Mad Money Machine

Our New Cyclical

Let’s hit the ask price of $48.91 right now for Foster Wheeler (FWLT). Jim said on May 5th that there is a huge infrastructure build out coming and that if you think the President will push through new refineries, you will win with Foster Wheeler. He also said that another reason to buy the stock is because the asbestos lawsuits are behind it.

So FWLT replaces PCAR in our Portfolio Smackdown.

SLE reported. Time to Act

The Secular Softgoods stock in our Cramer Portfolio: Sara Lee (SLE) reported a drop in third-quarter income, and gave a weaker-than-expected fourth-quarter forecast and the stock is down about 2.5% right now. I’m going to hit the bid right now at $18.20 and sell all of SLE in the portfolio. It was up ahead of the earnings and is back down now, so we’re not net down too much over the recent past. But let’s get out of this dog and into something FUN and PROFITABLE. The search is on…. Remember the category is Secular Softgoods. What is a recent Cramer pick that he is excited about that fits this category?

Onto the other ones. Paccar (PCAR). Remember Jim said to sell this one when it gets to $77. Well guess what? It is at $78.41. But he said that way way back on 5 January. Does it still apply? Lemme check yourmoneywatch.com… Nope, they sold it too. I’ll hit the bid on it right now at $78.74. Boom. Done. Now we need a Cyclical….

Wow, this is really a coincidence that we’re selling a secular and a cyclical because on yesterday’s excellent show, Jim said that the roles of secular and cyclical are at present reversed and whereas we would usually buy secular stocks going into a downturn, now we need to buy the cyclicals instead.

This is going to be fun.

Mashup MagicFormula with Rule #1

So I took stocks from MagicFormulaInvesting.com and ran them through the Rule #1 formula to calculate the Margin of Safety (MOS) price. I got the EPS growth rates estimates from MoneyCentral.msn.com. I used current P/E ratios in the Future Value (FV) calculation of the stock’s price.

Methodology: I used two different inputs into MagicFormulaInvesting.com: min of 50 million and min of 1000 million market caps. I took the two results, combined them, plopped them into a spreadsheet, and used the Excel Stock Quote plug-in to get the current EPS and P/E numbers (not shown) and price as of 8 May. I manually entered the estimated EPS growth rates from moneycentral.msn.com (note these are five-year estimates, not ten-year). From there the spreadsheet does the calculating of the Sticker, MOS, and % of MOS.

Commentary: PTEN looks severely undervalued, if and only if you believe a 42.3% growth rate each year for 10 years! If we knock PTEN back to a 23% growth rate, then it works out to be right at the MOS price.

Caution: I’m not a financial advisor, accountant, broker, investment planner, actuary, salesman, or much of anything really. I’m just a guy with a website and a spreadsheet. Do your own investigating before doing any investing.

Last week’s one Rule 1 stock from Cramer

Of all the stocks featured on Mad Money last week (below), which one meets the Margin-of-safety test from Rule #1?

MGP Ingredients, Inc. (MGPI)
Union Pacific Corp. (UNP)
Archer Daniels Midland Company (ADM)
The Black & Decker Corporation (BDK)
Celgene Corporation (CELG)
NTL Incorporated (NTLI)
Core Laboratories N.V. (CLB)
Dawson Geophysical Co. (DWSN)
FMC Corporation (FMC)
OAO GAZPROM SPONS GDR (OGZPY) (Closest I could get for its ticker)
ElkCorp (ELK)
Syngenta AG (ADR) (SYT)
Arris Group, Inc. (ARRS)
Knight Capital Group Inc. (NITE)
Cano Petroleum, Inc. (CFW)
SGL Carbon AG (ADR) (SGG)
Banco Itau Holding Financeira S.A. (ADR) (ITU)
Foster Wheeler Ltd. (FWLT)
Avnet, Inc. (AVT)

Take your guess… which one do you think it is???

Clues: It is a newer company. Analysts expect it to grow at an annual rate of 25% annually for the next five years. It had a Cramer Crackle of 1.9% and has gained 3.2% 2.8% since then.

Cramer said it owns an apartment on the new high list.
He said that it makes reservoir management equipment, meaning the company evaluates the quality of oil in a given reservoir as well as finds information about the rock that must be drilled into to get at the oil.

If you said Core Laboratories then you’re the winner of Pick the MOS stock.

By my calculations (that’s your cue to take this with a grain of salt), CLB has an EPS of $1.38. It has a P/E of 49. With an assumed growth rate of 25%, that makes the future value price in 10 years equal to $633.62. Divide that by 4 (meaning we assume a stock price growth of 15% per year for 10 years) results in a Sticker price today of $156.62. The Margin of Safety (MOS) would be one half of that at $78.31. The stock dropped from about $68 to $66.50 today.

Let’s assume that the P/E in ten years of 49 is silly and go with 25. What happens? FV is $321. Sticker price is $79.42. MOS is $38.71. So the stock would still be below sticker price (assming 25% growth in EPS per year for ten years).

Note that a 2:1 stock split is scheduled for 10 July.

Before you buy you should figure out if the other three M’s (Meaning, Management, Moat) apply to this stock and to you.

BTW: the next-closest stock to meeting the MOS that I calculate is MGPI.

(OH, and I have no idea what GAZPROM’s numbers are! So I don’t know if it meets MOS or not.)

MMM-021: An Ode to Lou

Best value: Get show #21 An Ode to Lou FREE THRU iTunes!

Or the lazy man’s way, play the show right here, right now…
[audio:MMM-021.mp3]

This just in, an article at the OttawaInsight Cashing In on Cramer features yours truly and is worth reading for the chuckle.

