Anadarko Petroleum
(APC)
Apache Corp. (APA)
XTO Energy Inc. (XTO*)
Southwestern Energy Co.
(SWN*)
El Paso (EP*)
Ultra Petroleum (UPL)
Range Resources Corp. (RRC)
Rex Energy Corp. (REXX)
After this segment, you
can see Jim's Lightning
Round picks
here...
JJC: Why
is it that as the price of
crude, crude oil has made
its historic run from
$100, which it first hit
on February 19th, all the
way to the $130s...
Why is it that major
integrated oil companies
have done next to
nothing... Think
about this...
Exxon Mobil (XOM)
is up 1%...
BP plc (BP),
up 2.4%...
Marathon Oil Corp. (MRO),
up 1.6%... Even the
better performers like
Chevron (CVX),
up 17%...
ConocoPhillips (COP),
which has a lot of natural
gas, up 18%... Those
do not come close to the
30% plus gain in the spot
price of oil... and
this is what question I
get asked, whether it be
from my dad on Father's
Day or the people on the
street... Why is it
that on average the major
integrated oils are up
just 10% as the crude has
gone from $100 to
$136.42?...
. . . .
.
I hear the chatter.
Some people are saying
that the performance of
these stocks is signaling
a top in oil...
That's wrong... I
say what it's telling us
is the truth, not the
truth about the commodity,
but the truth about these
companies... that
these companies can not
take advantage of the rise
in oil prices...
that's right... The
big oil stocks can't make
that much more money off
of higher crude...
They did it to
themselves... Either
because they didn't
believe in higher prices,
so they didn't drill
enough, and took all the
money and spent it on
buying back stock instead
of prospecting...
or, and this is more
likely, they figured that
it was 1980 all over
again, the last time we
got a big spike, when oil
went all the way up, and
then down... They
figured that oil would be
back down to the $40-50
range by now, and they
would've looked stupid...
it would have been too
expensive to lock in high
drilling rates...
day rates are up to
$700,000 a day to borrow,
lend and take a rig
down... I'm sure
they thought it wasn't
worth it. It seems
like they really did
believe oil was going back
down and it looks
ridiculous in hindsight...
but that's because all
these companies had, all
the executives had, was
hindsight.
. . . .
.
So the people who are
running the show, they
remember the big
disappointments of the
past, they didn't have the
foresight to realize that
the future was different.
People who run these major
companies, they were 25
years old back then...
they were the people, the
young staffers, who
recommended drilling in
1980 because they thought
that $27 oil was going to
$100 instead of $10, where
it ended up. Those
people are now running
these companies, and
they're attitude is once
burned, twice, not
drilling. And even
if they had embraced the
idea that oil was going
higher, I still don't
think that it would have
mattered. The big
oil companies have signed
so many contracts with
foreign governments that
have turned out not to be
worth the paper they're
printed on. Who
wants to invest in
Exxon Mobil (XOM)
when it's in Venezuela,
and the government is
happy to abrogate its
contract or outright
confiscate the assets...
Who wants to touch Shell,
BP plc (BP)
in Russia?... I pick
up the paper every day and
it's like, hey they're
kicking BP out of Russia
any minute. You
can't do what these
companies have done -
invest billions and then
write them off because the
contracts you signed don't
mean a darn thing.
Plus, incremental fields
just don't mean that much
to these behemoths.
In fact, they've been
sellers of the incremental
fields, not buyers.
. . . .
.
But there are companies
that can benefit from
higher oil.
Companies that have been
benefitting from the
natural gas stocks, that
are drilling like mad.
That cohort, natural gas,
is up an average of 33.8%,
in keeping with the crude
price. Crude is up
around $33-34, oil is up
from $100, now gas is up
the same amount...
And as natural gas breaks
out today, $13 bucks...
the stocks are heading
even higher. I want
you to think
XTO Energy Inc. (XTO*),
which I own for
my charitable trust, Anadarko Petroleum
(APC),
Chesapeake Energy Corp. (CHK),
Apache Corp. (APA),
Southwestern Energy Co.
(SWN*)
and
El Paso (EP*),
two others that I own...
I am heavy and have been
heavy in natural gas for
my trust, where I trade, open
handedly, if you want to
look at it... All
the wildcatters I talked
about last week...
right?... These
companies are aggressively
acquiring anchorage and
drilling... that's
why they're going up...
These companies have more
rig capacity to take
advantage of higher
prices, not so long ago
there was a glut in North
American land drilling,
which has made it much
cheaper for these
companies to drill too...
So they're constantly on
the move... They are
constantly adding
assets... They have
been the performers, the
real beneficiaries of
higher oil prices...
And I have every reason to
believe they will keep
going higher. We
have been using $16 as the
price target for natural
gas, it's at $13...
it's still cheaper at $16
to burn natural gas than
oil and cleaner, of
course. As I have
said over and over on this
show, I believe 2008 is
the year of natural gas.
