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Monday, 04/07/08
Posted 04/07/08, 10:51
pm ET |
(Scroll down to see Jim's
comments below) |
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Today's date:
Monday, 04/07/08 |
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Dow Jones: |
12,612 |
+ 3 |
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NASDAQ: |
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2,364 |
- 6 |
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S&P 500: |
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1,372 |
+ 2 |
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Opening Segment 1
Title: |
'From Russia With
Love'
'Steel Beams'
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. . . .
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Featured Stock(s): |
Mechel Open Joint Stock
Company (MTL)
See MTL's official
website
here.
See the Yahoo!
Finance profile for
MTL
here.
See Opening Segment 2,
below...
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After this segment, you
can see Jim's Lightning
Round picks
here... |
JJC: We
starting a new series this
week...
This week, I've got five
Warsaw Pact stocks... all
week... because, unlike
the United States, this is
a region that is
economically en fuego...
We start with Russia...
Now Russia's finally
making some rubles!...
. . . .
.
When you think about this
country on Wall Street,
it's always about their
natural resources, because
the Ruskies are sitting on
top of the world... on so
much oil and natural
gas... commodities...
But the new story is that
Russia's wealth from oil
and gas companies is
spilling over into other
parts of the Russian
economy, on the back of
marching orders from the
Kremlin. And when the new
guy, Dmitry Medvedev,
takes over to the extent
that Putin lets him, this
trend should only become
more pronounced, as the
guy's really focused on
developing the Russian
economy... a true
capitalist communist...
That's why, tonight, my
first "From Russia With
Love" stock isn't an
obvious natural resource
play like Gazprom... It's
a totally-unheard of
Russian steel company
called,
Mechel Open Joint Stock
Company (MTL)...
Even though I don't think
anyone's cared about the
Russian steel sector since
Uncle Joe Stalin... I
think MTL is one of the
best - maybe the absolute
best - international steel
play around, with a group
that's hitting 52-week
highs all over the world.
. . . .
.
Why?...
I liked American steel
companies, because they
were facing less
international competition,
because steel makers in
places like China, India
and, oh yeah, Russia...
were exporting a whole lot
less steel, because of the
internal demand... Their
own countries need the
steel so bad, they can't
ship it to us.
And then there's the
enormous demand for steel
still coming from China,
and from all the building
projects in the Middle
East, and that's created
more than just a steel
bull market... it's
created a steel
renaissance!
That's been great for MTL,
which is the #2 producer
of specialty steels in
Russia. 52% of its sales
come from Russia. It's
making steel where steel's
in demand. That's just the
tip of the old iceberg...
Like
United States Steel Corp.
(X)
- my favorite domestic
steel stock - MTL is
vertically integrated...
This is what we want in an
environment where iron
ore, coking coal... the
kind you need to make
steel and nickel, which
you need for stainless,
are all at sky-high
prices... Remember that
Cleveland-Cliffs Inc. (CLF)?
We caught a double
there... do not sell it
yet.
Some steel companies are
getting hurt by this,
because they can't pass on
all those price increases
along to their
customers... but MTL owns
coal mines, it owns iron
mines, it owns nickel
mines... It should be
benefiting from the higher
prices. This company can
supply 100% of its coal
needs... 92% of its iron
ore... and only 55% of its
nickel...
. . . .
.
MTL is the only global
stainless-steel producer
that can internally source
all three of these
materials. That means MTL
isn't all that vulnerable
to price increases in this
stuff... Everybody else
is, believe me... Although
X less so than everybody
else... It exports the
coal it doesn't need.
This company should
actually benefit from the
high coal prices.
And we know coal is en
fuego, because of what
Steve Lear, from
Arch Coal Inc. (ACI),
told us last week...
although his company's not
doing as well as we
thought, considering the
weak guidance that he gave
today, that kind of
wrecked the whole rally.
MTL hasn't already sold
its excess coal at lower
prices. It's selling now
at what really are very
high spot prices. These
Russians, man... smart...
just smart...
Should you buy MTL now?...
It trades at 11x forward
earnings... same multiple
as X... so I would say
don't... Given the
internal mining
capabilities... you could
argue yes. But I have to
acknowledge that it's a
$129 stock... It's only 13
points off its high...
That's how we nailed X.
But, believe me, I'd like
more of a pullback, before
buying... because I think
you'll probably get one.
And, if you don't remember
the 5-day rule - featured
in
Jim Cramer's Stay Mad For Life...
wait at least five days
from this show before
buying...
. . . .
.
The Bottom Line!:
The Eastern Bloc is back!
And the Soviets are now
making rubles hand over
fist! My first pick in
this five-day series is
Mechel Open Joint Stock
Co. (MTL)...
the only stainless steel
company with its own iron,
coal and nickel! Buy, buy,
buy!
[See Jim's 2nd Opening
Segment stock picks
below... ]
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See all of tonight's stocks'
latest quotes on
Yahoo! Finance |
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Most popular
investing books ordered:
(click any book to see at
Amazon.com) |
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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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MTL |
129.04 |
na |
Mechel Open Joint Stock
Co. (MTL)
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Mutual-Fund-Holdings.com
NEW RESOURCE!
See Ken Heebner's CGM
Focus Fund
Top 25 holdings - The No.
3 Top-Performing Mutual
Fund in 2007
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Final Segment 1
Title: |
'Message In A Bottle' |
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. . . .
. |
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Featured Stock(s): |
Fomento Econmico
Mexicano, S.A.B (FMX)
See FMX's official
website
here.
See the Yahoo!
Finance profile for
FMX
here.
