After this segment, you
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JJC:
Complete comments to be
posted prior to the market
open Thursday morning.
. . . .
.
First, the Federal Reserve
did nothing today... so,
unlike everyone else, I'll
spend no time talking
about it... because it
makes us no money, Mad or
otherwise...
Instead, I am going back
to the well!...
That's why I say, loud and
clear, one on one...
Cramer to Congress!... Let
me people drill!...
All week, I have been
making the argument that
there's no reason for
Congress to uphold its
moratorium on offshore
drilling... Why?...
Because we have the
technology... the clean
drilling and producing
technology... that will
allow us to look for new
oil and produce it,
without causing much
damage to the environment,
if at all...
Now, the oil spill that
shut everything down...
the so-called "Three Mile
Island" of offshore
drilling happened off the
coast of Santa Barbara in
1969... but, you know,
back then, they didn't
have the technology for
clean production that we
have now... the technology
that I believe makes this
entire offshore drilling
debate not a debate...
It's moot.
So, while I usually tell
you to wait to buy, buy,
buy... I am waiving my
five-day rule... and I
want you to take advantage
of the lower stock prices
you see right now on your
screen. You see, the
market is hating oil right
now - as it does
periodically - this time,
because this week's
domestic inventories are
bulging... When they're
bulging in communist
China, then I'll flinch...
but not until then.
Now, I think you're
getting a nice opportunity
for once to buy, maybe
even without the Cramer
effect, some fabulous
stocks that are on sale...
and I say Hallelujah...
We talked about seismic
imaging technology on
Monday... OII... That was
just slammed today. We
talked about CGV and we
talked about OII... that's
the remote-operated
vehicles thing... And,
today, I'm adding another
piece of the clean
offshore drilling and
production puzzle... and
that piece is subsea
infrastructure...
Specifically, what they
used to call XMas Trees,
and what they now call
Subsea Trees...
This subsea technology
makes drilling and
production on the ocean
floors safer and less
dirty... It works like
this... You stick a
wellhead on the ocean
floor to drill, and then
you start drilling and,
once the drilling is
finished, you cap it with
a subsea tree... and that
tree then connects to a
production platform, which
eventually gets the oil or
gas to land...
The first subsea tree was
installed in 1961... but
the technology has changed
dramatically since then...
These subsea trees are
used to control the flow
of oil and gas, as well as
injection of other
fluids... something an
operator can do
remotely... which helps
prevent spillage... like
what we saw off the Golden
State's (California's)
coast in 1969.
We now use multiple subsea
trees, and connect them to
a single manifold, which
means fewer rigs on the
surface of the water...
so, memo to Governor John
Corzine, it's not going to
wreck the whole New Jersey
coast... just my house in
front of Ocean Grove...
and fewer umbilicals that
can be severed and cause
spillage.
I believe subsea trees are
the safer, cleaner
alternative...
Next time the principle
opponent of drilling,
Speaker of the House,
Nancy Pelosi, reiterates
here desire to depend on
oil from the Middle East,
rather than her native
state of California, I'm
going to tell her to climb
a tree... or, at least,
hug a tree...
Subsea trees are also the
most profitable
alternative. They let oil
companies cut costs by
requiring fewer production
platforms, and they work
in very deep-water areas
where human involvement is
frankly impractible.
Okay... It's a long-time
Cramer favorite... It
seems, by far, the best
levered to this subsea
tree technology...
. . . .
.
Now, I recommended this
one earlier in the year,
on January 9th... It
was at $61.26. Now, it's
at $77 and change, giving
you a 26% gain... during a
whole period where the S&P
has just been a house of
pain. I don't care if you
may have heard about it
before on Mad Money... I
figure, after I've
recommended it 18 times,
finally, someone will
listen to me...
FTI is the market leader
in subsea trees. Of all
the trees installed in the
last four years, 42% of
them - nearly double the
share of the next-closest
competitor...
