Thursday, 04/24/08
Posted 04/24/08,  09:21 pm ET

(Scroll down to see Jim's comments below)

 
 
Today's date:  Thursday, 04/24/08

  Dow Jones: 12,848    + 85
  NASDAQ:   2,428    + 23
  S&P 500:   1,388    + 8
 
 
 
 
 
First Segment
 
 
Opening Segment 1 Title: 'Second Wind'

.  .  .  .  .

Featured Stock(s): Trinity Industries Inc. (TRN)

See TRN's official website here.

See the Yahoo! Finance profile for TRN here.



See Opening Segment 2, below...
 
After this segment, you can see Jim's Lightning Round picks here...


JJC:   It's Green Week on Mad Money, where we look for stocks that can make money cleaning up the environment, cutting back on global warming... We've been through solar and nuclear and natural gas and biofuels... companies with stocks, by the way, have been completely killed this week... truly annihilated badly... which is a terrific opportunity to get started. We don't want to buy them when they're ramping. We want to buy them when they're getting killed, and they are being hammered beyond belief, which is why you should be doing something, like... buy, buy, buy!

These are all anti-carbon emissions stocks... or lower emissions stocks. And we are buyers into any short-term weakness, because these are multi-year trends that should be strengthened with a democrat, but they could still be meaningful with a republican in the White House...

So, what's next?...

What's the next green energy source we want to highlight?...

(music playing)... The answer my friend is blowing in the wind... The answer is blowing in the wind...

That's right! It's wind power day! We are big believers in wind power, because it's so cheap. But the difficult thing about wind... is that it's so impractical for much of our great country. I mean, think about it... building a windmill in New Jersey for example?...

The thing is, in places where wind is practical, it's fabulous! And, although we're not in The Netherlands, there is a whole lot of this country that's just a windy wasteland... where wind can work.

Wind is far cheaper than oil, than natural gas, than coal, than solar... and, despite the practicality issues, it's totally viable.

Here's the caveat though... Let me just tell you that there is a wind power tax credit that's slated to expire at the end of the year, and the Senate and the House can't seem to come to an agreement right now about how to fund an extension. If this thing dies, the whole segment is not wiped out, by any means, but I just wanted to give you that color before I tell you, I still think it will pass. And, looking ahead to the next administration, if a democrat winds up in the White House, I believe it will be made permanent.

The money is here. But what about the stocks?...

We've scoured our great country for good plays on wind and, as it happens, they're all buried in other companies... which brings me to yesterday... and to the fact that, once again, our viewers... I call them the citizens of Cramerica... are the smartest in the world...

I took a call yesterday from Stephan in Florida... and what was the stock that he asked me about?...

He asked me about TRN... and what did I do to TRN? ... a company that just about everybody thinks of as a pure producer of railcars?... What did I say about it?... I gave it the thumbs down... sell, sell, sell! Well, because I thought that, as a short-term play on earnings, it's really just a railcar thing...

And, as far as that goes, it's true... I don't think their earnings from railcars will be any good. Why?... Because TRN just told us they wouldn't be that good. They just guided down earnings... I'm listening to the company. And that was despite the fact that they make railcars that ship ethanol and grain... and, despite the fact that Cramer-fave CEO, Michael Ward, of CSX... He said that there's going to be a lot of railcar buying... TRN's main lot of business... but I was not going to buck the company... I was not going to buck the company, and buy a stock where they told us not to like it...

But you know what?... I was thinking too small... too rear-view mirror... I was focused too much on the company that TRN is now. And too little on the company that TRN will become.

When I said TRN was a sell, I was breaking wind, when I should have been thinking wind...

Because, here's the thing... TRN also happens to be the largest manufacturer of wind towers in the U.S.... Last year, wind was only 6% of their business. I think it's going to grow to 10% just this year... and I now believe that TRN should be the #1 wind play out there... a mighty wind indeed.

