TheStreet.com's Jim Cramer is scaling in on the way down in names that have intrinsic worth.
Sure, there's been a steep fall in commodities, but at a certain point you have to believe they can bottom out. More important, some stocks, I believe -- certainly not all, but some -- are reflecting what might turn out to be rock-bottom prices if any of the major central banks start cutting anytime soon. Steels, coppers, infrastructure -- some stock or stocks might represent intrinsic value, or value at least to some other company that believes commodities will stabilize and go up in the next couple of years.
This collapse, which mirrors the collapse of all things early-cycle going into the July 15 changeup, has such a stunning velocity that you could see stocks like Freeport-McMoRan (NYSE: FCX) (Cramer's Take) down another 10 points in a heartbeat, even though they are making lots of money.
This gigantic beat also serves to remind us of the big dichotomy. You are either in the energy and petroleum products game or you are in a lot of games that don't work.
It's not easy for these companies, some of which have lived off the duress of state and local governments, including Shaw (NYSE: SGR) (Cramer's Take) and to a certain extent Aecom (NYSE: ACM) (Cramer's Take) and URS (NYSE: URS) (Cramer's Take), to become oil-and-gas plays.
The only ones that have transcended it beside Fluor are Foster Wheeler (NASDAQ: FWLT) (Cramer's Take) and Jacobs Engineering (NYSE: JEC) (Cramer's Take), and the only reason you would really know that is longevity. I remember in the early 1980s when FLR and then FWC would compete directly for all of the huge projects after the second oil shock.
As you saw in a Market tankola note earlier, today can be blamed on oil or many other things. But the charts are likely the real culprit as old resistance levels didn't hold as the new support levels. The bears may have gotten an upper hand for a while if today's sentiment holds.
To top it off, worker productivity data came out strong enough today that it might even allow companies to make more layoffs. Below are the unofficial closing bell prices today:
Cisco Systems (NASDAQ: CSCO) beat Street estimates for earnings Tuesday with $1.77 billion in net income, or $0.29 EPS, a 5.4% drop from first quarter 2007. Sales of $9.79 billion beat estimates of $9.75 million. Cisco gave 2008 guidance that met expectations as demand for Cisco's costly networking systems may still be slow during the economic slowdown. Shares fell 2% to $25.78 despite being positive earlier this morning.
All of them, what do they have in common? They have left the U.S. behind. We are an afterthought. If you can prove on a conference call that Ben Bernanke has nothing to do with your book of business, you are going higher.
Notice Eaton (NYSE: ETN) (Cramer's Take) and Emerson (NYSE: EMR) (Cramer's Take). They can't quit. When the coal operators come to their sense and realize that they can make fortunes digging for more, then Joy Global will take out the high. I am using any weakness to buy Foster Wheeler (NASDAQ: FWLT) (Cramer's Take), the tug of the non-U.S. cyclicals is that strong.
TheStreet.com's Jim Cramer says there are some names that will work here, but they're a small slice of the total market pie.
Can someone, anyone, tell me why we can bank on this Fed? "The Fed has to cut 50 basis points or we are going to Dow 12,500."
Yeah, OK. I get it. Fed panicked and cut 50 last time we were shocked with a weak employment number. Maybe they will do it again.
But I look at it a different way. This Fed thinks it is smarter than all of us. It looks at ways to tinker to bring down the short-rates without attacking them head on. They are clever.
Readers of this space know that the preferred sectors include oil services and infrastructure stocks, and when one can combine the two, it's like a double header at Yankee Stadium (or two chamber concerts at Lincoln Center). Foster Wheeler fits the aforementioned bill.
Foster Wheeler (NASDAQ: FWLT) provides design, engineering, procurement, construction, and project management services for oil/natural gas processing facilities. The company also designs and builds steam generating and auxiliary equipment for electric power generating stations and industrial markets around the world.
Analysts expect 2007 revenue to increase a remarkable 35%-40%, with a 20%-25% gain seen for 2008 on continued, strong Asia-Pacific and Middle East capital spending. Further, increasing demand for FWLT's preferred power generation system adds to the mix. The Reuters F2007/F2008 EPS consensus estimates FWLT for are $5.92/$7.00.
