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Thursday, 03/13/08
Posted 03/13/08, 9:55
pm ET |
(Scroll down to see Jim's
comments below) |
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Today's date:
Thursday, 03/13/08 |
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Dow Jones: |
12,145 |
+ 35 |
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NASDAQ: |
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2,263 |
+ 19 |
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S&P 500: |
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1,315 |
-
6 |
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Opening Segment 1
Title: |
'Southern Exposure'
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. . . .
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Featured Stock(s): |
CVRD (RIO)
See Opening Segment 2,
below...
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After this segment, you
can see Jim's Lightning
Round picks
here... |
JJC: Who wants
to invest in this vast
panoply of states (as he
points to a map of the
U.S.)... I think there are
50 of them... with our
recession, and our trade
deficit, and our budget
deficit, and our weak
currency, and our mortgage
problems, and our
declining housing
values... The
list goes on and on...
I mean, you really don't
even need me to tell you
how bad things are here,
when you can put money in
this country...
Brazil... where the
economy is stronger, the
government isn't reckless
for financial matters...
the people are much better
looking...
. . . .
.
Now, I know that I've been
on this Brazilian kick for
a while... I
may have been repetitive
but, you know what?
I also have the added
advantage of being right.
To celebrate Carnival, I
gave you a list of four
Brazilian stocks,
starting on February 5th...
These stocks are up a cool
11%... while the S&P 500
is down 1.2% in the same
period.
So, today... we're going
back to Brazil because,
frankly, it's a gold
mine... and the
United States, by
comparison, is pathetic...
. . . .
.
The Brazilian Real is the
foreign currency which
most-hallowed, favored
nation, best investor in
history,
Warren Buffett,
owns. And the man
has made a lot of money in
the Real, because it's
doubled... doubled in
value against the dollar
over the last five
years...
. . . .
.
How about the energy
game?... We're
thirsting... we're
dying... we're using
ethanol... a fuel that no
one wants, that can't be
shipped, that corrodes,
that uses too much water,
and uses a lot of
energy...
Them?... No.
Brazil's totally energy
independent. You
know how they got that
way? They swallowed
a five-year recession from
1980 to 1985. GDP
growth was -8%, because
they wanted to get off oil
and adopt a
sugarcane-based ethanol.
By the way, unlike our
corn-based (ethanol) -
which is like the
fundamental of all our
fuel... sugarcane... not
used anywhere, except in
really good ice cream...
You want to know what a
country that's in charge
of its destiny looks
like?... This one
(pointing at the U.S.
map)... this is so not in
charge of its destiny,
it's frightening...
This one (map of Brazil),
this one is in charge...
. . . .
.
Right now, while we're
dealing with our recession
and the specter of bank
failure, not to mention
brokerage failure, Brazil
is a microcosm of
everything that is going
right in the global
economy...
It's the world leader in
agriculture, with the
largest farm trade surplus
of any country...
It's brimming with oil...
the largest find in oil in
the world... and
they're the only national
oil company that has the
technology and will get
it...
Their socialist country
acts like a private
entity...
. . . .
.
And it's got minerals
galore!... And it's
got an economy that looked
like ours during the huge
economic expansion during
the 50s and 60s, when we
were a great nation...
with a federal government
that believes in prudent -
not reckless - spending...
the true cause of our
dollar weakness...
. . . .
.
Which is why I lead you to
a stock... You know what
we're going back to,
because we've got new, new
reasons...
We're going to buy
CVRD (RIO)!
The Brazilian mining
titan.
It is now off 4 points
from its 52-week high.
In a bull market, that's
exactly where you
pull the trigger...
down 10%, you pull the
trigger... And, if
this keeps going lower, I
think you buy it all the
way down...
. . . .
.
RIO is the biggest and the
best... the largest
producer of iron ore out
there... and, ever
since it bought INCO - a
total steal if there ever
was one - it's been the
second-largest producer of
nickel, with the largest
nickel reserves in the
world...
RIO's got coal... talk
about a commodity in short
supply... Did you see the
coal stocks today?
Almost all at a 52-week
high... because there
isn't enough of it.
We can't make more of
it... We're busy
trying to get more out of
the ground, but we're not
getting as much out...
They, in Brazil, are
upping production at RIO,
which is something we're
trying to do.
. . . .
.
These minerals have
worked, and should keep
working, because where
does the coal go? It
goes to feed the gaping
maw of the Chinese
communists... whose
current five-year plan
calls for tons and tons of
iron and nickel... as you
need nickel to make
stainless steel...
I'm mentioning it again,
because I've got a whole
new reason to like RIO...
RIO has been bidder for
Xstrata (XTA.L
- London Exchange)... the
European-based mining
company... but it's been
looking more and more like
they have to pay too high
a price for XTA's
acquisition.
RIO's management has been
very disappointed, and it
looks like they won't pay
up... Two reasons
why that's good...
It shows us that these
guys know what they're
doing, and aren't just
benefiting from high
commodity prices... and it
means, if the deal doesn't
happen, there won't be any
of that nasty
arbitrage overhang
that always occurs...
