Oil Shale Play Prevails
Closing out his "Stock Supermarket" series, Cramer examined energy producers
Green Plains Renewable
(GPRE - Get Report) vs.
(EOG - Get Report) to see which company is the true bargain.
On the surface, investors may opt for Green Plains which trades at 6.3 times earnings. EOG trades for 22 times earnings. But using the PEG Ratio, which divides a company's multiple by its growth rate, Cramer said investors will get a different story. Green Plains has a PEG ratio of one, he said, which is good. But EOG has a PEG ratio of .3, which is a whole lot better.
Cramer explained that EOG is an oil and gas producer with fantastic acreage in our nation's oil shale fields, primarily the Eagleford shale. He said the company is the top producer in Eagleford and its Eagleford assets are worth more than the entire company is presently valued. EOG grew production by 49% year over year and has plans to spend 90% of its capital expenditures next year finding the more lucrative oil and gas liquids vs. just natural gas alone.
Green Plains is a decent, well run producer of ethanol, said Cramer, but ethanol is problematic. First, it doesn't have a lot of growth. It also suffers as the price of corn, the primary ingredient in ethanol, rises. Cramer said that Green Plains is more like a refiner than a producer in that regard. Finally, Cramer said that Green Plains relies on government subsidies set to expire at the end of this year. The prospect of that subsidy being cut or eliminated are pretty high, Cramer explained.
That's why EOG is the better play, said Cramer. That company's super high growth rate makes its future earnings all the more valuable.
Telltale 10 Days Ahead
In the "Executive Decision" segment, Cramer went on location with Jim Sinegal, co-founder and CEO of
(COST - Get Report)
, a stock that's delivered a 4,793% gain since the company went public in 1985.
Sinegal said that the next 10 days will tell the tale for retail this holiday season. He remains optimistic, but noted that Costco competes with everyone, including online and offline retailers and even grocery stores. Sinegal said that he expects home entertainment, including LCD and LED TVs to be hot sellers again this year.
When asked how recent price increases were received amongst Costco's 64 million members, Sinegal said that the increases were received well and that Costco is already hard at work using that money to bring even better value to its stores. Speaking of stores, Sinegal said that Costco has always underestimated its market potential, noting that in the Los Angeles market alone the company could add another 20 locations.
When asked about his legacy as a retailer, the soon-to-be-retiring Sinegal said that he's most proud of the team that he's built. He said it takes skill to run a company of Costco's size and he's built an excellent team of smart people. When asked the same question, many of Sinegal's employees noted that affordable health care for all employees should be Sinegal's most important accomplishment.
On that topic, Sinegal said that Costco wants to keep great employees, and the company has a duty to provide good wages. He said that healthcare is a necessity, even for a low-cost leader like Costco.