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After this segment, you
can see Jim's Lightning
Round picks
here... |
JJC: I never
thought I'd see the day
when Mexico became more
fiscally responsible,
financially stable, and
better invested than the
old U.S. of A... When I
would rather own a Mexican
stock than a stock from
the States... But, believe
me, that day has come...
I believe that in
America... we have the
worst government money can
buy. But, in Mexico, when
you buy the government,
you get a lot more bang
for your peso...
Back on March 3rd, Felipe
Calderon, the President of
Mexico, announced a $5.6
billion economic stimulus
package, in order to
offset Mexico's exposure
to US... Think of it like
this... When the U.S.
sneezes, Mexico's supposed
to get the flu... The
stimulus package is their
flu shot...
And since Mexico doesn't
have a financial crisis -
just slowing economic
growth - Calderon's
stimulus plan makes a
whole lot more sense to me
than our "iPod in every
pocket" stimulus giveaway
that did nothing to
address our problems in
the banking system... and
in housing...
And they're doing a real
stimulus package... What
are we doing? We're giving
$6 billion in tax rebates
to the homebuilders...
which I think will cause
home prices to fall even
further, and make things
worse for us. As far as I
can see... Mexico, yes, is
pants-ing us, and they know it...
Now the stuff in the
stimulus package should be
fabulous for Mexican
businesses. A 3% income
tax break for companies
for the next five
months... A 10-20%
decrease in the price they
pay for electricity...
Credit from developing
banks... And, best of all,
reductions in mandatory
payroll benefit payments.
I thought we had perfected
the government
of, by and for the
corporation... but
now, Mexico has us beat
with a stimulus plan that
not only favors
corporations, but lets
them hose the workers by
paying less in benefits.
. . . .
.
Now we need to find the
right Mexican stock to
take advantage of this
huge government giveaway
to big business. Since the
Mexican economy is
slowing, because of us, we
want something a little
defensive...
There aren't that many
Mexican companies that
trade over here and, of
the ones that do, there
are only two that I really
like for this
environment...
Coca-Cola FEMSA (KOF),
which is the largest Coke
bottler in Latin
America... That means they
bottle Coca-Cola and
distribute... And
Fomento Econmico Mexicano,
S.A.B (FMX),
which just so happens to
be the parent company of
KOF.
When you've got a parent
and a subsidiary, and you
like both, you almost
always want to buy the
parent, not the child...
So go with FMX... so you
get both.
. . . .
.
KOF represents 40% of
Coca-Cola (KO)'s
volume in the region. We
know from KO that Latin
America is one of the
fastest-growing areas.
Mexico and the rest of
Latin America are still
growth regions for KO...
So this bottler works,
even though I don't
ordinarily recommend
bottlers in America.
This subsidiary makes up
40% of KOF's sales and 60%
of its operating profits,
because Coke is the
leading brand in Mexico...
No Pepsi, Coke... and the
rest of Latin America.
FMX - the parent company -
is the largest beverage
maker in Latin America.
Exactly the kind of
defensive stock that I
think you should own, when
Mexico's economy is
slowing, and its
government is giving away
money to businesses.
Other than just Coca-Cola
Femsa, it's got 70 brands
that it sells including,
of course, Fanta...
It sells all these brands
in Mexico, as well as
Colombia, Argentina,
Venezuela, four small
Central America countries,
and Brazil, which you know
we can't get enough of
here on Mad Money...
. . . .
.
FMX is also a brewer! The
second-largest in Mexico.
I want you to be thinking
Dos Equis, Sol, Tecante,
and Kaiser... with 31
total brands that it sells
in Mexico and Brazil...
and it makes its own glass
and bottle caps... so you
shouldn't worry too much
about glass cutting into
profits...
The beer business is doing
well, as beer prices have,
at last, stabilized in
most places that FMX
operates... and actually
increased in core Mexican
markets, as well as in
Brazil, where FMX has been
increasing its presence.
Exports are also ramping,
as FMX's beer penetrates
more of the Eastern
U.S.... It's not a
troubled brand like
Corona...
. . . .
.
Finally, and completely,
FMX owns Oxxo. That's
Mexico's largest
convenience store chain,
with at least 5500
stores... Oxxo is a great
channel for FMX to sell
its great soft drinks and
beer. They plan to triple
in size over the next 10
years. That's right...
triple! FMX can do that,
because Mexico is
under-penetrated, when it
comes to convenience
stores. They just don't
have enough of them.
One convenience store will
service 14,000 people...
which is astronomically
higher than in developed
countries. Oxxo already
has 67% market share but,
with this expansion, it
should also have growth as
far as the eye can see.
They might also start
opening Oxxo stores in
Colombia, which would mean
even more growth... even
though Hillary Clinton
doesn't like it... Well,
she doesn't like
Colombia...
. . . .
.
FMX... A triple threat...
Soda, beer, and
convenience stores. And
that combo is made even
more potent by the
appreciation of the
Mexican peso, which is at
6-month highs against the
dollar. Almost all of
FMX's businesses is
denominated in non-dollar
currencies... mostly the
peso... so, when they
report earnings in
dollars, the strength of
the peso translates into
an instant number bump...
I know, I know... The
stock's ramped a lot. It's
up 15% year-to-date...
Today, it closed at $42
and change... And, at that
price, my advice is to
maybe buy a little... wait
for a pullback to buy
more...
. . . .
.
The Bottom Line!:
The Mexican government is
throwing pesos at Mexican
companies, and I think the
one to buy is Fomento
Econmico Mexicano, S.A.B
(FMX).
. . . .
.
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Stock Snapshots - Includes
all stocks mentioned above |
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