Seeking Higher Prices
In the "Executive Decision" segment, Cramer once again talked with Harold Hamm, chairman and CEO of Continental Resources (CLR), a stock that's fallen seven points since Cramer visited the company in North Dakota last month. Shares of Continental trade just three points off their 52-week low, at 14.6 times earnings.
Hamm explained that the disconnect in pricing between Brent crude prices and West Texas prices is due to a lack of pipeline capacity in Texas that's hampering supply. That's why Continental sends 75% of its oil to places other than Texas, where it can take advantage of higher prices. Hamm said since places like the Bakken shale ship most of its oil via rail, it's easy to plan ahead and send the oil to where the best prices will be.
Hamm also said that Continental shares are a bargain at current levels, which is why the company recently purchased 100,000 of its own shares and is look to do so again soon. He said that Continental was able to hedge a lot of its oil at very good prices, so fears that falling oil prices will hurt the company are unfounded.When asked about oil prices overall, Hamm said he's not seeing demand fall off, as many have called from in China and other emerging markets. He said prices are likely to moderate some, with Brent prices falling and West Texas prices rising, but overall, Hamm said the markets are still having trouble meeting global demand. Cramer reiterated his buy recommendation for Continental Resources, saying that the stock still remains far too cheap given its market opportunities.
Privatized PrisonsInvestors looking for great, recession-proof stocks should consider the long-term trend on privatized prisons, Cramer told viewers, as he featured Corrections Corp of America (CXW) and Geo Group (GEO), two of the larger private prison operators in the U.S. Cramer explained that currently, only 10% of U.S. prisons are privately owned, but the trend is picking up steam as private prisons are a great way for states and the federal government to make money and save money at the same time. Ohio, for instance, just sold one of its prisons for $72 million, while in Florida, the state is privatizing 22 prisons this year alone, saving $22 million a year in the process. Cramer said he likes both Corrections Corp, based in California, and Geo Group, based in Florida, as both have been delivering earnings growth, even during the downturn. Private companies, it seems, are able to not only build new prisons faster than their government counterparts, but also operate them more cheaply, great news for a prison system that's running at 179% of capacity. Corrections Corp currently operated 90,000 beds at 61 facilities and trades at 14.9 times earnings with a 10% growth rate. Geo Group operates 80,000 beds at 116 facilities and trades at 11.1 times earnings with a 12% growth rate. Cramer said either one is a great choice, but since prices trend to jump on big contract wins, he gives the edge to Geo Group, which is likely to win the 22 facilities up for bid in Florida, its home state.
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