Wednesday, 05/14/08
Posted 05/14/08,  11:59 pm ET

(Scroll down to see Jim's comments below)

 
 
Today's date:  Wednesday, 05/14/08

  Dow Jones: 12,898  + 66
  NASDAQ:   2,496   + 1
  S&P 500:   1,408   + 5
 
 
 
 
 
First Segment
 
 
Opening Segment 1 Title: 'Knock On Woodward'

.  .  .  .  .

Featured Stock(s): Woodward Governor Co. (WGOV)

See WGOV's official website here.

See the Yahoo! Finance profile for WGOV here.



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

        
JJC:    I've got something for you... I've got something... You've never heard of it. How would you like to own a stock that is geared to everything that is working in the stock market... everything!...

Would you like it even better, if the stock were radically - if not criminally - undervalued?... and mostly flying under the radar of Wall Street?... Do I have your attention?...

Now, how about this?... How about if the earnings estimates are way too low, setting the scene for repeated better-than-expected quarters...

Okay, I've got one for you that's better-than-expected... I think you can find all of this better-than-expected, cheap, criminally-undervalued notions in one security... and that security is...

Woodward Governor Co. (WGOV)!...

This one is up a solid 17.4% since I recommended it last year, July 16th... The S&P has come down 8.5% since then... and, yet... I knew it was good then, okay... but what I didn't realize, when I first profiled this for you, was how this company represents the new technology idea that I am going to harp on. I need to break the habits of those old Silicon Valley lovers...

My "new tech" companies are industrial manufacturers. These are the ones that are innovating... That's what "old tech" used to do... They used to innovate... they used to solve real problems. Not anymore...

These "new tech" companies create solutions to the problems of whole countries and companies around the world... solutions that are in global demand...

WGOV has "new tech" written all over it...

WGOV makes systems that are designed to improve the energy efficiency and emission control of gas and diesel engines, along with steam turbines and compressors, in its engines systems segment.

What is that about? Saving energy. In its turbine segment, it builds systems that are made to improve the energy efficiency and emission control of aircraft and industrial gas turbines...

These are the solutions we're looking for... You find these improved engines in commercial, regional and military aircraft. In fact, WGOV has got exposure to the Boeing 787 Dreamliner... Obviously, even with all that exposure, and with all the delays in the Dreamliner production, WGOV still managed to beat the Wall Street estimates... and it did it six straight times...

Can you imagine how much better it will do when the Dreamliner starts to ramp?...

Then there's the wind angle... And you know, on Mad Money, we love wind... We love it more than any other source of renewable energy, because it's the cheapest source... not just of renewable, but of all energy.

WGOV gets wind... The company has an electrical power systems segment, where it makes systems that are designed to improve power sensing and electronic controls of generator sets... and wind turbines! You know I think 2009 is the year of the wind... and WGOV has the jump on it...

WGOV has been a real forward thinker, in terms of wind. It bought SEG, a German designer and manufacturer of power generation products, including a lot of wind, all the way back in October of 2006...

This is the next one... WGOV's wind business has been on a tear! I was listening on the conference call... Management has said that it now thinks wind power could be a $100 million business by the end of the company's 2008 fiscal year. Previous forecasts were for $60 million... And, in fiscal 2007, it brought in $40 million...

This wind business looks like it's set to grow 150% a year... Do you think Cisco (
CSCO)'s got that kind of growth? National Semiconductor (NSM)? Analog Devices (ADI)?... Western Digital (WDC)?...

This growth in wind, at WGOV, is completely fabulous... but I expect no less from any company with good wind exposure.

On the conference call, the company told us that wind was growing - are you ready - at "an exceptional pace." I think that's the understatement of the year. Now, WGOV seems to be doing its best to grow the wind business too. It added a major Chinese wind turbine manufacturer, and it announced plans to build a factory in Colorado, to make wind turbine inverters. The big slowdown in wind adoption, is that we don't have enough turbines. WGOV's got them.

Right now, as with most "new tech" stocks, WGOV is being treated like a cyclical stock... you know, the up, down... up, down... I think that's just wrong.

WGOV has its hands in every secular growth trend we like... meaning to me, that the numbers are way too low... Because I think even analysts who do cover the stock just don't get it...

How cheap?... How cheap is WGOV?...

It trades at 18x forward numbers... Wait a second... it doesn't add up... it doesn't add up... In the latest quarter, sales grew 19%... earnings were up 48%... The consensus long-term growth is 12%... Again, I think it's all based on the erroneous premise that this is a cyclical company...

I regard those numbers as next to useless... WGOV, it knows how to deliver. It's beaten the consensus for six quarters, right?... Never by less than 4 cents a share... This is a stock where I think both the price-to-earnings multiple, and the earnings are going up. Remember the equation I teach... Go into Real Money (see his book)... Remember, "M" times "E"... the multiple (i.e., the P/E) times the earnings equals the stock price... So, when both go up, the price should increase enormously...

I think it's conservative to assume that assume that WGOV will grow at 27.8%. If I'm right, that means we can assume, at the very least, that it should get a price-to-earnings multiple of around 27.8...

Okay, do the math... do the arithmetic... At that multiple, this $35 stock will become a $53 stock! A 51% gain... It could go much higher than that, if it beats the numbers... which I think it definitely will...

Now, the bottom line...

.  .  .  .  .

The Bottom Line!:      Woodward Governor Co. (WGOV) has everything I want for a "new tech" stock.  You know what I'm talking about... the Emerson Electric (EMR)s of the world... the Honeywell (HON)s...  I mean, these are companies that are reinventing the whole equation.  It's even cheaper than all those "new tech" plays and, considering how undervalued they are, WGOV... that's saying something.

 

.  .  .  .  .

 

   
 

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)


WGOV

34.64

na

Woodward Governor Co. (WGOV)


       

         
 

 

 



See all of tonight's stocks' latest quotes on Yahoo! Finance



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Second Segment
 
 
Opening Segment 2 Title: 'CEO Interview'

Bruce Carbonari, CEO

.  .  .  .  .

Featured Stock(s): Fortune Brands (FO)

See FO's official website here.

See the Yahoo! Finance profile for FO here.

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

        

Jim's comments BEFORE the interview:       All right, tonight, I'm talking to you about a real pastiche... a veritable mosaic of a company... Fortune Brands (FO)...

This four parts liquor...  it's two parts faucets and cabinets... and one part golf balls...

The last time I featured FO was back during the good old days of the housing bubble... I said I liked it as a play on the war between the homebuilders...  That was back on August 2nd of 2006.  The stock was at $72.89...  Obviously... a lot has changed since then...   You can't expect a company that makes faucets and cabinets to hold up that well, when the housing market it falling apart.  Even if, as with FO, 67% of that business comes from the remodeling market... a much more steady market than the new market, okay... much steadier...

Now, back on March 7th of this year, I brought on Bruce Carbonari, the CEO of Fortune Brands... a brand-new CEO... when his company's stock had fallen to $65.88...   My judgment was that that was too big a decline, and that you should buy FO, if you thought housing would turn around in the next six months... Okay, it's only been three months... three months since I've had Mr. Carbonari on.  But, with the stock now at $70 and change, it's up 7% since his last visit...  So I feel good about the call of a buy, even though my logic - which was that housing had to turn - hasn't come true yet.

A lot of the positive action in the stock came when FO lost to Pinnote Picard, in a war to acquire this... Absolut (vodka brand)...  The stock went up six straight points that day, March 31st, on the news it wasn't buying Absolut... and then, of course, the announcement they were taking that money - because these guys were very pro-shareholder... always have been... of a 15 million share buyback, of 10% of shares outstanding.

Now, we come to the key question... Do we keep owning the stock?

The last time FO reported, back on April 24th, it missed the Street's consensus numbers... but maybe that's not the whole, full picture...  but it missed by 3 cents.   It narrowed 2008 earnings guidance to the lower end of its previous range.  We knew home and hardware would be bad, but FO continues to cut capacity there, and focus on the remodeling market... To me, it looks like the spirits division got hit, thanks to an inventory cut by a distributor.  Very complicated stuff... but let's just say it wasn't as bad as it looks... Despite all of this negativity, FO still reaffirmed its free cash flow guidance of $760-860 million in 2008. 

The stock has made money for believers, but that earnings report was a slap in the face for some of the bulls...  So, to find out to do with the stock... and what's going on with the company... and to find out how the housing market is, because you know I think it's the key fulcrum to everything we talk about on the show, I'm once again bringing on the CEO of Fortune Brands (FO)... Bruce Carbonari.  Bruce, welcome back to Mad Money...

.  .  .  .  .

Jim's comments AFTER the interview:       Here's my take... If we get any sort of end to the house price depreciation, your stock rockets faster than anybody else in the game...  Always frank, always honest, always to the point...  Thank you sir.

 

.  .  .  .  .

 

   
 

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)


FO

70.91

na

Fortune Brands (FO)

         

 

 

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 >>
   
Helpful Websites:
  See the stocks currently known to be in Jim Cramer's
Charitable Trust at:

jim-cramer-charitable-trust-stocks.com

 
See the stocks currently known to be in Warren Buffett's portfolio
of stocks at:

warren-buffett-portfolio.com

 
  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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Fast Money Recap - Trades for next day...

Compare these picks to Jim's comments for the same stocks.

 

 

   
   
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