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)
Who’s the best of the rest?
Jim Cramer recently interviewed the CEO of Eaton Corporation, PLC Ordinary Shares (NYSE:ETN), a $29 billion market cap provider of electrical and hydraulic equipment among other products, on his show. Eaton actually had a good quarter, despite what the CEO agreed was a poor macro environment, and the market reacted positively. Interestingly, revenue grew 34% above its levels in the first quarter of 2012 but came in below analyst expectations while earnings per share beat by five cents and yet were lower than a year earlier. Wall Street analysts are predicting that net income will grow considerably over the next couple of years, as shown by the fact that the trailing and forward P/E multiples are 18 and 12 respectively. Eaton also deserves mention for paying a dividend yield close to 3%.
We’re not sure that Eaton is such a good opportunity- the current valuation is dependent on earnings growth, and yet recently the business has seen declining earnings per share even as revenue as risen. We wouldn’t be short the stock but it seems speculative to be buying it at this time. IBM and Apple’s financials don’t look so great either, although at least in the latter case we have a company which has a large cash hoard and which is cheap enough that it might be worthy of further research.
Disclosure: I own no shares of any stocks mentioned in this article.