The best comparison I have here, and this may sound a little strange just at first... is Apple Inc. (AAPL). I heart Apple... If you were thinking too small, too rearview mirror about AAPL in 2002 and 2003, thinking of it as a computer company that sells music players, you know you missed the biggest move that we've seen in ages... You didn't see what the iPod and, eventually, what the iPhone would become... fashion accessories!   You missed the idea that AAPL, the tech stock was becoming Apple, the sexy brand.

Of course, I'm very lucky... my daughter clued me into this change, when she asked me to buy her a second, different-colored iPod for the holidays, right after I bought her one for her birthday... I'm also lucky that my kids swear by iChat and now laugh at the pathetic Dell (DELL) and Hewlett-Packard (HPQ*) computers... don't buy, don't buy. They think those are (like) radio... Apple is television.

I reiterate that AAPL must be bought on the strength of iChat and the potential iChat at the iPhone... but that's not what we're talking about. It's an analogy. Sorry to get so sidetracked, but you know that I wanted you to be in AAPL...

We're talking about looking at AAPL as a static PC maker, and TRN, as I did, as a static railcar maker. You can view it as a railcar play... what it is now... or you take the Bobby-Kennedy-some-men-see-things-as-they-are-and-say-why-I-dream-things-that-never-were-and-say-why-not (whew!) approach, and look at TRN as the wind powerhouse it will become.

The company sells at 8x earnings. It's got merely a $2 billion market cap. It's down 41% from its high. Hey, we ain't missed anything right? Even though I don't think the next quarter will be any good, I think this could be like Nabors (NBR), where you have to get in ahead of the bad quarter anyway...

You have to, not because of where TRN is now but, because of where it might be, thanks to its dominance of the wind market. Right now, TRN's wind business has a $750 million backlog. The company expects wind towers to be an $800-900 million business in sales after five years.

This is a company, remember, that's only worth a little more than $2 billion (i.e., its market cap).

TRN's already expanded its existing wind plant. It's building another in Mexico. It plans to build a third in Iowa. TRN is based in Texas, which is the country's largest wind market... around 24% of the installed capacity too.

The wind story is here everybody...

It's not just Green Week. Wind will be here next week, after Green Week... post-Green Week... If there were any company trying to get a presence in this terrific source of alternative energy, I would buy TRN for the windmill manufacturing business, and spin off that train car manufacturing business. I would then bring the windmill business public for what I bet would be the whole... really the value of the whole company... 

.  .  .  .  .

[See Jim's previous extensive comments and argument to buy TRN here.]

.  .  .  .  .

The Bottom Line!:      If you want to keep thinking of Trinity Industries Inc. (TRN) as a railcar play, you're tilting at windmills... Focus on TRN's future as the top builder of wind towers, and you should see just how attractive this 8x earnings, $2 billion company, that is TRN, really is...


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

 

 

 



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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)

TRN

28.21

na

Trinity Industries Inc. (TRN)

 

       

 


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Second Segment
 
 
Opening Segment 2 Title: 'Prevailing Wind'

.  .  .  .  .

Featured Stock(s): Otter Tail Corp. (OTTR)

See OTTR's official website here.

See the Yahoo! Finance profile for OTTR here.

 
After this segment, you can see Jim's Lightning Round picks here...


JJC:   For Green Week today, we're talking about one of the cheapest forms of renewable energy... scratch that... one of the cheapest forms of any kind of energy out there... cheaper than oil, cheaper than natural gas, cheaper than coal, cheaper than solar... you name it... and cleaner than every one of them...

I'm talking about wind...

The problems with wind are obvious... but where it works - and this country is full of flat, windy places where wind power can thrive - it works well, and it works inexpensively. The problem, as I said earlier, is that there aren't any good pure plays on wind power that U.S. investors can easily buy... General Electric (GE), parent company of this network, has a big wind division, but you don't buy GE for the wind division, okay?...

So, we have to look for wind plays hidden within other companies... wind plays playing hide and seek... and we found them... olly olly oxen free... which brings me to my favorite play on wind power of all...

This is a company... that is so absurd... so stupidly-named, so funny... Otter Tail Corp. (OTTR).