The risks: A slowdown in Europe (more than 50% of revenue) or emerging market demand with hurt FWLT's results. Analysts also have their eye on the appearance of possible supply/labor shortages down the road.
The First Call mean rating for FLWT is: Buy. [5 firms.] Mean 2008 target: $176.00. [high: $190, low: $150.]
Stock Analysis: Foster Wheeler is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than two years should be rewarded from FWLT's shares. Sell / Stop Loss if you to purchase shares in this company: $95.
DISCLOSURE: Joseph Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.
MOST NOTEWORTHY: Cognos, MSC Industrial Direct, Fastenal Company, Royal Kpn and Koppers Holdings were today's noteworthy downgrades:
Cognos (NASDAQ: COGN) was downgraded to Neutral from Buy at Goldman and at Broadpoint following the acquisition by IBM (NYSE: IBM).
Baird downgraded MSC Industrial Direct (NYSE: MSM) and Fastenal Company (NASDAQ: FAST) to Neutral from Outperform, as they expect the difficult U.S. manufacturing environment to constrain shares.
Credit Suisse lowered its rating on Royal Kpn (NYSE: KPN) to Neutral from Outperform based on Getronics integration risk and slowing mobile earnings momentum.
Koppers Holdings (NYSE: KOP) was downgraded to Buy from Aggressive Buy at KeyBanc based on valuation and concerns on 1H08 comps.
OTHER DOWNGRADES:
Goldman removed Foster Wheeler (NASDAQ: FWLT) from its Conviction Buy List.
The secret is market cap. These are all the functional equivalent of small- or mid-cap stocks. Most of their capitalizations are in the $5 billion to $10 billion range and that's just not enough size to make a difference to the average hedge fund or mutual fund manager unless he or she takes a monster positioning the name.
Consider the case of personal fave Foster Wheeler. Despite being up 247% year-over-year and 143% this year alone, this stock still is not a $10 billion stock. (Need I remind you that most stocks that are large cap are over $100 billion?)
Yet the orders keep coming in to the company, and the business of building plants, once horribly cyclical, has turned secular because of the worldwide power shortage.
That theme, the best theme over the next few years, can best be played by the infra group. But the infra group all together doesn't amount to anywhere near $100 billion.
That means the move is still on; it means that it may be barely done.
It means they all can still go higher and remain the best place to be once the market inevitably sells off again.
Jim Cramer is a director and co-founder 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 had no positions in stocks mentioned.
Three years ago yesterday, Google (NASDAQ: GOOG) became public. Since then, those investors who could get past the seemingly high valuation of $85 per share have been generously rewarded with a hefty return of 478%. Google has been a perfect example of the need to look forward when analyzing growth companies. At the time of its IPO, value investors (rightfully so) appeared on CNBC to tell investors that Google was overvalued. However, because Google was able to grow its earnings per share at such an unbelievable rate, the stock's IPO price represents just 8x last year's earnings and 5.5x this year's. Given the choice to buy Google at $85 per share now I'd bet every value, growth, stupid and smart investor would jump on the opportunity to pick up the stock.
But Google hasn't been the only incredible performer during the last three years. In fact, Business Week has an interesting article listing the companies and stocks that outperformed Google during the last three years. You'll find that many of these stocks rose due to some huge underlying trend that these companies were able to ride out for powerful growth.
For example, high oil prices have been a huge trend for profits. Frontier Oil (NYSE: FTO) was able to return 611% to investors over the last three years as the company rode the increased oil prices to make huge refining profits. Foster Wheeler (NYSE: FWLT), with its focus on energy, pharmaceuticaul and environmental infrastructure products, was able to return 557%.
