Jim Cramer is the host of the popular “Mad Money” show on CNBC. He is famous for making big bold calls, liking momentum stocks and preferring dividend yielding stocks. On his show November 16, Cramer discussed the importance of looking beyond company metrics, using Celgene (CELG) as an example.
CELG is a fast growing biotech company. Cramer used the company as an example to illustrate the importance of paying attention to a company’s metrics as well as its future prospects. Cramer compared CELG to Pfizer (PFE). He explained that PFE is selling at 8.6 times next year’s earnings while CELG is selling for 14.5 times its earnings, so PFE appears cheaper, but Cramer says you have to look deeper. In this case, PFE has a 4% dividend yield but lacks growth. “That’s why when we’re playing in pharmaceuticals, I’d prefer to go with a fast growing biotech firm like Celgene,” Cramer said. “While Celgene has a higher multiple than Pfizer — selling for 14.5 times earnings — it also has a much higher growth rate, which is why this stock is the cheaper of the two.” In fact, because of its high growth rate (25%), Cramer said that CELG could be the least expensive growth stock he is following right now. CELG closed Wednesday at $64.87 with a one-year growth estimate of $75.70. Bain Capital’s Brookside Capital is a fan of CELG.
Similarly, Jim Cramer warned viewers that they should watch what is happening in Europe, cautioning that U.S. banks could take a hit in the European debt crises worsens. While it is impossible to know what will happen in the Eurozone, Cramer shared a piece of advice – he advised viewers to watch the FXE (FXE), a currency ETF that measures the euro to the dollar. “You want to know what stocks to buy if you get good news about the economy or individual companies? First ask about the FXE,” Cramer said. “If it’s down, don’t even bother with the stocks. If it’s up, then the good ideas will work and your portfolio might have a decent day.” Cramer said this is the best way to track what is happening in Europe. He went so far as to recommend viewers put the FXE above the Dow or the S&P on their screens.
Jim Cramer extended his caution on Wednesday as he discussed the stocks in his Lightning Round. He wasn’t willing to make a call on one of Ray Dalio’s Bridgewater Associates picks, Pitney Bowes (PBI), saying that its yield of 7.60% is a red flag but he would rather have the management on the show before making a call on the stock. Cramer also discussed Ken Fisher favorite Amazon (AMZN), saying that he likes AMZN but he thinks the stock can go lower. Fisher recently upped his Fisher Asset Management’s stake in the company. Cramer cautioned viewers over Wal-Mart (WMT) similarly. The stock had closed at $56.73. Cramer advised waiting until it hit $55 a share.
We think that Jim Cramer gave a lot of good advice Wednesday night. As much as investors, ourselves included, would like to believe that the financial fate of the U.S. is not tied, at least in part, to what is happening in Europe, the fact is that the world and its businesses are too globally rooted to not be affected. Even for the company that sells only to the U.S., its suppliers, financiers and complementary producers may be abroad. Keeping an eye on what is happening in Europe makes perfect sense in this way. So, does a somewhat bearish mentality, waiting until big-name, large cap stocks float a little lower. Patience is definitely the order of the day, and staying abreast of the global economy is just as important.