3 Buys, 2 Selling Ideas From Jim Cramer

During the week of January 21, 2013, Jim Cramer made reference to 42 companies. Just 21% of the calls were bearish. In that same time frame, the S&P 500 index rose 1.52% and is up 5.5% for the year. 

In the technology space, Cramer was favorable on a number of richly-valued companies that includes salesforce.com (CRM) and Amazon.com (AMZN). For the week, the Nasdaq was flat, but is up around 2.9%. It is worth nothing that the technology-heavy index was weighed down by weakness in Apple, Inc. (AAPL)

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Of the 5 technology companies mentioned, Cramer was also bullish on SAP AG (SAP):

Jim Cramer stock picks

Analysis and Discussion 

1. Amazon.com Inc. ( AMZN): Operates as an online retailer in North America and internationally. Market cap at $125.04B, most recent closing price at $276.04.

AMZN shares are trading at an astronomically high P/E of 4,057 (based on a closing price of $283.99). Its forward P/E is 163. Investors completely ignored reasonable valuation, choosing instead to anticipate a strong future. Amazon shares were supported by strong earnings from eBay ( EBAY) and Google ( GOOG). Amazon’s CEO said in a recent interview that higher margins should be less a focus than free cash flow.

Investors are in agreement with this view even though free cash flow tells only partially describes the health of a business. Analysts expect the company to generate an operating cash flow of $10.68 per share, up 65% in 2013. Amazon reports earnings on Tuesday, January 29 after the market closes.


2. SAP AG ( SAP): Provides business software primarily in Europe, the Middle East, Africa, the Americas, and the Asia Pacific Japan region. Market cap at $98.71B, most recent closing price at $80.36.

SAP reported good quarterly earnings. The company also provided 2013 software license and cloud subscription revenue growth of between 14% and 20%.

The “cloud” continues to be an area of growth for all companies. For SAP, it is expecting to earn $998 million in this space.


3. Salesforce.com ( CRM): Provides customer and collaboration relationship management (CRM) services to various businesses and industries worldwide. Market cap at $25.29B, most recent closing price at $178.07.

CRM was a positive mention. The company trades at a forward P/E of nearly 90. Throughout 2011 and 2012, company insiders were selling shares in the company. Shares received a boost after Salesforce said it will split the shares by a ratio of 4 to 1.

Investors should be reminded that a stock split does not change the value of the company, but increases its liquidity.

4. Nuance Communications, Inc. ( NUAN): Provides voice and language solutions for businesses and consumers worldwide. Market cap at $7.53B, most recent closing price at $24.02.

NUAN was mentioned negatively by Cramer. Nuance developed a new software that is voice-controlled, which ensures a consistent voice assistant experience across all platforms. This is a solid development: previous requests and a history of voice-requests are stored and could be reused on different platforms (iOS, Android, Windows).


5. Take-Two Interactive Software Inc. ( TTWO): Develops, and distributes interactive entertainment software, hardware, and accessories worldwide. Market cap at $1.19B, most recent closing price at $13.12.

TTWO was a sell call by Cramer on the Lightning Round. Take Two is 9.6% owned by Carl Icahn. A new release of Grand Theft Auto promises to be highly profitable for this company when launched this spring. In the interim, smartphone versions of the older game releases sell for a negligible amount.


Written by Kapitall's Chris Lau. Test these ideas with Kapitall's free practice portfolios.