"Investors need to stick with what's working and not take unnecessary risks," Jim Cramer told viewers of his "Mad Money" TV show Monday.
Cramer identified three bull markets that are working right now: agriculture, gold and natural gas. He said the biggest factor contributing to their success is that the earnings estimates are just too low.
Agriculture is a twice-blessed sector, says Cramer, with growth being driven by both global famine and an increased demand for corn-based ethanol. He predicts corn and wheat are headed toward $16 a bushel.
Cramer has long liked the agriculture sector, especially such stocks as John Deere (DE - Cramer's Take - Stockpickr), Mosaic (MOS - Cramer's Take - Stockpickr), Monsanto (MON - Cramer's Take - Stockpickr) and Agrium (AGU - Cramer's Take - Stockpickr).
Now he believes the company best positioned to take advantage of this coming boom in
commodity prices is Potash (POT - Cramer's Take - Stockpickr).
Cramer says Potash, which closed Monday at $157.36, about $11 off its 52-week high, is all about growth. The company is poised to grow 107% in 2008 and is expected to increase its potash production from 10.7 million tons to 15.7 million tons by year end.
And with the high cost of entry, Cramer expects little, if any, new competition to challenge Potash's dominance.
Potash reported a better-than-expected quarter in January and trades at only 22 times earnings. It also has a stock buyback program that Cramer finds attractive.
Cramer predicted Potash could trade as high as $383 a share.
Going with Gold
Cramer said he sees a bull market in gold, and taking a cue from Peter Marone, CEO of Yamana Gold (AUY - Cramer's Take - Stockpickr), a stock which he owns for his charitable trust, Action Alerts PLUS, says the commodity could reach $1600 per ounce.
Since Cramer first recommended Yamana Gold back on June 6, 2006, gold has risen 56%, while Yamana has risen over 100%.
But Cramer now recommends Agnico-Eagle Mines (AEM - Cramer's Take - Stockpickr) as the gold stock to own.
According to Cramer, Agnico is the second lowest cost producer of gold behind Yamana, and after interviewing the company's CEO last Friday, he says the company's story is just too good to pass up.
Cramer cited the American Stock Exchange's gold index as one measurement of how undervalued the gold stocks are. According to the index, the entire gold sector has only a $200 billion market cap, while a company like ExxonMobil (XOM - Cramer's Take - Stockpickr) is valued at more than $400 billion.
Cramer said the gold stocks as a whole should be valued at double their current levels.
"Very rarely do I mention a company two nights in a row," said Cramer, "But I believe so strongly in gold and Agnico that I just had to go more in-depth again tonight."
Strong Insider Buying
When oil gets too expensive and coal gets too dirty, Cramer says investors look towards natural gas. And that's why he predicts that natural gas is headed to $16. Cramer said he's returning to an old favorite as the best natural gas stock: Chesapeake Energy (CHK - Cramer's Take - Stockpickr).
Chesapeake is the largest driller and producer of natural gas in the U.S., with over 15 trillion
cubic feet in reserve. Cramer said he likes the company for its production growth and strong insider buying.
Cramer said Chesapeake is set to increase its production by 21% this year and is the most levered to the rising price of natural gas. He says both attributes make the company very attractive.
But Cramer said he's most impressed with the company's strong insider buying. He explained that there are dozens of reasons why a company's executives may sell stock, including estate planning, retirement and divorce. "But there is only one reason why executives buy stock in their own company," Cramer said, "and that's to make money."
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