This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Cramer: Nerve-Wracking Valuations

Editor's Note: This article was originally published on Real Money at 7:08 a.m. ET on April 29. To see Jim Cramer's latest commentary as it's published, sign up for a free trial of Real Money.

NEW YORK ( Real Money) -- Here's the current twinned narrative.

We should be worried about international companies if they have big exposure to Europe, because they will have shortfalls and slower revenue growth and are inherently risky. Or we should be worried about domestic growth stocks because they are overvalued and are therefore intrinsically risky.

You know this. I know it. It's the dialogue. No one comes on air or writes in these cyber pages that there's little earnings risk in PPG (PPG) or Alcoa (AA) because of Europe. No one says, "Right now I don't have to think about Europe or Procter & Gamble (PG) because things will be fine." That's simply not happening. Everyone is worried. In fact, we will accord it to a company like Kimberly-Clark (KMB), which pulled out of the western and central European diaper market because it had had enough with the lack of profit or growth in what is basically a low-birthrate, totally cutthroat market.

No one is getting a free pass for Europe, so the idea that we should be worried about it is absurd. We are worried about it.

Similarly, do you know anyone who is saying that General Mills (GIS) is a "table-pounding buy" at 18x earnings? Or that you have to get into Wal-Mart (WMT) at 15 times earnings, or that Coca-Cola (KO) is a "steal" at 19 times earnings? The only steal in this market is what Warren Buffett and his Berkshire-Hathaway (BRK.B) got with Heinz (HNZ). He's paying only one to two multiple points above the price-to-earnings multiples of General Mills and Coca-Cola for the whole company.

I am not even going to go there with Verizon (VZ). Without a transaction that would accelerate its growth rate via ownership of all of Verizon Wireless -- at a price that wouldn't ruin its balance sheet -- I think you are taking a lot of price risk to pick up that 3.84% dividend yield. That's especially so after AT&T (T) has shown how things can go wrong and a stock can be knocked back on a subpar wireline quarter.

These stocks are expensive. All of safety is expensive when you consider, say, a stock like American Electric Power (AEP), with its anemic growth -- a five-year average of 3% and change. You do get a 3.88% yield with that name but, again, why couldn't that go to 5% on any sign that rates will back up?

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Real Money
Try it NOW

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums


Chart of I:DJI
DOW 17,888.35 +168.43 0.95%
S&P 500 2,102.63 +22.22 1.07%
NASDAQ 5,156.3060 +47.64 0.93%

Our Tweets

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs