After this segment, you
can see Jim's Lightning
Round picks
here...
JJC:
What do you do on a day
like today?... When
the market's down about
200... and smacks you
around so hard, you prefer
a nice vacation... to the
shellacking you're out
there getting...
No... On bad days,
we do one thing...
We go back to
long-lasting, long-term
themes...
. . . .
.
You know the themes...
you've been there with
us... We like
agriculture... oil and
gas... infrastructure...
minerals... aerospace...
all of which do better, as
oil rises, and gets closer
to my price target of $150
smackers a barrel...
These are the themes that
will let you sleep at
night, and not have
nightmares about all the
red that's on the tape
today. I bet you would
have almost broken even
today, if you'd just
followed the themes...
You know what they do...
they let you buy at
cheaper prices. Not sell
low, after buying high...
Today, I'm adding a new
theme to the list... one
that I wish I had before I
wrote my last book...
because it's one that's
kind of come to me, over
the course since we
started our fourth year on
Mad Money... It's one
we've talked about
lately... but, today,
right here... it's joining
the pantheon of big
themes... the ones you
always have to go back to,
after a bad day... and it
is... "new tech"...
Now, I've given you "new
tech" stocks by the
dozens... You know,
Eaton (ETN)
and
Emerson Electric (EMR)...
First Solar (FSLR),
Parker Hannifin (PH),
Cummins (CMI)...
The list goes on and on...
But, today, I want to take
a step back, and truly
define what makes a new
technology company, so you
can help me find new
technology companies...
not just what separates
the "new tech" from the
"old tech"... You know,
the
Cisco
(CSCO)s,
the
Intel (INTC)s
and the Take-Two (TTWO)s
of the world... that only
care about better gadgets,
or better felon training
software... that is, Grand
Theft Auto... or stuff
that helps your employees
sell four more gizmos than
the other guy...
So what defines "new
tech?"... I've been
focusing a lot on
industrial manufacturers
that invent things that
solve the world's
problems... But not every
smokestack stock deserves
the "new tech" mantle...
These are the companies
that are engineering
solutions to the
long-term, big-picture
problems of the entire
world... They're
profitable do-gooders...
but only because, as the
"old tech" companies used
to understand, solving
problems is where the
money is.
. . . .
.
But which problems?...
There's a great chart,
from Dr. R.E. Smalley, at
Rice University, listing
10 needs of humanity over
the next 50 years... These
define what I am talking
about, when I say "new
tech"... and that "new
tech" is addressing the
important issues of the
era... You are "new tech"
if you're developing new
solutions, engineering new
products that help meet
these ten needs... So,
here's the list...
[Jim then listed his "Top
10 Needs of Humanity - for
the next 50 years", as
shown below]
Energy.
Creating more of it, using
it more efficiently...
something almost all of my
picks have in common,
because I've been focusing
on energy almost
forever...
Eaton (ETN)
and
Emerson Electric (EMR)
are two good examples.
Food.
You can think of
Deere (DE)
as a "new tech" stock, or
Monsanto (MON)...
I'm trying to rationalize
how
Agrium (AGU)
or
Mosaic (MOS)
can be, because they're
really just fertilizer
makers... but there's tech
involved there too, but
I'm not going to give them
that much credit. MON and
DE are innovating to make
it easier to make more
food with greater
efficiency. Count
DuPont (DD)
in there too. Maybe
Bunge (BG)
and
Syngenta (SYT)
in Europe.
Water.
This will be the next
great shortage after
oil... which is ironic
that ethanol uses a
gigantic amount of
water... another reason
not to like ethanol... And
any company that's making
products that improve our
use of water... recycling
it, improving it, or
decayed domestic water
infrastructure... well,
they're all "new tech."
I've been using
Tetra Tech (TTEK).
That's a great example.
Environment.
I've given you lots of
these. These are companies
that control and reduce
carbon emissions and make
cleaner energy. I want you
to think about
Cummins (CMI),
or
Owens Corning (OC)...
They're all "new tech"...
Poverty.
This one should encourage
you to get creative...
but, yes, companies that
are focusing on making the
bare necessities cheaper,
and more cheaply, are part
of the solution. I'm
working on good stocks to
meet the poverty
challenge. I am not
confident enough to reveal
them yet to you.
Terrorism/War.
That puts a lot of the
defense stocks that we've
liked forever... that's
one of our five themes...
into the "new tech"
category... Today,
Raytheon (RTN*),
which I own for
my charitable trust, was down
almost a dollar... That
makes it cheaper... You
know
General Dynamics (GD)
has long been a favorite
here.
