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Friday, 04/25/08
Posted 04/26/08, 08:07
am ET |
(Scroll down to see Jim's
comments below) |
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Today's date:
Friday, 04/25/08 |
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Dow Jones: |
12,891 |
+ 42 |
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NASDAQ: |
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2,422 |
- 6 |
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S&P 500: |
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1,397 |
+ 9 |
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Opening Segment 1
Title: |
'Pin Action'
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Featured Stock(s): |
Precision Castparts Corp.
(PCP)
BE Aerospace Inc. (BEAV)
See Opening Segment 2,
below...
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After this segment, you
can see Jim's Lightning
Round picks
here... |
JJC: I've
found some camouflaged
green plays... stocks that
you'd never imagine as
environmentally-friendly,
because they're as
disguised by cammo as I
am... and yet, they're
actually making money off
of green trends...
We can find our first two
hidden green plays inside
this... This is a
Boeing Co. (BA)
787 GreenLiner, and it is
poised to be the world's
greenest plane, designed
to consume 20% less fuel,
than similarly-sized
aircraft...
Now, BA has delayed and
delayed and delayed the
delivery date for this
plane, which I'm calling
from now on the
GreenLiner... But, when it
gave its most recent
guidance this week, it
didn't revise its
GreenLiner schedule any
further... which means it
looks like we can finally
recommend this plane...
But I'm not recommending
BA as a pure green play...
I have liked BA so long,
but BA is hidden in plain
sight... unlike Cramer,
and the two cammo plays I
am going to give you...
To find them under the war
paint, we have to take
apart the 787. Since 70%
of the GreenLiner's
manufacturing has been
outsourced, BA's suppliers
are the hidden green
stocks... They're the
cammo plays...
So, what's inside?...
Take the GreenLiner apart,
and you'll find not one,
but two, camouflaged green
plays...
Precision Castparts Corp.
(PCP)...
and...
BE Aerospace Inc. (BEAV).
We like PCP as an
early-cycle play on the
GreenLiner, meaning it's
making money off the early
construction of these
planes right now.
BEAV is a late-cycle
play... It makes most of
its money when BA sells
the planes, and other
companies (e.g., airlines)
furnish them with things
like seats and kitchens,
which is what BEAV makes.
These are what we call pin
action plays...
Let's start with
Precision Castparts Corp.
(PCP)...
This company is making
engine components and
fasteners for the 787 that
are roughly $5 million
worth of PCP components in
every 787... $5 million in
each one of these is
PCP... It's split 50/50
between fasteners - which
are like screws - and the
higher-margin engine
parts...
PCP's CEO has said that,
so far, it's a $4 billion
order book for the 787.
Let me give you some
context on that number...
The Street only expects
PCP to have revenues of $7
billion for its fiscal
year, ending in March
2008... so the GreenLiner
should be a big, big chunk
of its business.
I call PCP an early-cycle
play... What that means is
that BA is buying these
parts from them, and
putting them in the plane
itself... Fasteners and
engines are some of the
first things you build
into a plane...
This means this is a stock
you buy earlier than BEAV
- the late cycle of BA -
to take advantage of the
787...
Of course, PCP is about
more than just the
GreenLiner...
Half of PCP's business is
aerospace, where it makes
engine components, fans,
compressors, combustors,
air foils, landing gear
beams... this is the real
deal, right?... wing
structures, struts, tail
flaps, fasteners... You
get the picture...
In fact, PCP said that
they're in every single
kind of jet aircraft out
there... Considering that
we're only in year three
of what could be a seven
or eight year aerospace
cycle, that makes me think
that PCP is a long-term...
not a short term... but a
long-term buy, buy, buy!
Their customer base is
terrific... 17% of its
sales come from
General Electric (GE),
parent company of this
network... 17% from Rolls
Royce... 11% from
United Technologies
(UTX)...
These are companies making
money off of aerospace and
infrastructure booms, and
PCP is making money of
them.
This company also has a
power business... 21% of
revenues... making
components for power
plants that are used for
coal, nukes, oil and
gas... I mean, c'mon, this
company, PCP, has a lot
going for it... A lot of
that growth is overseas.
The CEO said in a recent
presentation that he is
seeing overall demand in
the power segment that he
wasn't expecting until
2010... He is basically
telling you that they are
two years ahead...
PCP seems like a real good
bet.
All right, on to the next
stock...
We're going to go on to
BE Aerospace Inc. (BEAV)...
This is the stuff that
falls out when you smash a
GreenLiner...
BEAV... They make the
interiors... oxygen masks,
ovens, beverage makers.
The company's CEO said
that the GreenLiner could
be a $1.5 billion
opportunity, assuming that
1,000 of these planes get
built... And that's just
slightly less than BEAV's
$1.6 billion in annual
revenues...
You get it... Another
camouflage play hidden
within the GreenLiner...
BEAV is focused on the
aftermarket from the
787... and other planes...
60% of its sales going
there...
I like this because things
like seats, which
represent 38% of BEAV's
revenues, generally need
to be refurbished every
one or two years... so
they've got this
replacement business...
The larger the global
airline fleet gets, the
more seats are out there
that need to be
refurbished by BEAV.
That's a positive shot to
the system, adding more
planes to the global
fleet, and increasing
BEAV's business...
Now, BEAV has got a great
backlog of $2.2 billion...
60% of the company's
market cap... Even better,
only 15% of that backlog
is associated with U.S.
airlines... 38% of total
North America, giving it
some real rest-of-world
credibility...
Okay, now here's the one
issue, all right...
The company reports
Monday, before the bell...
So, if you want to buy it,
be sure to do your
homework, read the
earnings release, and
listen to the conference
call...
