Cramer entered Hogg Auditorium to a huge, Lone Star State, Longhorn booyah from the McCombs School of Business at The University of Texas at Austin. He knew that because everything is bigger in Texas, he had to bring, not just one or two, but four great stocks based right in Texas if he was going to impress the locals.
Residents of Cramerica know these companies were put through Mad Money’s rigorous quality assurance test, so anything recommended today is best of breed and selling at a discount. And every one of them he’d buy right here and right now.
Who says size doesn’t matter? Not Texans, and not Cramer – especially when you can get size with a low multiple. So here are four great stocks that are easy to understand, inexpensive and have great potential.
First up, JC Penney. Cramer says this is the best, most consistent retailer in the country. Twenty years ago, it moved from the Avenue of the Americas in New York City out to Plano because it wanted to save shareholders money. That’s the kind of spirit Cramer likes to see in a company, and it’s that spirit that’s made JCP his favorite large-cap retail play.
Cramer thinks the CEO, Mike Ullman, is a stand-up guy. A month ago Ullman came out like a man and admitted that the merchandise assortment wasn’t right for the stores, he admitted the start-up costs for JCP’s expansion would take a couple pennies out of the numbers. Since then the stock’s taken almost a ten percent hit. Now JCP is on sale. It’s got $12 in cash per share, it’s got the most consistent growth in the group, a massive buyback, and Cramer’s betting on an upside surprise this quarter.
OK, on to number two. Obviously we can’t ignore oil and gas, so let’s go with a Cramer favorite – Transocean. Unlike almost every other oil service company, RIG’s got very little exposure to the weak markets – those being Canadian land drilling and the Gulf of Mexico. As Transocean rolls over the contracts on its giant rigs, it can raise rates enormously because the demand in the rest of the world is intense, especially in India where some of the most fevered drilling on the globe is happening. RIG is the cheapest and the biggest in the game, and it’s returning money to shareholders with a big buyback. Transocean’s biggest problem is that the cash is coming in too quickly for the buyback to handle, and when that’s your number-one difficulty, you know Cramer wants in.
Cramer doesn’t like most of the actual oil companies as buys right now because they’re not going to show strong year-over-year growth in earnings, and growth is like crack to Wall Street. Mostly he has been favoring oil service, but there is one oil and gas play that will deliver year-over-year growth: XTO Energy. XTO not only knows how to get the most out of its reserves – it’s got 12% reserve growth, which is something no other oil company in the Mad Money universe has – and it’s replaced 265% of its production – again unheard of.
Now XTO’s hedged half of its production at $9 on the gas side and $70 on the oil side, which proves they don’t just know how to find oil, they know how to trade it. XTO is a growth stock—a real rarity among oil companies right now.
Now last but not least, Cramer’s favorite of the four from Texas: Temple-Inland . This is one of the largest landowners in America. It’s got interests as varied as S&L, timberland, real estate, and packaging and building products. It needs to be broken up, he says. Carl Icahn agrees – and finally TIN, which had fought a break-up for years, is now on board, too. Cramer agrees with Deutsche Bank on the break-up value: $21 per share for the timberland, another $21 in real estate, $31 in packaging because it’s the best package container company in the world, $9 in building products and $18 in financial services. Subtract $15 for debt and Temple-Inland is an $85 stock, only masquerading at its current $58 price. The break-up will bring out huge value, but nobody knows it yet. It’s time for this stock to get rewarded with a price that’s more like its breakup value and less like its liquidating itself into nothingness – that’s 27 points of upside here.
Bottom Line: JCP, RIG, XTO and TIN--wherever you're from, these four Lone Star stocks are worth buying.
Jim's charitable trust owns Transocean.