If you've only heard the
show once or twice this
year I think you now have
heard that... And
when the futures broke
through $13 per thousand
cubic feet of natural gas
today, I cheered.
Natural gas hasn't been
this pricey since 2005,
but that was a Katrina
spike...
. . . .
.
But this time I think it's
going much higher...
why?... Do you know
that historically there
has been a 6-1 price ratio
between natural gas and
oil... That means
that with crude at $136...
do the arithmetic, it's
just arithmetic, not
math... $23 for
natural gas... Too
bullish for me... I'm
staying with $16.
And here we have all these
natural gas companies
drilling like mad to
produce more of this
stuff, and we have had
every one of them on this
show, some repeatedly, and
you've got to believe
prices are going higher...
and therefore, their
stocks are going higher.
You want a great indicator
of natural gas prices...
look to Cramer-fave and
friend of Mad Money,
Aubrey McClendon, the CEO
of
Chesapeake Energy (CHK),
$65, despite the market
being down 100.
Aubrey's been a veracious
buyer on the way up, but
has always held his hand
as natural gas prices have
fallen. See, on June
11th, Aubrey bought 11.9
million worth of CHK stock
on open - market...
he's not lining his
pockets with options like
those old tech guys in
Silicon Valley...
he's in there buying along
with you... How
about this... did you know
that he purchased 22
million dollars of stock
on May 30th? We have
to figure that sees these
prices and he's a
believer... He knows
natural gas is going even
higher... He has
always told us where it's
going to go and he's been
right. Insiders sell
for many reasons but you
know they only buy for
one, because they think
their stock is going even
higher. When we
followed Aubrey in the
past he has made you boat
loads of money and I say
we stick with him and we
stick with CHK, which is
up 51% since oil broke
through $100. You're
BP or XOM?... How about if
you bought for CHK?...
How about if you still buy
the CHK... I think
the rest of the natural
gas cohort has a lot
further to go and will
follow Aubrey's 51%...
. . . .
.
Now these natural gas
stocks are likely to
fluctuate with the oil
futures, like they did
yesterday, but as long as
you wait a few days, I
believe they stabilize,
start the ramp again, like
they did today...
Because they are levered
both to asset growth, as
they're buying more land
and drilling more, and the
price of rosined
commodity?... I call
them twice-blessed,
something we can't get
enough of on Mad Money...
It's a continual theme of
mine, finding stocks that
are twice-blessed...
Now I know I recommend
these names over and over
and I don't care.
I'm trying to make you
money. I'm not going
to start recommending bank
stocks. I recommend
what I think is going to
work for you. I
think these stocks
outperform as well as
another twice-blessed
group that I have not been
able to shut up about that
I have recommended over
and over and over again,
and that's the fertilizer
stocks. Since
October 31st of 2005, it's
to toot my own horn, no.
It's to please follow what
I recommend over and over
and over and over on the
show. It's like when
I worked on my hedge fund,
over at Goldman Sachs...
What I recommend over and
over, what I buy over and
over is what I believe in.
Since 2005, I have favored
Mel Gibson favorite,
Mosaic (MOS),
eight times,
Agrium (AGU),
eight times,
Potash (POT),
six times... These
have been my most
recommended stocks, like
the natural gas name are
now, and they have given
you huge gains, POT is up
773% since October 31st of
2005... the market
has done nothing...
that's when I started
praising it. MOS is
up 1,120% since 2005, AGU
is the lagger, it's up a
mere 419%... why?...
worldwide famine and
ethanol... With more
fertilizer being the
secret to more output,
even as it gets more
expensive to use...
Twice-blessed has
worked... It's worked in
fertilizer and I believe
it will work in natural
gas. The integrated
oils aren't even
once-blessed, since they
can't take advantage of
higher prices.
. . . .
.
The Bottom Line!:
Follow what I recommend
over and over and over and
over again. I do not
believe that oil's
topping, just because big
oil stocks aren't moving.
I think the truth is that
the natural gas companies,
that have some oil, that
are drilling like mad...
CHK,
Anadarko Petroleum
(APC),
Apache Corp. (APA),
XTO Energy Inc. (XTO*)
- at a 52-week high,
Southwestern Energy Co.
(SWN*),
El Paso (EP*),
Ultra Petroleum (UPL)
and the wildcatters... the
Range Resources Corp. (RRC),
the
Rex Energy Corp. (REXX)...
they're the real
beneficiaries of high oil,
and they'll even go
higher, as natural gas
plays catch-up to oil
prices. Oh, and by
the way, let's add a new
kicker... Everyone
else was talking about it
today... I think it's
fanciful... but, if there
was ever a chance that we
could drill offshore, you
think it's going to be
Exxon Mobil (XOM)?...