You can probably guess our Guru this time. I will miss him.

Start with $1000 and retire a millionaire in only three months! with this Tool.

Mark Skousen predicts Jim Cramer’s demise.

Congratulations to sweetheart! Hope the Bull brings you Bullishness for many years to come.

Mad Money Review looks at ERTS and EWC.

Things are heating up in the Portfolio Smackdown.

I detail the moves of the top three players in the Mad Money Machine Investment Guru Challenge.

It’s hard out there being a bear. Article from MarketWatch

Music from music.podshow.com:
Borderlands by Briareus
Illahie
Bombay Dream by jr
Romany Dance Gitano Flamenco by Hellozero

Coming on May 18th, the show THEY don’t want you to hear: Da Cramer Code!!!!!!!

MMM-021.mp3

International ETFs

IN show #20 I went through some of these ETFs and pointed out the stocks that Jim likes from them. Note that I got holding data from Morningstar.com and they only list the top 25 stocks in each fund. So I don’t know the sum total of Jim’s positions on every stock in each ETF. But this is a start…

Welcome MarketWatch readers!

Welcome MarketWatch.com readers! I was delighted to be included in an article in that fine web site that talked about Cramer Fan Sites.

And it was the first time I had heard of Leonard the Wonder Monkey. I will be tracking his progress closely! 🙂

So if this is your first time here, feel free to have a look around. Lots of stuff tucked in nooks and crannys here and there. The Portfolios page is where we compare the performance of two portfolios since the beginning of 2006; one is a set of 9 Exchange Traded Funds (like mutual funds but trade as stocks) and the other is a set of 10 stocks (in 10 categories) that Jim Cramer was excited about.

The Tools page lists some of the tools that I have referred to on my podcast. So far most of them are free websites that you can use to help you with your money.

I invite you to listen to one or all of the shows. I recommend using iTunes to subscribe to the shows, but if you don’t want to do that, you can simply click the play button above to listen to it thru your computer.

My ears are always open to your feedback at (feedback AT MadMoneyMachine.com).

And as the article said, this web site uses Google AdSense to try to make a couple of nickels. So please click away!

Thanks Doug A. for tipping me off to the article!!!

Oh yeah, this picture got archived off…

Business Week’s LBO Stocks

An article in May 8th Business Week provided a list of 25 top candidates for a takeover. Of the ones in the list, here is what Jim Cramer had to say about the stocks….

MMM-020: Thick as a BRIC

How about some foreign stocks? I take a look at all the ones that were mentioned on Mad Money and how well they’ve done. Did we give away the bull?

Best value: Subscribe to this show FREE with iTunes!

or… Play show #20 Right Here, Right Now!
[audio:MMM-020.mp3]

Keep watching the website and I will add details of the companies and ETFs mentioned on the show!

Music on the show:
Brazil by Dragon Ritual Drummers
Romany Dance Gitano Flamenco by Hellozero
A Tribute to Russia by Steffen Coonan
Bombay Dream by jr
Silk Route by Satya

MMM-020.mp3

Suggestions for BRIC topics?

On the next podcast I will talk about BRIC (Brazil, Russia, India, China) stocks.

Is there anything in particular you would like for me to cover on this topic?
Do you have anything to add to the show?
What is your favorite BRIC stock?

Email me with suggestions/ideas/data.

I’ll try to examine Jim’s performance on this topic.

I hope it will be more than just Another BRIC in the Wall. 🙂

Portfolio Thoughts

I’m bored with SLE, PCAR and TLM. I’ll re-evaluating these and thinking of replacing them with recent exciting Cramer picks. (And MO is smoldering too, but Jim still likes it…)

Here’s the breakdown…

Sara Lee (SLE) is one of three stocks that we originally purchased at the beginning of the portfolio smackdown. Jim said in December that it takes a magician to turn around a large company and CEO Brenda Barnes is “one of the best magicians in the business.” Cramer said Barnes is streamlining Sara Lee, which will increase operating margin, making the company more profitable. Barnes has already sold Sara Lee’s direct sales business, he said, and she has plans to spin off the company’s apparel businesses. That will leave SLE as a pure-play food and beverage company.

SLE announces earnings on May 9th. Let’s give Jim a chance to be right here, wait for the earnings release, see what the company says, then decide to keep it or jettison it.

Paccar (PCAR) was added on Feb 9th. Back on January 5th, Jim said, “Buy the stock at 71. Sell it at 77. … New engine rules start next year. Good for Paccar.” Well guess what, PCAR has not made it to 77 yet, but it is moving up. PCAR is in one of Jim’s Ten Bull Markets, but of the six stocks listed in bull market #9: Construction Equipment, it looks like CMI is the cheapest, using estimates from Moneycentral and average PE ratios. So why did we sell it? May have to swap back into it! Stay tuned…

Talisman Energy (TLM) is another of three stocks that we originally bought at the start (the third is MO). Jim made it his pick back in December because he believed that mutual fund managers would pour money into the stock in January.
“At the beginning of every year,” Cramer said, “mutual fund managers sit down and anoint stocks that in turn do well because mutual fund money pours into them.”

TLM did move higher in January peaking at 64.85, but then pulled back down and is trading around 57. TLM has scheduled a 3 for 1 stock split at the end of May. (Why???) First quarter results to be presented on May 10th. Again, we’ll wait and see what they have to say.

And in other portfolio enhancement news: I will add a SUMMARY VIEW table at the top of the page that shows just the active stocks in each portfolio, their percentage gain, and the current dollar value. Then below that I’ll keep the DETAILED view with all the data. This should make it easier to glance at the current state of affairs. Enjoy!