NEW YORK (Real Money) -- Nobody likes to leave the comfort zone, and it has been ages since you had to. I am talking about the comfort zone of low-growth, dividend-related choices exemplified by thoughts such as:
- Do I own Bristol-Myers Squibb (BMY) or should I swap to Merck (MRK)?
- Or Colgate-Palmolive (CL) has more upside than Procter & Gamble (PG), but Procter has that nice dividend and could restructure.
- Or, most of all, Dominion (D) vs. Con Ed (ED) -- which is it going to be?
When you have an employment number such as last Thursday's, it causes you to have to dust off the playbook for a more aggressive moment. It's been so long since this has occurred that I took heat advocating it on air from critics who no doubt have only lived through the Great Recession and its aftermath.
The job is much harder when you go down the risk curve to companies with real leverage to economic growth. You might have owned one transport, and it has been terrific. If you come in now to buy a second, it will be much more expensive than the last one you might have owned, and the earnings aren't necessarily coming through yet. You want to buy FedEx (FDX) up here after that terrific quarter? Probably better to buy UPS (UPS), betting that next quarter will be much better.
Plus, given the prolonged decline in the industrial economy, there aren't a lot of choices left. I cheered last week when Timken (TKR) gave you Timken Steel (TMST), a better-than-GDP pure steel play without any of the hazards of the ancient and troubled U.S. Steel (X) or AK Steel (AKS).
Normally, you would reach for Alcoa (AA), but it has had a huge run. Shares have doubled from the bottom, so it is priced for perfection. I think it is headed higher after any pit stop, but that's because of changes that it has made in its own product portfolio.
Maybe the best thing to do is simply find companies that have done just OK in the U.S. while their foreign businesses have kept them growing. Freeport-McMoRan Copper & Gold (FCX) is our choice for Action Alerts PLUS, as anyone enjoying the free sign-up period now knows.
You might want to consider aggregates companies, cement companies or earth moving companies, and remember that they can put on much better numbers than they have. I think Caterpillar (CAT) and Terex (TEX) work.
Oh, and of course, there isn't a regional bank in the world that doesn't do better in this environment. It's a deservedly hated cohort, but it is worth it.
No matter what, I think standing still is no longer an option. The numbers are too good.
You have to make a move.
Would you like to test drive all of TheStreet's premium products for free? Sign up for our all-access pass for July at absolutely no cost to you and read Action Alerts PLUS picks from me and Stephanie Link, Doug Kass' Daily Diary on Real Money Pro, Stocks Under $10 picks from David Peltier and much more. Learn more here.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long GE.
This article was originally published on Real Money at 9:12 a.m. on July 7.
Now let's look at TheStreet Ratings' take on some of these stocks.TheStreet Ratings team rates BRISTOL-MYERS SQUIBB CO as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate BRISTOL-MYERS SQUIBB CO (BMY) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and notable return on equity. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- BRISTOL-MYERS SQUIBB CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, BRISTOL-MYERS SQUIBB CO increased its bottom line by earning $1.55 versus $1.15 in the prior year. This year, the market expects an improvement in earnings ($1.79 versus $1.55).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 53.9% when compared to the same quarter one year prior, rising from $609.00 million to $937.00 million.
- The current debt-to-equity ratio, 0.49, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.17, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has significantly increased by 244.15% to $617.00 million when compared to the same quarter last year. In addition, BRISTOL-MYERS SQUIBB CO has also vastly surpassed the industry average cash flow growth rate of 10.55%.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Pharmaceuticals industry and the overall market on the basis of return on equity, BRISTOL-MYERS SQUIBB CO has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full analysis from the report here: BMY Ratings Report
TheStreet Ratings team rates COLGATE-PALMOLIVE CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate COLGATE-PALMOLIVE CO (CL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CL's revenue growth has slightly outpaced the industry average of 1.5%. Since the same quarter one year prior, revenues slightly increased by 0.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Household Products industry and the overall market, COLGATE-PALMOLIVE CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has slightly increased to $820.00 million or 5.53% when compared to the same quarter last year. In addition, COLGATE-PALMOLIVE CO has also modestly surpassed the industry average cash flow growth rate of 3.52%.
- The gross profit margin for COLGATE-PALMOLIVE CO is rather high; currently it is at 61.09%. Regardless of CL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 8.97% trails the industry average.
- COLGATE-PALMOLIVE CO's earnings per share declined by 13.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, COLGATE-PALMOLIVE CO reported lower earnings of $2.39 versus $2.58 in the prior year. This year, the market expects an improvement in earnings ($2.99 versus $2.39).
- You can view the full analysis from the report here: CL Ratings Report