankly, barring
a major, massive
disappointment - a titanic
disappointment if you know
what I mean - I don't know
how much lower it can
go...
It hit its 52-week low
Monday... $37 bucks...
Today, it's at $38 and
change. If or when
CCL tells us the business
is slower, thanks to the
slowdown/recession, and
higher fuel prices...
that's largely priced into
the stock...
Right now, CCL's selling
at 11x earnings.
I've never seen it like
this, okay?... It's
got a 14.5% long-term
growth rate, so it's 11x
earnings. So, it
gets a little nutty...
Some stocks are
priced for perfection.
This one's priced for
imperfection!
. . . .
.
I think CCL is actually in
good shape, considering
where we are... It's
funny, because most people
wouldn't think a company
that runs cruises would
make sense in a recession
but, in fact, if you look
at cruises as kind of a
trade-down vacation - a
3,4 or 7-day cruise -
because they're a
relatively cheap kind of
vacation, it fits...
It's not as though people
will stop taking vacations
just because the economy
smells bad... they'll just
take cheaper ones...
It is reported that CCL
will be able to increase
year-over-year prices for
the Caribbean by 10% for
the 2nd quarter... 20% for
the 3rd quarter... and,
look, they'd only do that
if they thought they could
get away with it...
And everywhere else, other
than Europe - where CCL is
trying to expand...
they've been able to hold
prices firm. So, it
doesn't look like the weak
economy is hurting CCL as
badly as you'd expect,
right?
Oh, by the way...
I should point out that
40% of their sales now
come from
rest-of-world...
They've been moving their
boats over there, making
CCL even less sensitive to
our battered economy...
Here's the bottom line...
. . . .
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The Bottom Line!:
Carnival Corp. (CCL)
works because of its
dividend... and because
it's not as exposed to the
weak U.S. consumer as the
Street thinks. If it
gets a 16x multiple -
which is still cheap,
relative to its growth -
then CCL goes to $55, for
a 40% gain. Don't
count on that happening
anytime soon because, as
they say on Wall Street,
the recession is making
the positives at CCL less
visible. But
this stock has gotten too
cheap to ignore,
especially with that sweet
dividend...
. . . .
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■ |
Stock Snapshots - Includes
all stocks mentioned above |
■ |
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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) |
|
|
CCL |
38.45 |
37.65 |
Carnival Corp. (CCL)
Price target: $55.00
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Go to the LIGHTNING ROUND from
tonight's show
here >>
See current quotes on Yahoo!
Finance from
tonight's show stocks
here >> |
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Symbol keys: |
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A Charitable Trust stock.
- An asterisk next to a
stock symbol indicates that
Jim mentioned it is a stock
that he manages within
his
charitable trust portfolio.
You can see the complete
portfolio
of stocks
here >> |
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Thumbs up - indicates
he would buy the stock or,
at the very least, not sell
the stock. We do our
best to interpret Jim's
opinion on stocks, as we
think it is indicated by his
comments during the show.
Please read his comments to
decide for yourself. |
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Thumbs down -
indicates he has said not to
buy or to sell the stock,
based on his comments
We do our best to interpret
Jim's opinion on stocks, as
we think it is indicated by
his comments during the
show. Please read his
comments to decide for
yourself. |
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Back up the truck -
indicated by Jim, when he
says the stock is so good,
that he would do a
'mon-back' on the stock...
In other words, this is the
sound someone would say to a
truck driver, "Come on
back... " as he is "backing
up the truck" to load up on
his cargo. Translation
for buying stocks:
This recommendation by Jim
indicates that, after you do
your own
homework on the stock,
you should feel comfortable
loading up on it, as it is
in a good position to be
bought at this point. |
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Stumped. - Of the
2,000+ stocks that Jim
Cramer has in his head, for
which he has an informed
opinion, he sometimes comes
across a caller with a stock
he does not know well enough
to opine on... He then
indicates he is stumped and
will have to come back to
it, after he does some
homework of his own on
the stock. This
usually occurs during the
Lightning Round, when Jim
does not know in advance who
is calling, or what their
stock question is about. |
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Definitions of key phrases
used by Jim, known as
"Cramerisms": |
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Definition: 'Pull the
trigger' is Jim's phrase for making
the decision at that point to trade -
either to 'buy' or
to 'sell' (although he
usually uses the phrase for
buying), as if to say you
should feel comfortable
enough to make the final
decision without looking
back... |
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Definition: 'Ring
the Register' is Jim's phrase for
selling a stock, and making
it a final sale, that you
should not look back on.
Put it behind you. |
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Definition: 'Let It Come In' indicates how you
may wait for it to pull back, or have the
stock price come down briefly, as your
chance (after letting it come in) to buy
the rest of your position (i.e., total
number of shares you own in that stock). |
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Definition: 'backing it up'
or 'doing a 'mon-back' is Jim's
phrase for the metaphor of backing up a
truck to load up on a stock by buying
it. 'Mon-back is short for the
imaginary worker saying, 'Come on
back...' as the truck is backing up to
receive its load... Notice that we use
the little truck icon to indicate where
Jim has mentioned this.
Translation for buying
stocks: This
recommendation by Jim
indicates that, after you do
your own
homework on the stock,
you should feel comfortable
loading up on it, as it is
in a good position to be
bought at this point. |
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See more
"Cramerisms" & other
financial phrases
here >> |
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Helpful Websites: |
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See the stocks currently
known to be in Jim Cramer's
Charitable Trust at:
jim-cramer-charitable-trust-stocks.com |
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See the stocks currently
known to be in Warren
Buffett's portfolio
of
stocks at:
warren-buffett-portfolio.com |
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Stock Homework 101:
This is an excellent
upcoming site that provides
resources and links to help
you do that homework that
Jim Cramer recommends after
hearing his suggestions...
StockHomework101.com
This site is coming soon.
Thank you. |
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FastMoneyRecap:
This site will be a quick
summary of recommendations
made by the great Fast Money
TV show crew, that will
offer you a unique service,
to compare their picks to
Jim Cramer's past comments
about those stocks.
Fast Money Recap - Trades
for next day...
Compare these picks to Jim's
comments for the same
stocks. |
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