Finding Value in Today's Market
One of the best ways to approach the recovery that comes after a sell-off is through a value strategy, Cramer said on Mad Money tonight.
Investors want to look for value plays on the new-low list, he said. This where they will find all the good companies the hedge funds were forced to sell to meet their redemptions. In Cramer parlance, these are broken stocks, not broken companies.
But because Cramer is expecting rate cuts, he added a twist to his plan. As interest rates drop, the amount of money investors can earn on cash does too. So stocks with big dividends become even more valuable in the current environment.
The dividend-paying stocks for which Cramer was looking good companies with good prospects and no serious flaws. Aircastle, which was more than 27% off its 52-week high and yields 8%, stood out among the group.
There are two other reasons Cramer is partial to this aircraft leasing company: Aircastle just upped its dividend, and companies don’t do that if they expect weakness that could prevent them from paying it out. The second reason is insider buying. Chief Operating Officer David Walton recently bought a couple of thousand shares. That’s not a lot in the grand scheme of things, but as Cramer pointed out, executives don’t buy more shares of their company if they don’t think there’s money to be made.
The Street took the stock down because it thought the weak credit markets are hurting the aircraft leasing business, Cramer said. But a quick look at the business shows this to be untrue. AYR’s entire portfolio of aircraft is currently leased out, and all the company’s leases that were set to expire this year have been extended or renewed at higher rates. Also, Aircastle is making a move into freight planes, which last longer and cost less to maintain, and that means better returns.
Another aircraft leasing company Cramer likes is Genesis Lease. It’s down 25% from its high, and 20% from his May 23 recommendation. But with a 6.8% yield, $1.2 billion in capital to support its growth and 100% utilization rate, this could be a chance to investors to buy a strong position in the stock.
Questions for Cramer? firstname.lastname@example.org
Questions, comments, suggestions for the Mad Money website? email@example.com