Yeah, OTTR... which is a strange pastiche, even a mosaic, of businesses... but mainly a boring utility serving the Dakotas and Minnesota.

OTTR is a bunch of random businesses that are in plastics, construction and potato processing, of all things... but we care about is the fact that it owns DMI Industries, a fast-growing wind tower manufacturer, that I believe could be worth as much as... well, it could be worth the entirety of OTTR... That's right. It could be worth the whole company...

I would never have known about this, without a great research piece from a firm called D.A. Davidson... Do some business with D.A. Davidson... get this research... because DMI's contribution is buried within OTTR's earnings. And, I've got to tell you, even when I went through "the Q"... the SEC document... it wasn't clear how big it is. Thank you Davidson...

The wind business contributed 27 cents to OTTR's earnings per share in 2007, up 42% - nice growth... Remember, up-30% growth is hard to find. We've got 42% growth within this company... from 19 cents in 2006.

The guys at Davidson... they believe that DMI could contribute 44 cents per share to OTTR's earnings this year... 63 cents per share to this power company in 2009. That means their wind business is set to grow... are you ready... at 63% this year. 43% next year, but it's so big that I find that incredible...

I scour the world both for wind plays, and for stocks that are up more than 30%. I found it within OTTR...

With growth like that, I have to believe that, if OTTR spun off DMI - its wind tower manufacturing business - it could unlock an enormous amount of value for shareholders, by letting people buy a fast-growing pure play on wind power, separate from the confusing mix, pastiche, mosaic of other businesses that make up OTTR...

We've got a market that's starved for wind. Remember, there aren't really any pure plays out there. So, if OTTR did do this DMI spinoff, I have to believe that the Street would leap all over it.

How much is the spinoff worth?...

D.A. Davidson sees DMI bringing in revenues of $439 million in 2009. Earlier in the show, I talked about TRN, and their wind tower manufacturing business. Let's slap the same enterprise value to sales multiple on DMI's revenues, as the one that I think TRN deserves...

Are you ready?... You get a company worth about a billion bucks... It comes to $36.71 a share...

That's actually a dollar more than OTTR's whole price. DMI is just one piece of OTTR's business, which should probably represent about 28% of the company's earnings next year...

In other words, with OTTR at $36, and the valuation of its wind division at $36, you get an implied... are you ready... double.

Why doesn't OTTR get credit for its fantastic wind business?... These guys are humble. That's why. Management doesn't say too much about DMI... It just stuffs it in with its six other businesses in its manufacturing segment.

That doesn't make me think too highly of their competence, frankly. They should be highlighting it. But maybe somebody at OTTR is watching this show, and wants to make some money...

Memo to Otter Tail... Wind is the tail wagging the otter!...

Let me give you a little more detail on the DMI segment of OTTR...

We know that the backlog for DMI was at around $289 million at the end of 2007... They've already built around 616 towers. Davidson says they have about 18% wind market share. There are some concerns about competition. I'm not that concerned about it. I'm not worried about it, because of the enormous potential for growth that the wind power industry has...

The company's expanding its Canadian manufacturing plant for wind towers. It now has three plants devoted to making them. Geographically speaking, DMI should be in a great position, because it's located close to some of the best regions in America for wind farming... North Dakota, South Dakota, Montana and Minnesota, just to name a few...

These are windswept areas, without a lot of people, so you can build a lot of windmills... you can build windmills galore!  

.  .  .  .  .

The Bottom Line!:      Otter Tail Corp. (OTTR), with its great wind subsidiary, DMI, could be the best play on wind power out there... especially if it gets it's act together and spins off the DMI....

All right, listen to me... right here, right now... The stock doesn't trade much, all right?  So let's talk about what that means. Do not pay above $37. That's your limit. That's called a limit order. No market orders.

Price target to buy: Buy below $37.00

.  .  .  .  .

 

   
 

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)


OTTR

36.01

na

Otter Tail Corp. (OTTR)

Price target to buy: Buy below $37.00

         

 

 

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