Disease.
Yes, those who can make
more efficient and
effective medical
technology... particularly
diagnostics, okay... Those
are companies that are the
arms dealers to biotech.
These all fit the "new
tech" rubric... I like
Thermo Fisher (TMO)
for that but, again, it's
a work-in-progress for
me...
Education.
Now, I've yet to find a
good "new tech" stock that
fits... I thought I had
one yesterday, and then
the Justice department
opened an investigation
against it, so that wasn't
right... Now, I've got
some in mind that could
pan out in the
not-too-distant future
though... These are
companies that give people
the skills they need to
address all the other
problems on the list...
Democracy.
I know it sounds a little
silly, but there's a lot
of infrastructure you need
on the ground before you
can get a functioning
democracy... something we
learned in Iraq... and any
company that's improving
the technology, that
creates the conditions for
democracy... for a
functioning state that's
stable enough for a
democratic government...
well, you put a lot of
infrastructure stocks in
this category, and they
deserve to be called "new
tech"...
Population.
Right now, there are 6.3
billion people on earth...
In 2050, they will be 8-10
billion... And all the
companies that are making
it possible to support
this population growth,
and the ones that help
slow it, also fall into
"new tech"... I'm working
on hygiene stories, just
so you know, to meet that
need.
. . . .
.
This is my playbook for
the next, I don't know,
five years of Mad Money...
That's how vital I think
the needs to humanity
are...
When I ran my hedge fund,
there was a great guy, Bob
Farrell at Merrill
Lynch... He identified
major themes, and then fit
the recommended list to
it. It was the most
effective thing I've ever
seen in my whole research
career. I'm trying to
duplicate that right here
with these top 10 needs of
humanity.
These are the 10 big
needs. Any company that's
innovating, that's
applying technology to
help meet these needs,
belongs to the "new tech"
family, and will be
featured right here...
Vital, unmet needs do not
include internet security;
cooler, hotter cell phones
with different colors;
smaller cameras; bigger TV
screens... Yet that's the
standard definition when I
hear "tech"... What
everyone else says is
tech, I say is "old
tech"...
We will visit all of these
unmet needs, and pick
stocks that meet them,
over and over and over
again... Why?... Because,
when the market is down
horribly, like it was
today, you need themes to
backstop you... to let you
say, you know what... I
don't mind buying more of
it. These themes aren't
going away. They are
50-year themes... And
(these themes) allow you
to buy more, rather than
to cut and run...
. . . .
.
The Bottom Line!:
Now you know what defines
"new tech"... when I come
in here and say
Emerson Electric (EMR)
is a "new tech" story...
or
Eaton Corp. (ETN)
is a "new tech" story...
The 10 unmet needs of
humanity... And now tech
is part of the pantheon of
ag, oil, minerals,
infrastructure, aerospace,
and defense... the groups
of stocks that you buy for
less, on a down day,
because you believe
they've got a great theme,
a powerful theme... These
stocks, when they go down,
are actually cheaper, and
the themes will take them
higher eventually...
. . . .
.
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JJC: I've
been preaching the gospel
of "new tech"... the
mostly industrial
companies that are
innovating, to create
technology that solves
real problems... not just
also-ran chip makers that
let you get sleeker cell
phones...
And, in keeping with that,
I've got a classic "new
tech" stock... a company
that was "new tech" at the
turn of the century...
the previous century...
with the original
McCormick Harvester... and
is now "new tech" once
again, at the turn of the
21st century...
And that company is...
Navistar International Corp.
(NAVZ.PK)...
Think about it for a
second... At one time,
tech tackled world hunger,
right... at the turn of
the 20th century... Now we
think of tech as tackling
the desperate need to
trump Guitar Hero with
Rock Band II...
Navistar is not like that.
It's like the original
Harvester... new tech
then, and new tech now...
Navistar is our "new tech"
truck and school bus
company... the education
part of the list...
The company has 60% market
share in school buses...
but that's not what we're
excited about... It's got
38% share in Class 6 and
Class 7 trucks, and 26%
share in Class 8 trucks...
the big guys...
. . . .
.
But Navistar is not a
keep-on-trucking kind of
company... They're a
keep-on-trucking-more-efficiently-with-fewer-emissions
kind of company.
Other than
Cummins (CMI),
Navistar is the leader in
fuel efficient engines.
