CNBC anchor and former hedge fund manager Jim Cramer has a large following because of his past success as an investor and for his media personality. Cramer’s charitable trust occasionally reports its stock positions, which includes a mix of value, growth, and income investments. We have gone through the most recent data on the trust’s holdings and here are five stocks it owns with trailing P/E multiples over 20 (implying that Cramer believes these stocks will achieve strong growth in order to justify the stock price):
Broadcom Corporation (NASDAQ:BRCM) trades a 27 times trailing earnings, but sell-side analysts believe that the $21 billion market cap communications technology company will do well over the next several years. Based on their consensus estimates, the forward P/E is 12 and the five-year PEG ratio is 0.9. As such, Broadcom is a classic growth stock: expensive on the basis of its current performance but potentially cheap when considering what its results will be in the future. Broadcom did grow its revenue 10% last quarter compared to a year earlier, though its earnings were actually down. However, Cramer seems to be on board with the sell-side in expecting strong performance.
$6 billion market cap equipment manufacturer Lam Research Corporation (NASDAQ:LRCX) is another of the trust’s picks. Lam’s equipment is used to produce semiconductor devices. At a trailing P/E of 24, this is another stock that isn’t cheap on a historical basis and depends on future growth, and again Wall Street analysts see a strong growth trajectory: the forward P/E multiple is only 8. However, Lam has been struggling recently. It showed a decline in revenue in its most recent quarter versus the same period in 2011, and net income fell 86%. The stock price is down 14% over the last year, compared to the S&P’s 21% rise. As such, Lam is not just a growth play but an out-of-favor stock.
Cramer’s trust also owns shares of EMC Corporation (NYSE:EMC). We looked at EMC Corporation earlier this month. The data storage company is another pick that is expected to significantly grow its earnings per share over the next several quarters: it trades at 23 times trailing earnings but at 14 times forward earnings estimates. EMC, unlike the previous two companies we’ve discussed, is actually on the right track in terms of earnings growth. Earnings rose 19% in the second quarter compared to the second quarter of 2011, fueled by a 10% rise in revenue.
We compared The Home Depot, Inc. (NYSE:HD) and Lowe’s earlier this month (see our article on the hardware retailers) and Cramer’s trust recently came down on one side of this age-old debate by buying shares of Home Depot. At a $90 billion market cap, the company has a trailing P/E of 21 and a forward P/E of 18. Both of these seem a bit high, even when considering the 2% dividend yield, so in this case investors are more bullish than the sell-side. Last quarter earnings were up 12% compared to a year earlier, driven by a rise in margins. Home Depot’s stock is up 74% over the last 52 weeks.
NIKE, Inc. (NYSE:NKE) rounds out Cramer’s growth picks, with the trust’s holding carrying a trailing P/E multiple of 21. The stock trades at 17 times forward estimates, possibly on the strength of its global brand as a driver of growth potential. Nike grew its revenue by 12% in the fourth quarter of its May fiscal year versus last year’s fourth fiscal quarter, though earnings were down 8%. Billionaire Ken Fisher’s Fisher Asset Management increased its own position in Nike during the second quarter of 2012 to a total of 3.7 million shares.
