AT&T's Banner Year
Cramer kicked off the new year with a week-long series entitled the "Diamonds of the Dow," his top picks from the Dow Jones Industrial Average for 2012.
For 2011, Verizon was the clear winner, advancing 12.1% versus AT&T with a scant 2.9% thanks to its failed merger attempt with T-Mobile. But in 2012, Cramer said he's betting on AT&T to play catch up, naming the company his first diamond for the year.On a valuation basis, AT&T is more promising, said Cramer, trading at just 12.3 times earnings versus Verizon at 15.7 times earnings. The dividend edge also goes to AT&T, with a 5.7% yield versus 5% for Verizon. But the good news for AT&T, said Cramer, is that the T-Mobile fiasco is now over. With the merger now out of the way, Cramer explained that AT&T can now focus its energies on building out its 4G network and adding to its spectrum through smaller acquisitions as it did late last year when it purchased spectrum from Qualcomm (QCOM). Cramer also noted that many investors expected AT&T to lose out when Verizon began carrying the iPhone, but that simply hasn't happened. Outside of wireless, Cramer said there's also lots to like about AT&T. For example, the company's legacy wireline business actually did well in 2011, as did its high-speed Internet and TV network Uverse, up 19%. Taking into account all of these factors, Cramer said he expects AT&T to play catch-up in 2012, which is why it's his top Dow pick for the new year.
Stock Super Bowl KickoffIn a new "Stock Super Bowl" series, Cramer pitted two of the top players in the S&P 500 against each other in a play-off match to see who will compete against the best player in the Nasdaq on Thursday. Tonight's contenders were Cabot Oil & Gas (COG), which delivered a 100.5% return last year, against Intuitive Surgical (ISRG), which returned 79.6%. Cramer said on the surface in might seem difficult to compare a company that makes surgical robots with one that drills for oil and gas, but some stock metrics apply across all sectors, and one of those metrics is the PEG ratio, which compares a stocks P/E multiple with its growth rate. Cramer never advocates buying a stock with a PEG ratio over two, which is why in this round the edge went to Cabot, with a PEG ratio of just 0.9 vs. Intuitive with a PEG ratio of 1.7. Cramer's next metric was takeover potential. He said that Intuitive is too large and rather specialized to be a big takeover candidate, but Cabot is ripe for the picking, especially given all of the merger activity in the oil and gas space. Next up was what Cramer called "home-run" potential, the ability of a company to surprise investors with a big upside surprise. He said that while Intuitive does have some new product roll-outs coming, the advantage once again goes to Cabot, which has the potential to discover even more oil in its already prime oil shale acreage. Cramer's final metric for the match-up was dividends. He said that while both companies pay a small dividend, the advantage goes to Intuitive, since its recurring cash have been directed towards shareholders, while Cabot's earnings almost already get sent for more and more drilling. The final score for this play-off match up? Cramer said it's Intuitive Surgical with six and Cabot Oil & Gas with nine, making Cabot the clear winner.
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