After this segment, you
can see Jim's Lightning
Round picks
here...
JJC:
With oil trading
erratically today... at
one point, down $3 bucks,
and then rallying... which
some view as a sign of a
top in the petrol
stocks... something we
here at Mad Money disagree
with vehemently...
you now have a great
opportunity to get into
some of the best plays on
high oil. And,
believe me, it will stay
high, even with days when
it drops - like today -
before it rallies.
What, pray tell, is the
best way to play high
oil?... I mean,
sky-high oil?... ... not
just regular, but
sky-high?...
Well, you know what we've
been doing all week...
It's the wildcatters...
which is why this is
"Wildcat Week" on Mad
Money... We're talking
about companies that drill
for oil and gas in new and
unexplored places...
including wacky ones like
Pennsylvania and
Illinois... I mean, places
where I didn't think there
was any oil.
Today's wildcatter is
Range Resources Corp.
(RRC)...
This company is believed
to be the largest player
in the Marcellus Shale...
It's definitely the
oldest, when it comes to
milking these giant
Appalachian fields...
including the birthplace
of where oil was first
found in this country...
the Keystone State... and
the stock made a big move
earlier in the year, when
the spotlight was entirely
on this... okay...
entirely on the Marcellus
Shale alone...
In fact, at one point, at
the end of March, it was
the biggest percentage
gainer in the whole S&P
500... everything,
including the ag stocks...
But, since then, the
spotlight's faded, except
on Mad Money, and the
Street's getting worked up
on other plays, like the
Bakken Shale and, most
recently, the Haynesville
Shale... They're
attracting the hot money
right now.
RRC has pulled back from
its high of $76.81, less
than a month ago... It's
just $64 right now,
because of all that
attention shifted away
from this (Marcellus
Shale)...
We don't care, as long as
it stays on natural gas,
because the spotlight on
the fuel of the year in
Cramerica has made us a
lot of money. We also
don't care, because 99% of
America doesn't know what
shale is, let alone all of
these cool shales that
will help the dream of
energy independence... or,
at least, higher stock
prices... come true.
But Marcellus Shale is
still big... and so is
RRC...
. . . .
.
With some of the spotlight
off of Marcellus Shale,
RRC now has a chance to
catch up to the newer,
hotter wildcatters that
we've been featuring...
It doesn't matter which
shale play the Street is
salivating over at the
moment... What matters is
who can find oil and gas,
and that's a contest that
maybe you should put your
money on RRC to win...
2.2 trillion cubic feet of
reserves, with another
potential 16-21 trillion
cubic feet of natural gas.
Remember, 2008 is the year
of natural gas. This is
throughout all its
properties... 8 to 10
times more than its proven
reserves...
. . . .
.
RRC isn't just in
Marcellus. It's a big
player with exposure all
over the place. The Huron
Shale... there's another
one... This one's in
Kentucky, where it could
have 0.8 to 1.5 trillion
cubic feet... Our old
friend, Barnett Shale...
it's got 1.4 trillion
cubic feet. How about this
one?... The Woodford Shale
in Oklahoma, with 300
billion cubic feet, plus
400 billion cubic feet in
the old-fashioned Permian
Basin, which we always
knew about... and 200
billion cubic feet in
Floyd Shale in Alabama...
Are you getting the
picture?... Are any of the
politicians getting the
picture?... We actually
have a lot of natural gas
in the country but, no...
they're too busy trying to
stuff us with ethanol.
RRC has its hand in so
many different shales...
we call that
diversification on this
show, and we like it...
that I think it's more
likely to be successful
than a wildcatter with
just one or two different
prospects, even though we
have profiled those this
week.
RRC is also a low-cost
operator, and this is why
you need to focus...
because, in the show, the
wildcats, the props...
everything... is about
profits.
It's finding costs are
about $1.89 per million
cubic feet of natural gas.
The industry average is
$3.00. We love it when
wildcatters can find oil
and gas on the cheap,
because that just leaves
more profits at the end of
the day. So let's just do,
not the math, but the
arithmetic...
You find something at
$1.89... you sell it at
$12 bucks...
Do you have any companies
in your portfolio with
that kind of profit
margin?... I don't think
so.
. . . .
.
What else do I like?...
The company has raised its
production growth guidance
to 19% for the year, from
15%... That's like, when
you're on the conference
call, saying, listen,
we've been saying it's
X... It's going to be much
better...
It plans double its number
of rigs in 2009 from three
to six... The Street likes
growth wherever it can
find it, whether it be new
or old tech, or oil and
gas. That's what attracts
new buyers.
Now get this... RRC did a
secondary offering,
selling $267 million in
stock to fund its land
acquisiton in the
Marcellus Shale... The
offering price was $66.38.
Do you know that's higher
than RRC is now, which
closed at $64 (today)...
At these levels, I've got
to tell you, I think this
stock is an absolute
steal.
. . . .
.
The Bottom Line!:Range Resources Corp.
(RRC)
should never have gotten
this cheap. And, if
you want a large,
established, now
undervalued play for
Wildcat Week, RRC is the
one for you.
. . . .
.
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JJC:
With my friend, Ben
Bernanke (i.e., Fed
Chairman) and Hank
Paulson, practically
quoting Herbert Hoover,
saying of course, the
worst is over... I defy
you to tell me whether
Bernanke or Hoover said
this: "I am convinced we
have now passed the worst
and, with continued unity
of effort, we shall
rapidly recover. There is
one certainty of the
future of the resources,
intelligence and character
of the people of the
United States... that is,
prosperity." Or, who said
this: "Any lack of
confidence in the economic
future or the basic
strength of business in
the United States is
foolish." Yeah, okay...
with these guys in full
Hoover mode... talking
about how the worst is
over... When they say that
you know the worst is far
from over, you know
that... you know it's
recession time. And, when
it's recession time, you
want to own recession
stocks... the ones that
thrive in a bad economy,
because they can keep
delivering consistent
earnings.
