Monday, December 1, 2008
(Cont'd from above)...

Jim (cont'd):   

Of course, they all rallied off this news, but they don't all have exposure to the infrastructure project that this plan calls for...

The stimulus project is all about rebuilding highways, roads and bridges... The infra companies that do just that hit the jackpot... but the rest of them... well... get ready...

The engineering and construction companies that build the infrastructure needed to drill for oil and gas, or the ones that build refineries and petro-chemical plants... they all went up too. They're not going to benefit from the stimulus package. It was wrong for them to rally.

The infra plays with more of an energy focus are all hostage to oil and gas prices.... What are they, like, $49 bucks today, oil and gas...

These companies need higher energy prices work... something we know they don't have... And, failing that, they need credit to be available to finance their massive projects... and, for many companies, that's in short supply. Without higher energy prices or easier access to credit, the only thing I can think can save these energy-oriented infrastructure names is government spending...

But it's clear that this stimulus plan is about roads and bridges, not energy projects.

Unless I specifically tell you to, I think you should avoid the energy-oriented names and, as they come down, you can go and buy the roads and bridges' infrastructure stocks.

Look, keep in mind when you do this buying, that the stimulus won't hit the bottom line for these companies for at least three quarters... and you've got to deal with the endless sellings of hedge funds gone wild... so take your time... build on the way down...

But first... what doesn't work? Let me give you like the cartoon characters that people bought...

What went up on the news of the stimulus plan that I think shouldn't have?...

The classic one... Chicago Bridge & Iron (CBI)... Ooh, people jumped at that one... "bridge"... "iron"... CBI, for you homegamers... It sounds like exactly the kind of company that should benefit from the stimulus plan...

Bridges and Iron? No! Fooled you, fooled you... It gets 55% of its revenues from liquefied natural gas projects. I didn't hear Obama talk about that. CBI serves a lot of big energy companies. It's steel plate structure business makes storage tanks. I didn't see that from Obama... And it has another big division that makes technology used in petro-chemical plants. I mean, this is like an anti-Obama play...

This is all about energy. CBI went from $5.72, its close on Friday, November 21st, the last day before the news of the stimulus package, to $8.16... I mean, more than a 50% move? Even after today's decline, this one is still higher than it should be... Sell, sell, sell...

What else didn't benefit?...

Cramer pal, Shaw Group Inc. (SGR)... 56% of its sales from fossil fuels, nuclear energy... chemical businesses... 23% from sales at businesses that are heavily exposed to energy products. That one went up $2 bucks... you know, SGR closed at $13.88 on Friday the 21st. It's still 2 points above that price. It's cheap, but it's not in Obama's plan, okay...

Foster Wheeler (FWLT*)... a Cramer-fave... another one with a lot of energy exposure... 24% of its revenues come from power generation... 23% from refining... 28% from oil and gas... 23% from chemical and petro. I like the stock enough to own it for my charitable trust, ActionAlertsPlus.com... and I think it's got great things going for it... It's one of those, like SGR, it trades near its cash... but you don't buy it off the Obama stimulus plan... We're going to hear from the man in charge, FWLT's Ray Milchovich, in just a few moments... but, if you bought it because of Obama, you'd be stupid...


Now you know the plays that don't work off of Obama's stimulus package. I've given you the ones... the ones to avoid... the ones to sell...

How about some winners?...

Companies that make asphalt, concrete and cement... rock plays, like Martin Marietta Materials Inc. (MLM) and Vulcan Materials Company (VMC)... both of these which get half their sales from U.S. roads and bridges... But these two have really run, okay... Yeah, the MLM... that is up from $63 before the news... $63... to $77 now. I mean, and that is after today's monumental decline. MLM is up too much.

How about Vulcan Materials Company (VMC)?...

That went from $40 to $57... Three months ago, the Street's consensus for 2009 earnings for MLM were 19%, and 33% higher for VMC... They'd taken the estimate cuts. Now they've got a positive catalyst that could bring the estimates higher for some time in 2009. But keep your powder dry... I bet you could buy these at lower prices, given the awfulness of this market, and the forced selling by hedge funds gone wild...

I'd look for entry points in the mid-$60s for MLM, and wait for VMC to fall to at least $49, where it gets that accidental 4% yield, that even Leonard Nimoy could like... Spock, okay?...

Caterpillar Inc. (CAT) works here too, because it has a huge road-building machine portfolio... Go to their website. You won't believe it. You probably never even heard of most of them. It's got a juicy accidental high yield.

How about AECOM Technology Corporation (ACM)?...

A big infra winner... 60% of its revenues, 70% of its backorders are from government-funded projects... but it was at $21 before the details... and then it just roared... I say, wait until it goes below $20. I think it will take patience. This one doesn't have a dividend... isn't trading near cash.

How about this one that really zoomed?...

Granite Construction Inc. (GVA)... I mean it's going to get business out of the stimulus plan as well, but the stock's up too much. It's only 5 points off its 52-week high right now, and the company's currently doing poorly. Not only would I not recommend buying it... I say, "Sell, sell, sell!"...

Bottom line...

Jim's comments AFTER the interview:     Do homework... Don't confuse the infrastructure stocks. They won't all benefit from Obama's stimulus plan. But Vulcan Materials Company (VMC) - when it yields 4-5% - you could live long and prosper... Martin Marietta Materials Inc. (MLM), Caterpillar Inc. (CAT), AECOM Technology Corporation (ACM)... when they come down... CAT, I like right here, kinda... That said, each moved too much off rhetoric. They should fall until we get closer to Obama's inauguration. Let them go lower... let them go lower before you buy.

[verbatim recap]

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