Top Dow Stocks
Continuing with his new year's predictions, Cramer offered up his top three best performing stocks in the Dow for 2011. Coming in at number three was American Express (AXP), a stock which Cramer predicted will see a 40% rise to $60 a share.
Cramer said this Action Alerts PLUS stock is the best way to play the return of travel and the business customer. American Express is already seeing improvement in its financials, with net charge offs down 0.3% and delinquencies off 0.1% in its most recent quarter.
With the government done meddling with credit card and financial regulations, Cramer said American Express is a cheap stock trading at just 12 times earnings. He said the company could earn $4 a share in 2011 and deserves a 15 multiple.In the second slot was Intel (INTC), yet another Action Alerts PLUS pick for Cramer. He said Intel has become a hated stock on Wall Street, but despite reports to the contrary, the PC is not dead. In fact, Cramer said PC sales should be strong in 2011 on the heels of Intel's next generation microprocessors. The company is also moving aggressively into processors for tablet and smartphones, two of the hottest segments around. With its 3% yield, and recent McAfee acquisition, Cramer said Intel is far too cheap at just 9.2 times earnings.
Alcoa ShinesCramer's favorite name in the Dow for 2011 was Alcoa (AA), another name in his Action Alerts PLUS portfolio. Alcoa will give investors two ways to win, said Cramer, either through great earnings or by being taken over. Alcoa is firing on all cylinders, said Cramer, as global demand for aluminum continues to surge from intense demand in bull markets in aerospace, autos and gas turbines as well as a recovery in housing and construction. Alcoa is also benefiting from the bull market in trucks, which Cramer said will propel Cummins into the top performing slot in the S&P 500 for 2011. With Alcoa being such a well run company, one that is generating huge cash flows while paying down its debts, Cramer said the company is also a prime takeover target. He said the company could earn $1.50 per share in 2011, and deserves a 12 times multiple. But given its takeover prospects, Cramer said Alcoa is worth $22 a share, or a 43% gain. He would be a buyer ahead of Alcoa's earnings release on Monday, and would buy even more on weakness.
Story IntactIn the "Executive Decision" segment, Cramer spoke with Jim Whitehurst, president and CEO of Red Hat (RHT), a stock whose shares have risen 13% since Cramer last recommended it on Sept. 28. Whitehurst reminded viewers that other than platforms using Microsoft's proprietary software, every cloud computing application today is running on Linux or open source software like those that Red Hat provides. He said 70% of the Fortune 500 companies now utilize Red Hat software somewhere in their businesses. Turning to the company's most recent results, the CEO said that all of the company's top 25 renewals for the quarter did renew, with revenues increasing by 20% thanks to increased footprints within those companies. He said Red Hat has kept pricing the same over the past two years, yet the company has been able to grow since the number of installations continues to grow. Asked about the holiday season for Red Hat, Whitehurst said he had "no complaints," noting results were consistent with expectations. Whitehurst also noted that government sales continue to be the company's strongest sector, with Europe and Latin America leading the charge. In the U.S., Whitehurst saw growth in federal business and also in state governments, although states, he noted, are far smaller. Finally, when asked where Red Hat fits in with tech giants like Salesforce.com (CRM) and IBM (IBM), Whitehurst said both companies' cloud computing platforms run on Red Hat, and both companies are great partners. Cramer said the Red Hat Story remains intact, and he'd continue to be a buyer.
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