Value Oil Play
"We're entering a new era of high oil prices," Cramer told viewers, as he kicked off a week-long series on stocks that will benefit from permanently high oil prices.
His first pick,
(FLR - Get Report)
, the engineering and construction company that gets 60% of its revenues from the oil and gas industry. Cramer currently owns shares of Fluor for his charitable trust,
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Cramer explained that Fluor is the top engineering and construction firm on earth, with excellent know-how and the reputation to prove it. Yet shares of the company are off 17% for the year, falling some 20 points from its 52-week high. Shares of Fluor now trade at just 14 times earnings, while historically the company usually trades at 19 times earnings, with its peak at 22 times earnings.
Flour did miss estimates when it reported earnings on Nov. 3 and offered only conservative guidance, but Cramer noted that the company's higher costs stemmed from a single wind farm project that has kept a lid on the stock. THat project is now 90% complete and should only impact one additional quarter, he said.
But more importantly, Cramer said that engineering and construction companies should be valued on their backlogs. Fluor currently has a $42 billion backlog of business, up 26% from last year. That compares to its rivals, all of which saw a decline in their backlog thanks to Euro fears and the economic slowdown.
With all of its divisions doing well, the company's stock buyback program and $7 a share in cash, Cramer said the Fluor is set to prosper as oil prices remain high for the foreseeable future.
Cramer was bullish on
(BIDU - Get Report)
Kohlberg Kravis Roberts
(KKR - Get Report)
KKR Financial Holdings
SPDR Gold Shares
(GOOG - Get Report)
Cramer was bearish on
iShares Silver Trust
Lightening Up on Tech High-Fliers
In his "No Huddle Offense" segment, Cramer opined on the resurgence of the high-multiple stocks like
Chipotle Mexican Grill
Cramer said this current rally was started by companies like
(GOOG - Get Report)
, but was fueled even further by the takeover of
Cramer characterized the move as a classic multiple expansion, in which the markets are willing to pay more for future earnings. But Cramer remained cautious, saying that he likes buying these high-fliers when the earnings rise, not the market's perception of those earnings. He advised lightening up on these names and waiting for next earnings season to buy more.
--Written by Scott Rutt in Washington, D.C.
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