Foster Wheeler Ltd. (NASDAQ: FWLT) is one of the few infrastructure stocks so far that felt a little selling pressure on earnings. Shares opened lower today and then went positive briefly. The infrastructure company posted $1.41 EPS, above the $1.33 EPS estimate from First Call, and its actual net results were $0.99 on items. Revenues were $1.19 billion, compared to estimates of $1.2 billion. That EPS number is before an increased reserve charge related to a legacy power project. Overall, after a huge run-up in recent years, many will think this gives reason for a pause.
However, the global power group unit has its highest backlog in years and it expects strong bookings in engineering and construction in the second half. What is interesting is that if you look through this and through the other infrastructure earnings scorecards, you just do not get the feeling that infrastructure is dead. Not even close.
We still have a U.S. highway bill that got mothballed and we have a highway system that is actually behind the new interstate highways in Mexico. We just had a deadly and shocking bridge collapse in Minneapolis. The Middle East, Asia, and parts of Africa are seeing major projects come online and still many more planned. There may be some profit taking in the infrastructure stocks as valuations have to play the earnings catch-up game. But there is little reason to believe that a slowdown in the sector is going to come on strong. This was one of Cramer's Wild Bull Market Picks, so you can expect him to be keying on this and other infrastructure plays later today.
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
The last month has been very good for the stock price of TRC Companies, Inc. (NYSE: TRR), which has doubled since early May. I think this is a company with a great deal of growth potential, and I am confident we'll see its stock price double again within the next two years.
In fact, imagine that TRC doesn't even have sell-side research coverage and the stock still succeeded in attracting some of the smartest money on Wall Street. TRC provides infrastructure, engineering, and environmental services such as as transportation, land development, water and wastewater treatment, and the redevelopment of contaminated sites.
These are absolutely vital services for a wide range of industries, from energy providers to construction firms; TRC also provides its services to government agencies. TRC has been benefiting of late from the strong economy, but it will be in demand even in a slower economy, as it provides services that are necessary just to keep businesses going --not just for growth. In fact, the company's website clearly indicates that it is positioning itself to work on the $1.3 trillion of upgrades that will be necessary just in the U.S. infrastructure (such as bridges and roads) in the next decade.
MOST NOTEWORTHY: Coca-Cola (KO), Fiserv, Inc (FISV) and several real estate companies were today's noteworthy upgrades:
Coca-Cola (NYSE: KO) was upgraded to Buy from Hold at Citigroup, as the firm believes the company is addressing growth issues through recent acquisitions and notes that there are signs of stabilization in Japan.
Fiserv (NASDAQ: FISV) was upgraded to Outperform from Neutral at Cowen based on valuation, upside from restructuring, new management's willingness to unlock value, and the potential possibility of a company sale.
RBC Capital upgraded Texas Roadhouse (NASDAQ: TXRH) to Outperform from Sector Perform, citing valuation and improved EPS outlook.
Kenexa Corp (NASDAQ: KNXA) was upgraded to Outperform from Neutral at Credit Suisse, citing valuation and reduced risk from the BrassRing acquisition.
Goldman Sachs added Foster Wheeler (NASDAQ: FWLT) added to its Conviction Buy List, citing valuation and leverage to energy infrastructure build and power.
Goldman also added ProLogis (NYSE: PLD) to its Conviction Buy list, citing upside to FFO guidance, favorable domestic and international demand and above-average development margins.
On tonight's MAD MONEY on CNBC, Jim Cramer discussed where the "Wild Bull Markets" are that you want to be in for the rest of the year. He has six bull markets and he thinks this full year will be in bull market mode for these sectors and stocks.
3) Infrastructure, perhaps the most wild bull market: the two cheapest after the big runs are Foster Wheeler (NASDAQ: FWLT) and McDermott Intl. (NYSE: MDR).
4) Aerospace: Cramer's pick is Boeing Co. (NYSE: BA) and he now thinks it will pass $100.
6) Minerals, where the mergers are nuts: The buy for the things the Chinese use is Freeport-McMoRan Copper and Gold (NYSE: FCX) for copper and gold that could see its 9-times earnings go to 12-times.
TheStreet.com's Jim Cramer is scaling in on the way down in names that have intrinsic worth. 
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