The way to survive market declines like we saw on Thursday – with the Dow falling triple digits intraday only to rebound to a 50-point loss by close of trading – is to buy companies that have already proved themselves, Cramer said Thursday. Strong quarterly numbers mean that the underlying business is sound, so investors should seek out the earnings season’s top performers.
Among the best was Time Warner , Cramer said. On Feb. 3, the company reported better-than-expected profits and revenues for the fourth quarter and announced that 2010 earnings should grow in the mid-teens. Then management upped the dividend, bringing the yield to a respectable 2.9%. And that’s on top of the $2.2 billion TWX added to its stock buyback in January.
How’d the company pull it off? Cramer attributed Time Warner’s success to the stewardship of CEO Jeffrey Bewkes. Since taking over in January 2008, Bewkes has separated from AOL and its free-content and no-growth businesses and spun off the stressed-by-competition Time Warner Cable. The end result is a great film, TV and publishing company, which Cramer called “one of the best media plays out there.”
Consider the assets Time Warner is holding: Warner Brothers and its hits Sex & the City and Harry Potter, among others; HBO and Cinemax; Turner Broadcasting, TNT, CNN and Cartoon Network; and a host of brand-name magazine titles like Time, Sports Illustrated, People and Fortune. Even this last group, which has suffered terrible losses due to competition from the Internet, performed well this past quarter, as cost cuts pushed up profits even as revenues declined.
This great story has Cramer thinking that TWX might be undervalued, especially if you take the dividend boost as a sign of confidence in the company’s future. Investors may want to buy the stock so that they can “sleep soundly at night,” he said, when the market is giving them every reason not to.
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