If there were ever a
chance that the
President's plan,
announced today to drill
off our coast, gets
passed, do you think it
will be
Chevron (CVX)?...
Something we have been
pushing endlessly on this
show... do you think it
will be
Marathon Oil Corp. (MRO)?...
If it actually happens,
it's the same group of
stocks I keep referring
to... It's the
natural gas stocks.
They're the ones that
would do the finding.
. . . .
.
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After this segment, you
can see Jim's Lightning
Round picks
here...
Jim's comments BEFORE
the interview:
Cramer-fave liquor
company,
Brown-Forman (BF-B)
has been outperforming in
a time when the other
liquor stocks... even also
plain beverage stocks,
like
Coke (KO)
and
Pepsi (PEP)...
are flirting with their
lows. BF-B is
a name where I have real
credibility. I
recommended it when we had
the CEO, back on August
30th of 2005. The
stock was at $57.31...
that's right... $57
dollars, 33% gain.
It's up 5.3% since I
recommended on May 13th of
this year, at $72.65...
However, full disclosure,
it's actually below where
I picked it among the
rubble on June 6th, at
$77.25, after the big
sell-off... I think
it's an opportunity to
buy, buy, buy. It's
stock is trouncing the
competition...
Diageo plc (DEO),
Johnny Walker, is down 12%
year after year...
Constellation Brands Inc.
(STZ),
down 15%,
Fortune Brands (FO),
down an astounding 21%...
but BF-B, which you know
and love as Jack Daniels,
Southern Comfort,
Finlandia Vodka...
and my favorite,
Herradura... is up
7%, and up 17% since
January 22nd, when the
stock got hammered.
BF-B is one name that you
won't have to be sipping
cheap scotch on your dirty
linoleum floor with.
Here's the question:
How have they crushed
their cohort? How
has a great old brand
re-invented itself to
trounce the
competition?...
drinking its peers under
the table. Now, part
of the story is
international growth...
BF-B now gets 50% of its
sales from outside of the
US... five years ago it
was only 30%... We
know that the rest of the
world is where the action
is. Now, I also
think there is good
marketing... That's
what has been keeping the
US business manageable...
although I do feel like in
a recession, people should
be prone to drink a little
more, not less...
But the convention is to
go from this to this...
BF-B made a sales alliance
with Bacardi and Remy,
creating a combined sales
team, selling all three of
the company's products...
It seems to be working...
Now BF-B has admitted the
US business is
challenging... but
they also said that base
business is still strong,
and they're developing
brands that are actually
out-performing the
market... And even
though Southern Comfort
volumes were down, beats
the heck out of me...
pricing kept sales in
North America flattish...
so it's holding its own
here as it takes ground in
Europe... But now
BR-B may be a victim of
its own success...
The analysts have ceased
to be believers of the
eight how covered down in
three are sells, three are
holds, don't buy...
and only two of these guys
are buy, buy, buy...
These guys, frankly, I
think, are ridiculous...
If I didn't know any
better, I'd think they
were hitting the sauce.
Lehman's been underweight,
genuine Wall Street
jibberish for sell, at
least since the stock was
at $57.41 on August 30th
of 2005, it's at $76 and
change... Wrong,
JPMorgan (JPM)
downgraded BF-B to
underweight them on
February 13th of this year
with the stock at $63, up
$13 from there...
Wrong... Goldman Sachs (GS*),
Goldman, also a seller,
negative since January
7th, the stock was at $65
then... These guys
have been in the bag, and
they just persist in their
negativity, and they don't
like the weakening US
spirits market, it's all
they focus on, or the fact
that younger people are
drinking more mixed
drinks... They don't
like the premium nature or
BF-B's brands, they don't
like it's evaluation...
they think the people
would trade down...
even though it's become
the best of breed....
and I think it deserves to
trade at a premium to the
competition. Now
maybe the stocks run so
much that these analysts
who have wrong for as much
as 18 points should no be
listened to, but I'm
skeptical... Maybe
instead of listening to
the analysts, we should
listen to the company,
since it's been right so
far... More
specifically, BR-B's CEO,
Paul Varga, a friend of
the show... and let
him tell us how his
company manages to stay
afloat and what he thinks
the future looks like...
. . . .
.
Jim's comments AFTER
the interview:
We are not, not jingoists
or xenophobes on Mad
Money... We
recognize where the growth
is. The growth is
overseas. This brand
is so under-penetrated
overseas. I think it
has multiple years.
I think the people who are
recommending sale of this
stock will be dragged, in
the $80s and $90s, into
recommending it.
Don't be that way.
Pull the trigger now.
I think
Brown-Forman Corporation
(BF-B)
is the best of breed.
I think the stock goes
higher.
. . . .
.
■
Stock Snapshots - Includes
all stocks mentioned above
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Jim
Cramer's
rating on
this stock
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SYMBOL
Closing
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Please read his comments to
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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
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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.
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financial phrases
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