Released from Sell Block, This Stock a ‘Buy’: Cramer
When Jim Cramer sees good things happening in the corner office of a company that had been a real dog, he takes a second look.
“That’s why I’m releasing Symantec from the Sell Block and telling you that the stock is now a buy thanks to the strength of its new CEO,” said Cramer
Cramer feels that when a company’s stock had been real laggard - a serial disappointer - the buck stops with the CEO.
And few companies better examplify this philosophy than Symantec, a security software and storage company whose stock had been a real dog for ages.
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The company sure had its fair share of problems; declining margins, anemic growth, and an inability to compete. However, even with all of those problems, the worst thing about Symantec was something else entirely.
“What really made this stock un-investible was the appearance that management was complacent, and the board of directors satisfied with the clearly unsatisfactory status quo,” said Cramer.
But, appearances can be deceiving.
On July 25th, the company ousted its CEO, Enrique Salem, under whose leadership the stock had turned into a house of pain, and they replaced him with Steve Bennett, a board member who has now taken over as permanent CEO.
Bennett was the CEO of Intuit, the software company, from 2000 to 2007, and under his leadership it grew from a company with one billion in sales to a company with $2.7 billion in sales.
“Plus, Bennett knows how to increase margins, which is Symantec’s main problem,” said Cramer. “In his first five years as CEO of Intuit, the company’s margins expanded by an average of 260 basis point a year.”
In other words, Cramer thinks Bennett is exactly the kind of CEO that Symantec needed.
“In his first day on the job, he said that he’d conduct a 90 to 120 day review of the business, where he would view Symantec as a clean sheet of paper. Even better, within a week of taking the CEO job, Bennett disclosed that he’d made a big insider purchase, buying 89.3 thousand shares of Symantec at $15.75 on July 31st."
Sentiment on the Street says insiders buy huge chunks of stocks when they think they can turn the company around.
As a result shares surged.
“I’ve been waiting for Symantec to give me a decent pullback, so that I can buy without feeling like I’m chasing something,” admitted Cramer. “And in the last few weeks, that pullback has arrived, with the stock now trading at slightly less than $18 a share.”
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