Monday, 04/07/08
Posted 04/07/08,  10:51 pm ET

(Scroll down to see Jim's comments below)

 
 
Today's date:  Monday, 04/07/08

  Dow Jones: 12,612    + 3
  NASDAQ:   2,364    -  6
  S&P 500:   1,372    + 2
 
 
 
 
 
First Segment
 
 
Opening Segment 1 Title: 'From Russia With Love'
'Steel Beams'

.  .  .  .  .

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...
 
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... ]

 

 

 



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)

MTL

129.04

na

Mechel Open Joint Stock Co. (MTL)


 

       

 


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Second Segment
 
 
Final Segment 1 Title: 'Message In A Bottle'

.  .  .  .  .

Featured Stock(s): Fomento Econmico Mexicano, S.A.B (FMX)

See FMX's official website here.

See the Yahoo! Finance profile for FMX here.

 
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).

.  .  .  .  .

 

   
 

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)


FMX

42.57

na

Fomento Econmico Mexicano, S.A.B (FMX)

         

 

 

Go to the LIGHTNING ROUND from tonight's show here >>

See current quotes on Yahoo! Finance from tonight's show stocks here >>

Symbol keys:

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 >>

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.

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.

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.

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.
 

 
Definitions of key phrases used by Jim, known as "Cramerisms":

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...

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.

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).

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.
  See more "Cramerisms" & other financial phrases here >>
   
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of stocks at:

warren-buffett-portfolio.com

 
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StockHomework101.com

This site is coming soon.   Thank you.

 
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