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Did you miss last night's "Mad Money" on CNBC? If so, here are Jim Cramer's top takeaways for next week's trading.
American Water Works(AWK) - Get Reportand Aqua America(WTR) - Get Report : Investors might not have noticed the "stealth bull market in the water utilities," Cramer said. Led by the 35% gain in Aqua America and 58% gain in American Water Works over the past year, these stocks have vastly outperformed the S&P 500 over the past 12 months and five years, he noted.
The water and waste water industries have becoming a stream of steadily rising sales and earnings, which has allowed for consistent dividend increases for both companies. The only problem is the stocks' recent rally, which has driven down the dividend yields and raised the valuation.
However, both stocks are benefiting from the massive water and waste water infrastructure upgrades that have been, and are still, needed in the U.S. The Environmental Protection Agency recently forecast the country's water infrastructure would need $400 billion in investments over the next 20 years, while the the American Society of Civil Engineers forecasts $300 billion will be needed for waste water infrastructure.
Most of the companies' business comes from regulated water, with just a small amount coming from the more volatile, unregulated water business that each company is shedding, Cramer explained. Because each company is consolidating it's giving them scale and pricing power, which is good for earnings.
SiteOne Landscape Supply(SITE) - Get Report : Cramer took a closer look at SiteOne Landscape Supply, which went public a little more than one month ago. The stock has actually traded pretty well given the overall stock market. Shares shot up from an IPO price of $21 to nearly $30 within its first few days. Currently, the stock is near $27.
The company is the country's largest and only national wholesale supplier of landscape supplies. Operating 477 branches in 44 states, it's got a commanding grip on the market and is four times largest than it's next largest competitor.
OneSite was created by Deere(DE) - Get Report , but a majority stake was purchase by a private equity firm, which still owns 45% of the company. This isn't a great situation because as the stock increases the firm will look to reduce its holdings, Cramer said.
The company is levered to housing, so as household formation, home sales and construction continue to rise, OneSite benefits. Conversely, if the economy takes a hit or housing slows down, this stock most likely will too, he explained.
The company raised roughly $200 million in its IPO, part of which will go to paying down debt. Investors who are intrigued by this stock can consider buying a small position ahead of earnings next week and waiting for more clarity before their next move, Cramer said.
Almost 12% of the company's total workforce and roughly 20% of new hires since 2011 are military vets. It's important for the country that these vets have somewhere to go, Farrell explained. Plus, they fit the culture of the company well.
As for the business, Farrell said it's imperative to look beyond this quarter and this year when leading this company. Management needs to be focused years down the road, which is one reason why Dominion bought Questar for $4.4 billion earlier this year. He expects the deal to close before the end of the year and it will be immediately accretive to earnings. It gives the company needed geographical diversity and the potential for future growth, he told Cramer.
As for different types of plants, Farrell said he does not think any more coal plants will be built in the United States. Nuclear plants depend on the country's clean power plans. Over the next several decades though, it will be difficult for the U.S. to meet its carbon goals without more nuclear power, but that could be a decade or more away, he said.
Cramer likes the stock and its 3.8% dividend and said this stock should be on investors' radar if the broader market pulls back.
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At the time of publication, Cramer's Action Alerts PLUS had no position in stocks mentioned.