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Tuesday, 05/27/08
Posted 05/27/08, 8:43
pm ET |
(Scroll down to see Jim's
comments below) |
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Today's date:
Tuesday, 05/27/08 |
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Dow Jones: |
12,548 |
+ 68 |
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NASDAQ: |
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2,481 |
+ 36 |
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S&P 500: |
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1,385 |
+
9 |
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Opening Segment 1
Title: |
'Smooth Operator' |
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. . . .
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Featured Stock(s): |
Kaydon Corporation
(KDN)
See KDN's official
website
here.
See the Yahoo!
Finance profile for
KDN
here.
See Opening Segment 2,
below...
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After this segment, you
can see Jim's Lightning
Round picks
here... |
JJC:
Every good law-abiding
citizen of Cramerica knows
that our favorite source
of renewable energy... the
one that's the cheapest...
the one that's been making
companies money right
now... is the mighty
wind!... Wind power...
yes, wind power...
It may be the best form of
renewable energy...
something we have to care
about, even if oil is down
$3 bucks from $130 (cost
per barrel)...
Wind... 4 cents a
kilowatt... cheaper by
half than the next
alternative... clean as a
whistle, even if it does
whistle pretty loudly...
So great, in fact, that
I've declared 2009 the
year of wind! Just like
2008 is indeed turning out
to be the year of natural
gas... But, unlike natural
gas, where we've got so
many (stock plays)...
where we've got the
Apache Corp. (APA)...
where we've got the
Anadarko Petroleum
(APC)...
we've got the
Chesapeake Energy Corp. (CHK),
we've got the
Southwestern Energy Co.
(SWN)...
No. There are very, very
few pure wind plays...
So, we have to get
creative, and find
companies where the wind
business is hidden inside
of something else...
stealth wind plays, if you
will...
Today, we've got one of
the great stealth plays
left in my universe...
Actually, it's the last
one I have left...
The last great wind play
in my series on wind is...
Are you ready,
skee-daddy?...
Kaydon Corporation
(KDN)!
On the face of it, KDN is
boring manufacturing,
okay... It manufactures
bearings... anti-friction
bearings, split-roller
bearings... along with
shock absorbers, gas
springs, rotary dampers,
engine rings, filtration
systems...
Yeah, you're yawning about
these systems, right...
unless you're a "new tech"
aficionado... like Cramer,
who recognizes the value
of bearings that reduce
friction... When you
reduce friction, you
increase efficiency for
the manufacturers who are
actually trying to solve
the world's problems, and
making money doing it...
Real world problems!...
In that case,
anti-friction bearings
shouldn't be putting you
to sleep... No... I don't
want to hear this, when I
hear anti-friction
bearings (sound of a heart
monitor, going
flat-line)... I want to
hear this (all aboard!
sound)... Just in case you
conked out when I was
talking about bearings,
let me give you a little
wake-up call...
KDN is the market leader
for wind power bearings...
It's got 50% market
share...
I bet you never even
thought about a wind
bearings play but,
wherever there's motion...
bearings will be there.
And, when that motion
comes from the turning of
a windmill, KDN's the
company to go to...
In 2007, KDN's
wind-related sales came to
$35 million. I know, I
know... Only 8% of the
company's total revenues
last year... But, by 2009,
wind is expected to grow
to 20% of KDN's sales...
that's $108.2 million in
two years...
In two years, KDN's wind
business is expected to
triple... Can you believe
that? We've got to get in
ahead of that, don't
we?... And this is based
on a bunch of what I think
are low-ball sales
estimates that I am pretty
sure the company can
easily exceed.
Already, wind makes up
almost half of KDN's $320
million backlog... That's
terrific.
Now, because KDN had been
investing in, and
expanding, its wind
capacity, its margins had
been held back. It's not
making as much money as it
should yet. I think that
overhang should be lifted,
as the volume of wind
sales picks up... and we
know that's the case...
because the single-biggest
issue with wind is we
don't have enough
turbines!...
KDN reminds me of
Trinity Industries Inc. (TRN),
another stealth wind
stock...
TRN makes railcars...
Nobody cared about its
wind tower business...
until we mentioned it on
the show, and then, a week
later, it blew away
earnings, thanks to its
wind division... The stock
has yet to look back from
when we liked it...
Then we had
Owens Corning (OC)...
Another one that hasn't
looked back, reminiscent
of KDN... a company that
everyone thinks of as an
insulation play levered to
housing... I would look at
it as an emergent wind
play, as it makes the
heavy-duty flexible
composite materials needed
for new windmills that
have wingspans often as
large as a Boeing 747...
and need the sturdy
materials only OC can
provide, in order to
capture wind energy... You
have no idea how hot these
windmills can get. You
need special fibers.
Or how about
Thomas & Betts (TNB)?...