And, if you don't know
what I mean by homework, I
want you to pick up a copy
of Jim Cramer's
Real Money,
where I explain what you
have to do before you buy
a stock I pick on the
show, to get a better
idea...
I like PCP and BEAV as
stealth, cammo green
plays, but they're also
part of one of the
long-term trends that I
like so much, that I
committed in this
Stay Mad For Life...
I have said that this
aerospace cycle, from 1995
to 2000... think about
this... the previous
cycle... PCP went from $4
to $21 bucks... 325%...
BEAV went from $7 to $16,
a 124% gain... although
the stock had been at
higher levels in the
middle of the cycle...
The latest aerospace cycle
started in 2005. These
have generally lasted five
to eight years... and,
with the 787 Dreamliner,
we're looking at an
extended cycle now...
I think we're three years
in... I believe PCP and
BEAV have a lot further to
go...
Now here's the bottom
line...
. . . .
.
The Bottom Line!:
You want camouflage green
stocks? I want you to
crack open a 787... and
what will fall out?
Precision Castparts Corp.
(PCP)
and
BE Aerospace Inc. (BEAV)...
Those are the plays on the
incredible run that
Boeing (BA)
has had just this week.
[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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PCP |
28.21 |
na |
Precision Castparts Corp.
(PCP)
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BEAV |
na |
na |
BE Aerospace Inc. (BEAV)
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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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Opening Segment 2
Title: |
'Cramer's Game
Plan
For Next Week'
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. . . .
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Featured Stock(s): |
Cummins Inc. (CMI)
See CMI's official
website
here.
See the Yahoo!
Finance profile for
CMI
here.
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After this segment, you
can see Jim's Lightning
Round picks
here... |
JJC: What if I
told you that our next
green stock was a dirty,
smokestack, industrial
company that makes diesel
engines? You might call me
crazy...
But sometimes it takes a
madman to see that, even
the least-green-looking
companies can make money,
because of something like
a political push to fight
global warming...
And that's why (I like)...
Cummins Inc. (CMI).
Yeah, remember that one?
That's right, dirty old
CMI is my next camouflaged
green play.
By the way, this is
also the stock that I
picked for my Game Plan
next week. It reports
Wednesday, before the
bell, and I think the
quarter will be good.
This is a stock that we've
had a lot of success
with... I recommended this
stock at $36.61... that's
split-adjusted... I was
betting against the shorts
that day, who thought it
was in trouble, because of
weak North American truck
sales...
CMI and Cramer proved them
wrong...
And I declared victory,
less than a month later,
on April 27th, with the
stock up at $48... a quick
31% gain...
At the current price, the
stock's up 53%, from my
Indiana University
recommendation (on
April 4th, 2007)...
Now... What makes this
engine company so
green?...
All over the world,
governments are increasing
their emissions standards
for trucks so that they
run cleaner... releasing
less pollutants...
especially carbon dioxide
into the atmosphere.
CMI has been one of the
most proactive engine
makers, in terms of
responding to tighter
emission standards...
They make fuel injectors,
filters and turbo chargers
for trucks that make their
engines run cleaner than
other companies'
engines...
Based on this head start,
it seems to me that this
is a company with a clear
technological advantage,
when it comes to making
greener engines... They're
looking forward, designing
engines to be compliant
with emissions
regulations, well into the
future. They're already
testing 2010 compliant on
highway engines, and
integrating 2011
compliance...
It's very unusual to see a
company this far ahead...
You know, most of the
companies fight the rules.
CMI embraces them.
The engines CMI makes...
on average... 6% more fuel
efficient than ones made
by Cramer-fave
Caterpillar Inc. (CAT)...
CMI and Navistar
International Corp. (NAVZ.PK)
are supposed to be in the
lead, with the next
generation of 2010
emissions-compliant
technology. But since NAVZ
is vertically integrated,
it's likely to benefit
from this less than CMI...
because it's less likely
to sell its engines to
competitors, which is what
we really need, when we
spread out...
Beyond the green engine
business, CMI is eating
CAT's lunchables... with
other types of engines.
CMI's share in heavy-duty
engines has gone from 25%
to 43%. Its share of
overall Class 8 engines
has gone from 25% in
January of 2007, to 42%!
This is the biggest share
take I've seen by a major
American company, since I
started Mad Money...
In the same period, CAT's
share went from 25% to
11%... To put it bluntly,
CMI is
pants-ing CAT...
CMI is also gaining share
among all truck
manufacturers... It's now
the largest supplier to
Paccar Inc. (PCAR)...
it had some big gains
there.
Right now, CMI is super
cheap, cheap, cheap...
It's trading at just 10x
earnings, 21% long-term
growth rate... It's
average price-to-earnings
multiple (i.e., P/E) has
been in the 20x earnings
range historically...
I wouldn't be surprised...
yes, here I come skee
daddy... that we could
get a double here
eventually.
Now for the Game Plan
element...
The company reports before
the bell on Wednesday, and
I've got a good reason to
think that CMI will beat
the numbers.
You know why?...
Volvo AB ADR (VOLVY.PK)
reported a great number
today, and Volvo is
trucks... They sold their
passenger car business a
long time ago.
CMI is in 27% of Volvo's
North American Class A
trucks, so we're
extrapolating here... If
Volvo had a great quarter,
to me, that says that CMI
should have a great
quarter...
Here's the bottom line...
. . .
. .
[See Jim's
previous extensive
comments and
argument to buy
CMI
here.]
. . . .
.
The Bottom Line!:
Cummins Inc. (CMI)
is a green sheep in
industrial wolf's
clothing... with its
fuel-efficient,
low-emissions engines, and
it reports before the bell
next Wednesday. If you
want the Game Plan next
week, pull the trigger
ahead of the earnings...
Maybe even ring some
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