The company is more
focused on the higher end
of the market, and it's
also raising capacity to
335 trees a year, to take
advantage of increased
demand. I regard these
guys as the orchard of
trees... No, they're a
veritable forest!
Remember that word
visibility?... the ability
to see how much money a
company will earn in the
distant future, which tech
companies used to have?...
Well, FTI has it. Over the
next 15 months, they're
expected to be awarded two
contracts for 219 trees,
as part of 12 projects,
each worth over $150
million... meaning at
least $1.8 billion in
work... The company has a
$5 billion backlog.
They've got future
business galore. I'm not
even counting
Petroleo Brasileiro (PBR)...
which hasn't even started
putting in its big orders
yet.
Around half of FTI's tech
sales are related to
subsea... It could be
incredible potential sales
growth in this area.
Business has grown at a
29% clip since 2002.
That's
Google (GOOG)-like...
Over the next five years,
FTI expects... get this...
subsea tree growth of
62%... That's twice
Google-like...
Now FTI is still working
on its spinoff of its
legacy airport and food
businesses. It can't lose
them fast enough.
Remember, FMC stands for
when it was, earlier in
its career, "Food
Machinery Corp."... Can
you believe it?... It's
slated for the middle of
the year, which we're at,
so I think this selloff's
going to happen very soon.
I think the company gets
about $200 million from
it, but they'll probably
use that to buy back
stock.
If that comes through, and
then you use roughly the
12 million shares left in
the repurchase
authorization, you've got
a company that can buy
back 10% of its shares
outstanding... That would
be a mega buyback, very
pro-shareholder, and we
love it.
You know, the tech
companies do nothing but
issue stock. My "new tech"
companies do nothing but
buy back stock...
FTI trades at just 20.7x
earnings. It's got 27.5%
long-term growth rate.
Remember, what we look at
is the growth rate versus
the price-to-earnings
multiple. This is really
cheap in my book...
particularly since your
entry point now is five
points lower than it was
just two days ago, when
people liked oil.
Remember, now they hate it
and now I'm telling you to
buy...
. . . .
.
The Bottom Line!:
Subsea trees greatly
reduce spills, and make
oil producers more
productive... It's
the key to our drilling
off both coasts...
Someone wake up Congress.
I think
FMC Technologies, Inc. (FTI)
is a great business.
I think this business is
dominated by this
company... and I am
blessing, for once, buying
it tomorrow, rather than
waiting five days, because
these stocks are for sale.
. . . .
.
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JJC:
Complete comments to be
posted prior to the market
open Thursday morning.
. . . .
.
On this show, we embrace the kind of
cutthroat anti-competitive laissez-faire
capitalism... While it may be horrible
from a human standpoint, it is terrific
for profits! We are capitalists with
ugly, but wrinkle-free, faces...
What we don't like is competition...
Competition is terrible for profits...
And that's why I have to recommend
RSG... off of its wonderful, beautiful
anti-competitive merger with AW... which
they just agreed to on Monday, because
it will effectively create a duopoly in
the waste management business.
Okay, we did get beaten to the punch on
this one. Goldman Sachs came out with a
note this morning, recommending RSG off
this deal, and the stock is up 3% off
their recommendation. That means you
have to wait a week, unlike the (first
opening segment) oil recommendation, for
this stock to pull in, before you buy...
But we're not backing away from this
trash story... No, we know that there's
money in trash... and this is a new
duopoly that is just too good to miss...
just because Goldman got there first!...
It is honor to be beaten by a research
staff that gets paid more than $100
million a year!
Here's the wonderful cash trash story...
The
Republic Services (RSG)
and Allied
Waste (AW)
deal should close in the fourth quarter,
depending on the - and I hesitate to say
this - anti-trust regulators... But,
since this deal isn't the most important
deal to stop ever... the
XM Satellite Radio (XMSR)
and
Sirius Satellite Radio (SIRI)
merger... I doubt there'll be much of a
holdup...
