Jim Cramer has a bad reputation. He makes several buy and sell calls every night that his average performance can’t be much different than average market performance. Surprisingly Jim Cramer’s stock picks managed to beat the S&P 500 index according to two Northeastern University professors. We believe there are two reasons for that. The first one is that Cramer generally select stocks with certain characteristics, like momentum stocks. As a result of that he sometimes gets embarrased when one of these stocks blow like. Recently a long time Cramer favorite Netflix (NFLX) went down significantly. However, on the average these stocks beat the market. That’s based on an 80-year historical pattern.
The second reason Cramer is successful at beating the market is that he recommends certain high quality, low risk stocks. He also buys most of these names for his charitable trust. Historically low risk stocks also managed to beat the market (who could have guessed that low risk stocks are better at maximiing returns?). In this article we compiled a list of 10 stocks Cramer is most bullish about. They are the top 10 positions in his charitable trust. We think these stocks as a group have better than 50% chance to outperform the market:
Alcoa, Inc. (AA): Alcoa Inc is engaged in the production and management of aluminum. It lost 28.77% since the beginning of this year. The company reported a third-quarter net income of $172 million, better than net income of $61 million a year earlier, but weaker than the second quarter numbers and analysts’ forecasts. But its revenue rose 21% to $6.42 billion, topping analysts’ estimation of $6.24 billion. The company is expected to earn $0.88 in 2011 and $1.02 in 2012. The stock recently traded at $10.87. Its forward PE ratio is 12.13. Cramer had 5,700 shares of AA as of November 3. John Paulson invested $430 million in AA shares.
Bank of America Corporation (BAC): Bank of America is a financial institution, serving individual consumers, small and middle market businesses, corporations and governments with banking, investing, asset management and other financial and risk management products and services. It lost 48.05% since the beginning of this year. Bank of America reported revenues of $28.7 billion for the third quarter of 2011. Third quarter net income was $0.56 per share. Compared to a loss of $7.6 billion a year ago, Bank of America made a profit of $5.9 billion in the third quarter. The company is expected to lose $0.06 in 2011 and earn $1.01 in 2012. The stock recently traded at $6.91. Cramer had 6,000 shares of BAC as of November 3. John Paulson had over $600 million invested in BAC.
EMC Corporation (EMC): EMC develops, delivers and supports the IT industry’s range of information infrastructure and virtual infrastructure technologies, solutions and services. It returned 9.17% since the beginning of this year. The company reported better than expected third quarter earnings as its spending on internet-based computing drove sales of data products and software. Its net income rose to $605.6 million, or 27 cents per share, from $472.5 million, or 22 cents, a year earlier. The company is expected to earn $1.25 in 2011 and $1.42 in 2012. The stock recently traded at $25. Its forward PE ratio is 19.41. Cramer had 4,000 shares of the stock as of November 3. Ken Fisher had the biggest position in EMC.
Ensco plc (ESV): Ensco is a global offshore contract drilling company. It gained 0.69% since the beginning of this year. The company reported diluted earnings per share from continuing operations of $0.88 for third quarter of 2011, compared to $0.92 per share in third quarter of 2010. Revenues in third quarter 2011 were $916 million, compared to $428 million a year ago. The company is expected to earn $3.38 in 2011 and $6.04 in 2012. The stock recently traded at $52.7. Its forward PE ratio is 14.45. Cramer had 2,100 shares of the stock as of November 3. David Einhorn had $225 million invested in ESV. Steven Cohen also had $160 million of ESV stocks.
Starwood Hotels & Resorts Worldwide Inc. (HOT): Starwood Hotels & Resorts is a hotel and leisure company. It lost 15.89% since the beginning of this year. The company reported better than expected profit in the third quarter of 2011. It reported a net income of $163 million, or 84 cents per share in the third quarter, compared with a loss of $6 million, or 3 cents a year ago. The company is expected to earn $1.78 in 2011 and $2.19 in 2012. The stock recently traded at $51.12. Its forward PE ratio is 28.57. Cramer had 1,800 shares of the stock as of November 3. Jeffrey Vinik held the largest position in HOT among the 300+ hedge funds we are tracking.
Juniper Networks, Inc. (JNPR): Juniper Networks serves the networking requirements of global service providers, enterprises, and public sector organizations. It lost 35.10% since the beginning of this year. The company reported a revenue of $1,106 million in third quarter of 2011, which is 9% higher than a year ago but 1% lower compared to the second quarter. Non-GAAP net income is $0.28 per share diluted, 13% lower than the third quarter of 2010 and 10% lower than the second quarter of 2011. The company is expected to earn $0.94 in 2011 and $1.15 in 2012. The stock recently traded at $25.1. Its forward PE ratio is 23.96. Cramer had 2,500 shares of the stock as of November 3. Bain Capital held about $300 million in JNPR.
The Coca-Cola Company (KO): The Coca-Cola Company is a non-alcoholic beverage company. It returned 6.62% since the beginning of this year. The company reported a third quarter net income of $284 million, compared to $208 million in the same quarter last year. Its revenue rose over 27% to $2.14 billion. The company is expected to earn $3.83 in 2011 and $4.14 in 2012. The stock recently traded at $68.65. Its forward PE ratio is 17.72. Cramer had 1,800 shares of the stock as of November 3. Warren Buffett invested over $13 billion in KO.
Oracle Corporation (ORCL): Oracle Corporation is an enterprise software company. It returned 6.53% since the beginning of this year. The company reported a third quarter revenue of $8.37 billion, 22% lower than second quarter revenue. Its net income is $1.84 billion, 43% lower than that of second quarter. The company is expected to earn $2.34 in 2011 and $2.56 in 2012. The stock recently traded at $33.11. Its forward PE ratio is 13.82. Cramer had 3,100 shares of the stock as of November 3. Ken Fisher held over $600 million in ORCL.
Prudential Financial, Inc. (PRU): Prudential offers an array of financial products and services, including life insurance, annuities, retirement-related services, mutual funds, investment management and real estate services. It lost 9.64% since the beginning of this year. The company reported a net income of $1.505 billion on nearly $10 billion in revenue for the third quarter of 2011, compared to $1.167 billion in the same quarter last year. Earnings per common share were $6.69, up from $7.62 last year. The company is expected to earn $0.88 in 2011 and $1.02 in 2012. The stock recently traded at $53.05. Its forward PE ratio is 8.02. Cramer had 2,100 shares of the stock as of November 3. Jeffrey Altman invested more than $200 million in PRU shares. Ric Dillon also had $156 million invested in PRU.
Sanofi (SNY): Sanofi-Aventis is a global and diversified healthcare company discovers, develops and distributes therapeutic solutions focused on patients’ needs. SNY returned 14.64% since the beginning of this year. Sanofi reported 3% drop in its third quarter profit as generic competition hurt sales of three key medicines. It posted a profit of 2.4 billion Euros ($3.29 billion), compared with 2.47 billion Euros a year before. The company is expected to earn $4.63 in 2011 and $4.12 in 2012. The stock recently traded at $10.87. Its forward PE ratio is 7.39. Cramer had 2,600 shares of the stock as of November 3. Ken Fisher invested nearly $600 million in SNY shares.
