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Cramer on BloggingStocks: Cramer bullish on the Dow for '09 -- Part II

Posted Jan 6th 2009 9:04AM by Jim Cramer
Filed under: General Electric (GE), Coca-Cola (KO), PepsiCo (PEP), Exxon Mobil (XOM), Market matters, Walt Disney (DIS), Caterpillar (CAT), Chevron Corp (CVX), duPont(E.I.)deNemours (DD), Dow Chemical (DOW), DJIA, Stocks to Buy, Cramer on BloggingStocks

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TheStreet.com's Jim Cramer takes a look at the next six Dow stocks: Caterpillar, Chevron, Coca-Cola, Disney, Du Pont and General Electric.

Editor's note: This is the second part of Jim Cramer's series of predictions for the Dow components in 2009. If you missed the first part, you can go to Cramer bullish on the Dow for '09 -- Part I

Caterpillar (NYSE: CAT) (Cramer's Take): Here's a direct play on a turn in China and a huge stimulus plan by President-elect Obama. I believe the dividend is safe, and I trust management when it says that 2009's second half can be much better than the first half, even though I am in a lonely minority on that front. The decision to freeze wages and fire a bunch of people made sense and made me believe the company cares more about maintaining the dividend through hard times than I thought it did.

I believe the stock will get gigantic orders from the U.S. government after the passing of a stimulus plan. You can't build any infrastructure without Caterpillar's equipment, and the government ain't buying tractors from Komatsu. Helped by its 4% yield, the stock will go back to $55, a fantastic move, even though first-quarter earnings will be horrible. Don't forget, China's coming back, and that's a second big customer.


Cramer's Dow Outlook for 2009
Company
Target
2008 Close
% Change
Dow Point Change
CAT
$55.00
$44.67
18.78%
82.3
CVX
$82.00
$73.97
9.79%
64.0
KO
$49.00
$45.27
7.61%
29.7
DIS
$26.00
$22.69
12.73%
26.4
DD
$32.00
$25.30
20.94%
53.4
GE
$20.00
$16.20
19.00%
30.3
Source: TheStreet.com

Chevron (NYSE: CVX) (Cramer's Take): It is difficult to expect a radical turn up in oil, but I do believe that these prices are artificially depressed. That's why Chevron's stock rallied from the $55 level, where it fell to in October.

I believe 2009 will be a year where dividends tell the tale, and every time Chevron dips back to 4%, it will pick up buyers. I believe that oil saw its lows at the end of the year, but I don't think we are going back to $60. A rangebound oil may the best thing for this company, and I predict good things, which is why I am buying it for Action Alerts Plus (click here for a free trial). It should rally to $82, another nice move, and should be bought aggressively on any decline of any magnitude. ExxonMobil (NYSE: XOM) (Cramer's Take) is.

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Coca-Cola (NYSE: KO) (Cramer's Take): The dividend protects the downside, but the earnings limit the upside, even in a recessionary environment. The company's products simply don't provide a lot of upside; as we know, the world is cutting back, even on sales of soda!

But there is good news here. The dollar has seen its highs and will come crashing back down when the European Central Bank cuts rates dramatically to avoid a depression -- they have lagged so far. That means KO can trade to $49 on currency. (Still, if that's the case, Pepsi (NYSE: PEP) (Cramer's Take) will go to $75 and is a much better buy, and it also has that fantastic Frito Lay business.) I simply don't believe you are going to see Coke's top line grow more than 3% to 5%, which is what is needed to get the stock above that $49 level. If the economy comes roaring back in the second half of the year -- something I do not think will happen -- you will have to sell it at $49, as other stocks will be far more attractive.

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Disney (NYSE: DIS) (Cramer's Take): A weakened consumer and no real dividend yield to speak of will handicap this equity for 2009, as I am very bearish on the consumer's spending habits. That means flat theme park attendance and no increases in park fees. I believe that TV advertising will be down in 2009, further hurting the cause, although the movie franchise should remain strong.

The stock should have a hard time exceeding $26 or $27, where it hung before the Lehman Brothers collapse -- that was the seminal event of 2008 -- but it will get there simply because a weak dollar and lower gasoline prices will make the trip to Disney Land/World a destination vacation for the second half of the year. I do believe that the franchise value of Disney is mighty and will ride right through any short-term misfortune. Fantastic management here, don't forget, and a monster good brand.

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Du Pont (NYSE: DD) (Cramer's Take): I am greatly concerned about the dividend of this company, given its exposure to housing and autos -- far more substantial than other chemical companies, especially PPG (NYSE: PPG) (Cramer's Take) and to a lesser extent Dow (NYSE: DOW) (Cramer's Take), even after PPG's recent earnings blowup and Dow's big problems.

While it has a healthy ag business, which was worshipped earlier in 2008 but now doesn't even seem to matter, Du Pont has a drug business that is about to have a nasty patent loss. All that said, if housing bottoms in 2009, you are going to see some stabilization and the stock moving up to between $31 and $33. Could be worse to own, but if it goes there, PPG will go to $60 -- it's the better stock to own.

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General Electric (NYSE: GE) (Cramer's Take): As an owner of shares in GE as part of my compensation package from CNBC, I feel torn on this one. The company has drawn a line in the sand on the dividend for 2009, but no such line in 2010. That said, I believe the company can weather the storm and will fix its balance sheet's problems by continuing to shrink its problematic finance division.

I sure wish the bonds would rally, as that would make me more confident of the upside. I believe GE will rally back to where Buffett bought stock -- call it $20 -- and then will stall out as worries about the dividend in 2010 cloud the stock's progress.

This is a company that has benefitted from the Fed's plans and will continue to do so. What it needs to do is make an acquisition -- perhaps in infrastructure or health care -- to help shrink the size of finance as a percentage of the whole.

Be sure to check back all week for the rest of Jim Cramer's 2009 predictions for the Dow components.

Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer was long Chevron, GE and Pepsi.

Tags: cat, cvx, dd, dis, djia, dow, featured, ge, jim cramer, JimCramer, ko, pep, ppg, xom

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Last updated: July 04, 2009: 01:30 PM

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