A lot of wind-related
hardware there... And
Emerson (EMR),
a classic "new tech" play,
which makes the components
for the turbines, among
others, including
Siemens (SI)
and
General Electric (GE),
parent company of this
network... You split open
a turbine... out tumbles
EMR... And don't forget
Woodward Governor (WGOV)...
kindred to EMR... but back
to the stock at hand...
While we wait for KDN's
wind business to pick up -
and I don't think we'll be
waiting very long, frankly
- I don't think we have
the worry about the rest
of the company. It's
selling bearings and other
friction and velocity
control products... "new
tech"... with some great
end markets.
At KDN, 50% of sales are
coming from automation...
heavy industrial mobile
equipment, defense,
aerospace, power
generation... This
company's making the nuts
and bolts of all that "new
tech" needs, that I've
talked about endlessly on
this show, and will
continue to do so...
This company's exposure to
residential construction
and autos in North America
is less than 10%, so you
don't have to worry... you
don't have to sweat...
I mean, you've got to
contrast that with another
company I really like, but
I have not recommended...
That's ball bearing maker,
Timken (TKR),
which has a good wind
business, but way too much
automotive exposure for my
taste.
KDN... shareholder
friendly... a buyback of
epic proportions... 4.1
million shares are left in
its repurchase
authorization... That
comes to around 14.8% of
the company's total
shares...
I think one of the reasons
why the stock has hung in
there - it's only a point
below its 52-week high -
is that it's been
bolstering the stock, and
its boisterous buyback...
but also because, while it
looks expensive, I think
it can go much higher...
It's only trading at 19x
expected earnings. Oh...
19x... You think that's
high? No. Remember, it's
versus growth rate... and
it's got 14.5% long-term
growth rate... And I think
these earnings numbers are
low. I don't think they
take into account just how
strong wind will be for
KDN.
The analysts that are
covering... they're all
kind of from these obscure
firms and I've got to tell
you something... As soon
as wind catches their
attention, I think the
stock's in for one wild
ride higher...
The Bottom Line!:
For a great stealth play
on wind, I think you
should stick
with Kaydon Corporation
(KDN).
. . . .
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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) |
|

|
KDN |
59.11 |
60.90 |
Kaydon Corporation (KDN)
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See all of tonight's stocks'
latest quotes on
Yahoo! Finance |
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Most popular
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(click any book to see at
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NEW RESOURCE!
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|
Opening Segment 2
Title: |
'Generation SPX' |
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. . . .
. |
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Featured Stock(s): |
SPX Corporation
(SPW)
See SPW's official
website
here.
See the Yahoo!
Finance profile for
SPW
here.
|
|
|
After this segment, you
can see Jim's Lightning
Round picks
here... |
JJC:
"New tech" versus "old
tech"...
On this show, I have been
going on and on about the
difference between the
two... perhaps ad
infinitum... or, perhaps,
ad naseum...
And, today, we got a great
demonstration of why I
should keep talking...
Hey, let's go to page B5
of a much better Wall
Street Journal than it
used to be... The title of
the article is...
"Graphics Chips Reshape
the Battlefield"...
Sorry... It's about how
Intel (INTC),
NVIDIA (NVDA)
and
Advanced Micro Devices
(AMD)
- all "old tech" to the
bone - are in, and I quote
- "a bruising battle over
chips that draw the
animated landscapes in
computer games"...
Wow... I wonder how much
energy INTC's saving with
this initiative...
While these "old tech"
companies work to better
virtual landscapes, may I
ask a plaintive
question?... What are they
doing to improve crop
yields on real
landscapes?... How about
designing chips that
protect real U.S.
soldiers, or give them
better equipment to see
the people who are trying
to kill them?... instead
of making chips that give
us more detailed
renderings of Nazis in
"Call Of Duty"...
Even the "old tech"
stalwarts seem to be
figuring out that the day
of "new tech" has
dawned!... There was a
great article in this
week's Barron's about how
"old tech" was feeling
stale at the Churchill
Club's 10th annual top 10
tech trends dinner... This
is a dinner for all the
big... tech investors, and
Barron's - which gave us a
nice shout out for our
"new tech" rant, as they
called it... pretty much
agreed with our conclusion
that there was no real
innovation going on in
Silicon Valley anymore...
Today, I want to give you
a company that may very
well be the apotheosis of
new technology... "new
tech" being the companies
that are innovating to
solve the biggest problems
facing humanity...
A week ago, I gave you
a list of what I, and
Dr. Smalley from Rice
University, think are the
top 10 of these
problems... and the stock
I'm about to reveal seems
to address almost all of
them... and the company
is...
SPX Corporation (SPW)!
Right off the bat, let me give you
a taste of SPW's "new tech"
credentials...
It makes better valves used in the
newest lines of nuclear
reactors... clean energy... and
crystal growers for solar
power!... How's that for solving
the global energy crisis?...
Back on May 19th, SPW had a
conference... This is
a must-read slide show...
where they laid their key external
drivers... six of them... and
every single one was one of the
big issues of the day that "new
tech" companies are trying to
solve, while "old tech" companies
systematically ignore! | | | | |