Jim Cramer’s brand new Lifestyle Index picks chosen by branding guru FUBU CEO Daymond John includes Apple Inc. (NASDAQ:AAPL), Visa Inc (NYSE:V), MasterCard, Nike, Walgreen Company (NYSE:WAG), Facebook Inc (NASDAQ:FB), Yahoo!, and Urban Outfitters, Inc. (NASDAQ:URBN). I wasn’t surprised to several favorites of mine listed as these companies are coolness personified. Which are the most promising?
The big Apple
I never doubted that Apple Inc. (NASDAQ:AAPL) was still cool. As Daymond John, CEO of FUBU clothing put it on the April 11 airing of Mad Money, Apple was like the prettiest girl at the party, but as you got drunker everyone (and their tablets and smartphones) looked attractive.
Have a cup of joe and sober up. John said Apple is still “amazingly cool” with a yield of 2.50% at an easily sustainable payout ratio of 12.00% with a 9.08 P/E. If you didn’t know this was Apple Inc. (NASDAQ:AAPL), with a .52 PEG and the lowest corporate governance risk score of only 1 and no debt, you could easily assume it was a consumer staple, maybe a cereal company based in the Midwest.
Only nine months ago Apple was the company with the largest market cap in the world, outstripping Exxon Mobil Corporation (NYSE:XOM). Rival Samsung has been gunning for Apple with its release of a large phone/tablet the Galaxy Mega, straddling sizes between a smartphone and a tablet as well as cheaper, but perfectly adequate alternatives to iPhones. Amazon.com, Inc. (NASDAQ:AMZN) and Google Inc (NASDAQ:GOOG) have been competing against Apple on cloud and tablets, but neither has the appealing valuation of Apple (although I like Amazon as a momentum name).
Apple reports April 23 and the stock is down almost 25% since the beginning of the year. The company has missed estimates for several quarters. Rumors of decreasing Apple Inc. (NASDAQ:AAPL) orders at parts supplier Foxconn were given more credence on April 17 by Cirrus Logic‘s report on declining sales of certain chips sending Apple’s share price crashing below $400.00 only to close at $402.59.
But all is not lost, Piper Jaffray’s Gene Munster, formerly one of the most bullish analysts on Apple is back in the herd again. He came out with a report that teens want iPhones and iPads more than other brands, saying, “Apple Inc. (NASDAQ:AAPL) remains the top choice for teens.” See, I told you Apple was still cool.
The hippest of hip
Urban Outfitters is a founder run company with CEO Richard Hayne back at the helm. Its clothing and home accessories are targeted to trendy young men and women. Brands include: Free People, Beholdn (hip wedding clothes), Urban Outfitters, Terrain (home and garden), and Anthropologie for a total of 475 stores. It also has very effective and cool e-commerce sites for each brand as well as catalogs. Those direct-to consumer net sales increased 31% in 2012.
Urban Outfitters reported Q4 and full year 2012 results on March 11. Of special note was the 104% increase in Q4 operating profit and improving gross profit by 212 basis points on decreasing merchandise markdowns. In other words, their clothes are moving.
It has a P/E is 25.51, a forward P/E of 18.44, and a PEG of 1.35. Analysts expect a five year EPS growth rate of 15.38%, better than the industry’s 12.07%. Their median price target is $46.50 for 10% upside. Barclays and Ascendiant Capital Markets initiated coverage in the last month with ratings of Overweight and Buy respectively.
One concerning issue is that CEO Hayne sold 898,063 shares at $38.87 a share in March. However, he still has 19,404,188 shares remaining as of March 24. Goldman Sachs and FMR LLC both believe in the name with 7% stakes.
John likes the name for its unique merchandise that he calls “a bit quirky.”
A destination retailer
Walgreen is certainly the oldest company of all these founded in 1901 but like Johnny Depp just gets cooler with age. Its one stop health and wellness stores with floors devoted to beauty products and grooming services (manicures and eyebrow shaping) and fresh food court make waiting for a prescription fun. Its health concierges wielding iPads (there’s Apple Inc. (NASDAQ:AAPL) again!) and nurse practitioner staffed Take Care health clinics are making health care convenient even for those with chronic conditions like diabetes, asthma, and high blood pressure.