The combine waste, trash-to-cash company
will immediately become the #2 waste
management company, with
Waste Management (WMI)
continuing to be the #1 player...
The new company, created from the merger
of RSG and AW, combined with WM, will
control a wonderful 60% of the waste
disposal capacity in the United
States...
It sounds like an anti-competitive
duopoly to this guy... and, when we get
an anti-competitive duopoly, we get
price increases for the big players...
something RSG is about to become...
Plus, it's hard to think of a duopoly
with higher barriers to entry than this
one. New landfills are almost impossible
to build... Remember, I'm okay with
nuclear power... I am happy to have a
nuclear power plant put right behind the
middle school in my town - because my
daughter just graduated from it - but I
will not tolerate a landfill! Actually,
building a new landfill requires permits
and crossing myriad environmental and
regulatory hurdles... and they take a
long time, and they tend to not be able
to be stopped... So it looks like we'll
have a happy duopoly in the waste
disposal business for a long time to
come...
Lots of money from trash!...
But there's more to deal than just the
creation of a duopoly in the waste
disposal business, or I would be
recommending this... I'd be recommending
WMI... which had 271 landfills at the
end of 2007, over the combined RSG and
AW, which altogether, has 219.
This merger has been two years in the
making, and there are multiple reasons
why it will work for shareholders. First
of all, a company with more landfills
has better margins, because the greater
the distance waste needs to travel for
disposal, the higher the fuel costs, and
so on... and, therefore, the lower the
margins...
These extra landfills will let RSG and
AW take advantage of what are called
"tipping fees." Waste management
companies would rather pay a fee to use
someone else's landfill than use their
own, if it's too far to transport. This
deal will have these two companies
paying fewer tipping fees and receiving
more of them.
The best thing about this deal though is
that each company brings something
different and valuable to the table...
The guys at RSG are top-notch operators,
with a great CEO, Jim O'Connor, who
spent 26 years in various management
positions at WM, before joining RSG in
1998. AW owns a whole lot of valuable
facilities. You put these two together,
and you've got a best-of-breed waste
disposal company, where I probably would
not have liked either one separately.
The cost savings from this deal will be
magnificent... The combined RSG and AW
will be able to shut down duplicate
hauling facilities and lay off
employees, and save on subcontractor
costs, because of the combined
purchasing power. Management expects
$100 million the first year, and $50
million over the next couple... Come on,
I consider that a low-ball,
under-promise, over-deliver forecast...
But, if we take those numbers at face
value, that translates into an
additional 13%+ growth... another 10-15
cents of the combined company's 2009
earnings-per-share.
In other words, we've got a story that's
going to go out for a while and it's
going to be great for us...
The combined RSG and AW will have $8.2
billion in debt. Okay... not
everything's perfect... but they plan to
pay down $2 billion in debt in the next
three years, which result in interest
savings that are not baked into the
guidance that RSG has provided with the
merger.
The new RSG will have a 17% or 18%
growth rate. Remember, I think that's a
low-ball estimate for 2009... $2.22. Why
don't we slap an 18x multiple on these
earnings, and you've got a $40 stock...
a $40 stock, up 26% from the current
price.
Just remember to wait a few days... I
say five... for RSG to come in, after
the Goldman recommendation and the
Cramer recommendation, and that should
serve you well.
Let me give you the bottom line here...
. . . .
.
The Bottom Line!:Republic Services (RSG)
is a buy, now that it's
combining with Allied
Waste (AW)
to form a garbage disposal
duopoly with
Waste Management (WMI).
And RSG, after the merger,
will be the better
company. The
guy from WMI is a fabulous
guy, but I really like
this combo, even if it is
the smaller part of the
duopoly.
. . . .
.
■
Stock Snapshots - Includes
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In other words, this is the
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This recommendation by Jim
indicates that, after you do
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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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across a caller with a stock
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indicates he is stumped and
will have to come back to
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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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