. . . .
.
But, more importantly, you
have to own the right
recession stocks. It's not
like the old days, where
you could go to the
supermarket or the drug
store and say everything
here gets bought, even in
a slowdown.
It doesn't work like that
anymore. There are such
things that have raw costs
that have wrecked that
thesis...
And that's what tonight's
Sell Block is about...
. . . .
.
Isolating a recession
stock... putting it not
just in the Sell Block,
but in solitary... because
we think it's earnings
will disappoint.
And the stock... and I say
this with trepidation,
because me like them...
the management of this
company... The stock is...
ConAgra (CAG).
And you know why...
because, obviously, all
the things that Cramer
eats when he gets home
alone on his gigantic
linoleum floor... Now, I
think you've got to stay
away from this stock...
Now, I had Gary Rodkin,
the CEO of CAG, on... and
I'm clapping for him,
because he's a good man,
okay... I had him on the
show
on April 29th, and I
endorsed the stock at the
time. It was roughly the
same price now as it was
then, so I've got an
opportunity... In other
words, it's like the
Hippocratic Oath... I
haven't done any harm
here...
But, since that interview,
things seems to have
gotten worse for the raw
costs for CAG...
. . . .
.
Raw costs for this packaged foods
company... which makes a lot of stuff
that's wrapped in plastic too... they
just keep going higher and higher, and I
have a lot of trouble believing that CAG
is going to be able to make its numbers.
In other words, there are estimates out
there that Wall Street creates... I
don't know if it can beat them... I
don't know if it can make them...
You know, it's actually kind of funny...
Back on September 20th, CAG's CEO said,
"Inflation input cost is through the
roof." He said that on his quarterly
conference call. I almost dropped the
phone when I heard it, because it's very
rare to hear a CEO basically say that
something's not that great.
Well, since then, the problem is that
costs have gotten even higher...
Corn is 76% more expensive... I want to
thank ethanol... and thank the
government... so it made it so that corn
went to $7 bucks.
How about wheat?... Wheat is up 39%
more. Live cattle, 7% more expensive.
. . . .
.
And then, of course, energy costs have
ballooned. Oil up 64%... Natural gas up
113%.
From what I can tell, CAG is being eaten
alive by raw costs. They have gone
higher since the last time they
reported, but I don't think the analysts
are factoring in these intra-quarter
price increases, which we estimate are
going to shave $215 million off of the
fair value of this company, into the
numbers.
In English, I think CAG is going to
disappoint us big time.
When you own a stock, and you think the
numbers are too high... well, you know
what that's like being?... That's like
being on the train tracks, and hearing
the toot-toot of an oncoming train...
You've got to get off the darn tracks!
And that's why I am saying, sell, sell,
sell CAG.
. . . .
.
We want to own recession stocks... We
want to own the ones that have earnings
proof, that are not going to disappoint,
because we know that people are still
going to go to the store and buy them.
But will someone please tell me why we
should own a CAG, where I think the
earnings are in doubt, because of the
costs... and that's being very generous
about it...
When Indra Nooyi (CEO) at
Pepsi (PEP)
has said it's having no trouble making
its numbers... and
Coke (KO)
is telling Wall Street the same, why
take the risk with CAG, as the whole
group is inexpensive historically...
Obviously, CAG is cheaper on what's
known as a price-to-earnings multiple,
but I think what you want to do is go
with safe and solid earnings. KO and PEP
has them. CAG doesn't. I'd even prefer
General Mills (GIS)
to CAG.
And, of course, the cheapest of the
recession-proof stocks remains a company
that I continue to buy for
my charitable trust, and is doing
quite well, especially when you lump in
the dividend, and that's
Altria (MO*)...
Cigarette companies... sorry, they have
almost no raw costs, and this one has a
great dividend... not to mention what
looks to be soon like a gigantic
buyback.
Remember how institutions think... They
want stocks that will allow them to
sleep at night, and not wake up the next
morning to an earnings shortfall. That's
the house of pain.
PEP took fears away that that could
happen with their statements on the
tape. CAG apparently can't alleviate
them, or I think they would have done
just what PEP did.
. . . .
.
I want you to swap out of CAG, and into
Pepsi (PEP),
if you want to own a recession-proof
stock. You know, that's what the big
boys will be doing. I want you to do it
with them.
It's clear to me that Herbert (Hoover)
Bernanke and Herbert (Hoover) Paulson...
or should it be Ben and Hank Hoover?...
are leading us down a path where the
recession stocks are essential, now that
they're saying everything's turned up.
But when you go shopping for them in the
supermarket and the pharmacy aisles,
stay away from the CAGs... the ones that
have seen big intra-quarter increases in
raw costs... that means increases
between the last time it reported and
now... because I really unfortunately
believe that CAG will disappoint.
Here's the bottom line...
. . . .
.
The Bottom Line!:
Recession stocks are going
to be in season again,
because of Paulson and
Bernanke... but not
ConAgra (CAG).
That's the one I've
sentenced to a stay in the
'Sell Block' thanks to
increases in raw costs
that seem to make it near
impossible for this
company to meet its
earnings estimates, let
alone beat them.
. . . .
.
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In other words, this is the
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This recommendation by Jim
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you should feel comfortable
loading up on it, as it is
in a good position to be
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Stumped. - Of the
2,000+ stocks that Jim
Cramer has in his head, for
which he has an informed
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he does not know well enough
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indicates he is stumped and
will have to come back to
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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.
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