CNBC host and investing personality Jim Cramer achieved significant success as a hedge fund manager before going into the media, and so many investors like to pay at least some attention to what he is thinking. Of course, through his various media appearances Jim Cramer expresses positive or negative views on a wide variety of stocks and so it’s impossible to buy everything he likes- instead of blindly following his endorsements we recommend using his picks similarly to a stock screen, doing more research on some of his picks and only buying the few which pass inspection. Here are our brief thoughts on three stocks which Jim Cramer has mentioned on his show recently:
Jim Cramer’s charitable trust owns shares of Apple Inc. (NASDAQ:AAPL), which Cramer mentioned along with several other blue-chip companies as examples of businesses which did not do too well in the first quarter of this year. Specifically, the consumer technology company’s earnings fell 18% for the quarter versus a year earlier despite a rise in revenue as margins shrank. We track 13F filings from hedge funds and other notable investors as part of our work developing investing strategies (for example, we have found that the most popular small cap stocks among hedge funds outperform the S&P 500 by 18 percentage points per year) and during the fourth quarter of 2012 Apple Inc. (NASDAQ:AAPL) actually lost its place as the most popular stock among hedge funds to AIG. Find more of hedge funds’ favorite stocks. Apple Inc. (NASDAQ:AAPL) has, however, risen since its report largely on the news that the company will significantly increase the size of its buyback program. In addition, the stock is in value territory given that it trades at 11 times trailing earnings (and of course much of its market cap is in the form of cash).
Image: Apple Inc. (NASDAQ:AAPL)
Another leading company which Jim Cramer provided as an example of disappointing recent results was International Business Machines Corp. (NYSE:IBM), which he also owns in his trust. Warren Buffett is also a fan of International Business Machines Corp. (NYSE:IBM): at the end of December, his holding company Berkshire Hathaway had over 68 million shares in its portfolio (see Buffett’s stock picks). As with Apple Inc. (NASDAQ:AAPL), the case for International Business Machines Corp. (NYSE:IBM) depends on value: the trailing earnings multiple of 14 means that the business needs very little growth to justify its current valuation. However, the most recent quarter’s results showed a 5% decline in sales compared to the same period in the previous year and net income was also down (though only by 1%). As such we would avoid International Business Machines Corp. (NYSE:IBM), at least for now.
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