Cramer Hearts Conoco
Stocks that make it to $80 in a bull market have a good chance of seeing $120 before they’re done their climb, according the latest Cramer postulate.
When a stock passes $80 when the market’s hot, that means it’s favored by the big institutions that set prices, he said. These same buyers that brought the equity to $80, should carry it to $100, or par in Wall Street gibberish, then on to $120. All week Cramer’s highlighting a group of picks he thinks are set to make that 50% jump.
ConocoPhillips, which is at $84 and change, fits the thesis perfectly, he said. The strength of the market and the fact that “oil cannot be stopped” should carry this stock to 20 over par, which may be a horrible golf score, but it’s great for investors.
The stock is cheap based on fundamentals. It’s trading at 9.7 times next year’s earnings estimates and 1.3 times growth. This price-to-earnings-growth ratio (PE divided by the company’s annual EPS growth) is one of the best metrics for determining whether a stock is over- or undervalued, Cramer said. At 1.3, Conoco is not an expensive stock.
The $15 billion stock buyback that was announced should do wonders for the share price as well. On the whole, the plan encompasses 10% of the shares outstanding and 6.7% of the market capitalization. That’s a real buyback, Cramer said.
Conoco’s oil reserves are in safe countries, too, now that it has left Venezuela. COP refused President Hugo Chavez’s offer of entering into a state-run joint venture, and now it should get fair market value for its expropriated assets, which means COP could get some of Venezuela’s assets elsewhere in the world. Admittedly, though, this probably won’t happen any time soon, so don’t expect any upside in the near future.
Bottom Line: Stocks that break through $80 tend to break through $120, Cramer said. Let it make you some mad money. Conoco's at $84 and change, you've got the chance to buy it nearly three points lower than where the gun-jumpers bought it intraday - now that's our kind of S&P sell-off pin action!
Questions for Cramer? email@example.com
Questions, comments, suggestions for the Mad Money website? firstname.lastname@example.org