Remember our themes... If
you can cut back the use
of energy, you're a
winner... This sets it
apart from other truck
makers that are just plain
old smokestack industrial
stocks with no "new tech"
component...
Navistar has plenty of new
tech...
This was first company to
enter production of hybrid
commercial trucks and
school buses. Hybrids
work... big cutbacks in
emissions. It's got all
kinds of
environmentally-friendly
power-saving products...
An auxiliary power unit
that's designed to help
trucks produce power
without idling the
engine... And this is a
huge one... Navistar has a
line of MaxForce diesel
engines that are supposed
to save 9-13% of fuel,
compared to similar
non-fuel efficient
engines...
. . . .
.
I also want to throw in
that Navistar has a very
strong military
business... The company
thinks it could become a
$2 billion business for
them. You know what they
make is the MRAPs - those
mine-resistant vehicles...
along with tactical and
support vehicles. By
fiscal 2009, Navistar
expects $15 billion in
sales and $1.6 billion in
profit.
They have a parts revenue
of $2 billion... Once you
buy their product, you
have to buy the
replacement parts to keep
it going... It should be a
great source of recurring
business...
. . . .
.
Now, Navistar is more than
just a "new tech" story.
It's also a company
getting its act
together... This is really
important... because you
have no idea how much of a
catalyst the next element
of this story is going to
be...
Navistar was de-listed
from the New York Stock
Exchange, back in 2005...
some accounting issues...
they're behind them. It
will soon be eligible to
be re-listed. I think
that's going to produce a
huge gain.
Listen... I recommended
this stock
on September 25th of last
year, because it was
set to start filing
restated financials on
October 25th... That was a
promise the company
fulfilled. That's when it
started filing... The
stock was at $60 bucks
then, okay... and now it's
trading at $68.70, giving
you a 14% gain, if you got
in on my recommendation...
The market's done
horribly. This has done
much better.
See, Navistar got
de-listed from the New
York Stock Exchange,
because it screwed up the
financials. But, once it
files its
10-K for 2007 - which I think could happen any week
now - it's going to be
eligible to be re-listed
on the New York Stock
Exchange. That will bring
in a lot of institutional
money, that takes a stock
up when they want to get
in. That money is staying
away from the stock,
because it's on the
bulletin board right
now...
You see, now this stock is
toxic... because lots of
funds can't own the stocks
that don't have up-to-date
financials. Navistar is a
pariah, a leper... the way
Terex (TEX)
- a Cramer-fave
construction equipment
company - was not that
long ago, when it wasn't
up-to-date with its
filings. That's another
name that I pushed hard
for you, saying the
financials were about to
be filed.
You caught a double when
TEX finally put their
accounting problems behind
them. I think you can do
the same with Navistar...
Plus, I think Navistar
would make a great
acquisition candidate,
once it has up-to-date
financials. It makes tons
of sense, as part of a
larger industrial company.
Again, that will not
happen until its
10-K gets filed. It's too risky for an acquirer to
buy a company that doesn't
have current financials.
. . . .
.
All right, let's talk
about price targets...
where this thing could
go...
Right now, Navistar's
trading at a pathetically
small 7.7x expected 2009
earnings. That is
ridiculous!
Paccar (PCAR)...
the same business...
hasn't been de-listed, and
trades at 11.6x forward
earnings... So, in other
words, you get this thing
to file, and I think it's
every bit as good as PCAR,
if not better.
Now, if Navistar got
Paccar (PCAR)'s
valuation... (the stock
price would be) $104...
That would give us a 51%
gain. Give it a 10%
discount to PCAR... The
stock would still go to
$94... a 37% gain.
I don't even want to tell
you what Navistar would be
worth if you gave it the
multiple of a great
company like
Cummins (CMI)...
I'm not even going to tell
you, okay... because you
wouldn't believe me if I
said $135... a double...
so there's no way I will
share that with you... I
promise... You will never,
ever hear that $135 number
from my lips...
. . . .
.
The Bottom Line!:Navistar International Corp.
(NAVZ.PK)
is a classic "new tech"
company, with a great
catalyst, that should send
the stock much higher. I
think it's too cheap. I
nailed it once. I think
I'm nailing it again... I
think you should get in,
before it becomes
expensive, when the
paperwork problems get
cured.
. . . .
.
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Definitions of key phrases
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the decision at that point to trade -
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stock price come down briefly, as your
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the rest of your position (i.e., total
number of shares you own in that stock).
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