When one company buys
another, the arbitragers
short the acquirer,
and go long the company
that's being bought.
That puts pressure on the
acquirer - the buyer - and
sends its stock lower.
This would have happened
to RIO, if it had bought
XTA. But now the
deal seems dead.
RIO's stock's safe from
the nasty arbitragers, and
safe from dilution, for
all current and -
hopefully for you - future
shareholders...
. . . .
.
The XTA deal has been
holding the stock back
and, now that it's
apparently off the table,
I think you ought to
strike... I think RIO
might be a
coiled spring.
Our friends over at
Goldman Sachs have been
right as rain about RIO,
every step of the way...
thinks the stock can go to
$57 (from its current
closing price of $34.18),
now that the XTA deal
probably won't happen...
Boy, there's a quick
$20...
RIO is the best Brazil has
to offer, and that's
saying something, because
there's stiff competition
from the oil, banking and
steel sectors...
among which, even the
worst, is better than the
best the U.S. has to
offer...
. . . .
.
RIO is part of a great
bull market in metals and
a great bull market in
Brazil, and it is no
longer going to be held
back by XTA's deal.
It has nearly all been
removed... all the
risk.
RIO... 11x consensus
earnings... 8.9x Goldman's
numbers...
I feel this stock is
begging to be bought, even
if the weakness of this
market forces it lower.
I regard that as a
blessing - a blessing that
would give you the
opportunity to buy RIO
even cheaper...
Here's the Bottom Line...
. . . .
.
The Bottom Line!:
Brazil makes the U.S. look
like wimps. Cramer
says, buy their best!
Buy CVRD (RIO)!
[See Jim's 2nd Opening
Segment stock picks
below... ]
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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) |
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RIO |
34.18 |
34.98 |
CVRD (RIO)
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Mutual-Fund-Holdings.com
NEW RESOURCE!
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Focus Fund
Top 25 holdings - The No.
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Fund in 2007
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Opening Segment 2
Title: |
'Chemical Formula' |
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Featured Stock(s): |
Dow Chemical Co. (DOW)
See DOW's official
website
here.
See the Yahoo!
Finance profile for
DOW
here.
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After this segment, you
can see Jim's Lightning
Round picks
here... |
JJC: In this
market, nothing is more
important than safety...
and nothing is safer with
a big, fat, secure
dividend...
All this week, we're
focusing on dividends and
short-term trades, because
we're
oversold.
Now, this environment is
ideal for high-yielding
stocks... Cash has
to get trashier and
trashier, as rates go
lower. You know
we've got another Fed
meeting next week. I
think they'll cut...
So, more investors looking
for income will buy
high-yielding stocks...
and, given how dismal and
rough this market has
been, something we need to
be more - not less - aware
of on days where we close
nicely... you want the
safe haven that dividends
represent...
. . . .
.
I did this screen last
Sunday of every stock I
follow - a couple of
thousand stocks - and I'm
looking for yield, and
that's why, tonight, I'm
recommending a stock that
may seem a little odd,
given where we are...
given where we are in the
business cycle, given
where we are where oil
is...
And that stock is...
Dow Chemical Co. (DOW).
We need to be worried
about the downside.
The show is all about the
downside, because the
downside is here, and it
keeps coming back...
. . . .
.
DOW has a great dividend.
It's $1.68 a share.
You get a 4.5% yield.
Remember what that means,
after taxes, after
Treasuries... it's much
better. And the
company raised that yield
47 times in the 95 years
that DOW's been paying
dividends... It's
not a fly-by-night yield.
They can afford it.
But, other than the yield,
this company looks like it
has something really wrong
with it...
The spike in oil - and
especially natural gas,
their raw feed stock - is
killing them. Oil
and gas make up half of
DOW's production costs.
These guys owe billions...
They have to pay billions
of dollars for energy...
and you need them both,
because energy is the
basic ingredient...
and, since chemical
companies are classical
cyclical businesses, this
isn't the kind of thing
you expect to buy with the
recession looming, or
already here... although
the steel stocks all hit a
52-week high today...
well, most of them...
. . . .
.
DOW isn't though... it
isn't just another
chemical stock. Even
if it were, it should get
a break in natural gas
prices, as every spring,
they go down. That
would relieve some of the
pressure, but it wouldn't
be enough to recommend the
stock, if DOW wasn't doing
a lot of other things to
make the business more
attractive...
This is the kind of stock
you can buy... never say
buy and put away...
this is the kind of stock
you buy and do
homework on, if you're
going to hold, and I think
you'll be pleasantly
surprised...
. . . .
.
Things should be at their
worst for DOW - earnings
wise - typically, in this
part... chemical cycle...
I know the chemical
cycle... It should
be the worst in 2010 and
2011. But, in the
last earnings call, DOW's
CEO, Andrew Liveris, who's
just great, raised
earnings expectations for
that period, from the $2
to $3 range (per share)...
to well above $3.
And he said that DOW would
not expect the ethylene
trough in 2010 or 2011.
That's a huge confidence
booster. That's the
cycle that I'm most
worried about...
. . . .
.
DOW is a classic
self-improvement play.
There was an aborted
attempt to sell the
company by a couple of
rogue executives last
year, when the stock was
in the $40s... They
were wrong.
I don't blame them for not
selling the company.
DOW could go to $50 on its
own. That's more
than they could get with a
rogue operation.
So now it's trying to
become less cyclical, and
cut its input costs, which
have really been eating
into DOW's earnings.
First off, DOW has made a
joint-venture deal with
the Kuwaitis... that will
give it access to cheaper
food stocks. This
was brilliant. DOW
is contributing
polyethylene,
polypropylene, and
polycarbonate and a chunk
of ethylene businesses, in
exchange for around $7.3
billion in after-tax
cash... and a 50% stake in
the joint venture...
I mean, this is going to
really help them, but
nobody cares.. .the
stock's laid down...
It's going to give the
company the cash it needs
to get through the lean
years. Nobody cares.
Get this... the stock is
actually down big, since
they announced that joint
venture... I read
(about) the joint venture,
and I thought the stock
was worth $5 more than it
was. But it actually
subtracted that amount...
It subtracted value...
I don't know... I
don't think the people who
have been selling this
stock even understand why
they're selling...
DOW announced the deal
with the Kuwaitis on
December 13th. The
stock was at $44.39.
It's now down 7 straight
points from there... and
this was good news.
It's ridiculous.
It's an opportunity to
buy...
. . . .
.
It also cut a deal with
Monsanto (MON)...
DOW does have some
ag... and you know how
much we like ag, only it's
only 7.2% of the revenues.
It's growing at a steady
11%, which makes it DOW's
second-fastest-growing
segment.
DOW's done a
cost-licensing deal, where
they're co-developing a
corn seed with Monsanto,
and it's going to combine
insect-resistant genes
with herbicide-tolerance
genes in a single hybrid.
I only go into this
detail, because the ag
bull market is so alive
and well.
This should make DOW less
cyclical, and make it more
exposed to what might be
the single-best theme out
there... ag.
Twice blessed... remember,
renewable energy and world
famine...
. . . .
.
Most of the bad news for
chemicals is priced in.
Positive actions that DOW
has taken? No one is
talking about it.
And, if oil - the raw feed
stock - would go down for
a day or two, I think DOW,
very quickly, could add 4
points and go to $41.
As for safety, which
should always be a concern
when you're looking at
dividend, DOW's got
nothing to worry about.
They have cash and cash
flow to maintain that
yield through the coming
down cycle, if we have
one. Even if DOW
raises its dividend -
which we would love, and
it wouldn't be surprising,
as DOW upped its dividend
12% last year - it still
would have the cash to
cover an 8% annual
increase in the dividend.
Here's the Bottom Line...
. . . .
.
The Bottom Line!:
Oh yeah, things are tough
for
Dow Chemical Co. (DOW).
That's why the stock's at
$37, for heaven's sake...
it's tough for everybody
now. The company's
doing everything it can to
mitigate the damage, and
that's not in the stock.
And that juicy 4.5%
yield... in
Cramerica, that's plain
prurient (i.e.,
arousing)...
. . . .
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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) |
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DOW |
37.43 |
38.00 |
Dow Chemical Co. (DOW)
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Go to the LIGHTNING ROUND from
tonight's show
here >>
See current quotes on Yahoo!
Finance from
tonight's show stocks
here >> |
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Symbol keys: |
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A Charitable Trust stock.
- An asterisk next to a
stock symbol indicates that
Jim mentioned it is a stock
that he manages within
his
charitable trust portfolio.
You can see the complete
portfolio
of stocks
here >> |
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Thumbs up - indicates
he would buy the stock or,
at the very least, not sell
the stock. 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 comments to
decide for yourself. |
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Thumbs down -
indicates he has said not to
buy or to sell the stock,
based on his comments
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
comments to decide for
yourself. |
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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. |
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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. |
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Definitions of key phrases
used by Jim, known as
"Cramerisms": |
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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... |
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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. |
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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). |
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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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See more
"Cramerisms" & other
financial phrases
here >> |
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Helpful Websites: |
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See the stocks currently
known to be in Jim Cramer's
Charitable Trust at:
jim-cramer-charitable-trust-stocks.com |
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See the stocks currently
known to be in Warren
Buffett's portfolio
of
stocks at:
warren-buffett-portfolio.com |
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Stock Homework 101:
This is an excellent
upcoming site that provides
resources and links to help
you do that homework that
Jim Cramer recommends after
hearing his suggestions...
StockHomework101.com
This site is coming soon.
Thank you. |
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FastMoneyRecap:
This site will be a quick
summary of recommendations
made by the great Fast Money
TV show crew, that will
offer you a unique service,
to compare their picks to
Jim Cramer's past comments
about those stocks.
Fast Money Recap - Trades
for next day...
Compare these picks to Jim's
comments for the same
stocks. |
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possible. Some comments have been
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