NEW YORK (TheStreet) -- Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:
- The stock for bulls and bears, and
- The consumer cavalry.
Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
The Perfect Stock
Posted at 5:44 a.m. EDT on Friday, Dec. 12, 2014
Eureka! I found the perfect security for this moment. The stock that can do it all for you. Either side, bull or bear!
I am talking about Freeport McMoran Copper & Gold (FCX) , the one-stop shop for all who want to play the current moment.
Yep, here's a highly leveraged play on oil, copper and gold with a 5.44% yield that is at the vortex of pretty much everything that's going wrong in the world right now.
Back in December of 2012, with copper -- as represented by the iPath DJ-UBS Copper SubTR ETN (JJC) -- trading at $46 and gold holding steady at $1694, Freeport chose to diversify away from those two metals. It bought Plains Exploration & Production in a $16.3 billion transaction to create "a premier U.S. based natural resource company with an industry leading global portfolio of mineral assets, significant oil and gas resources and a growing production profile," to quote the release from the day the deal was announced.
It was a shrewd move to diversify from copper and gold as they were just about to hit the skids. Unfortunately, FCX diversified into oil when Brent was at $109 and West Texas was at $86.
For a while it looked real smart. But now it's in a world of hurt. The stock is down almost 40% and, judging by the supply demand considerations for what it produces, I would think that this one has further to fall.
However, if you think that the fortunes of the world can turn, if you think that oil's about to bottom, or that gold is stabilizing and that China's about to get much better, I don't know if you can dream up a security as precisely terrific as this one.
Think about it. Plains has huge offshore assets, just the kind of assets that are horrendous at low oil prices but can be amazing at high ones. The reserves here are gigantic. I think that's unquestioned. Copper's down huge from its high, and FCX has the world's best product. How low and out of favor can gold stay if the world's printing even more money than during the Great Recession?
At the same time, the number of things that can go wrong here are staggering even at these prices. Freeport's major copper repository is in Grasberg, Indonesia. You know all of those commercials always telling you to go into emerging markets? Well, what's more emerging that Indonesia? Sure, it's got some labor issues, some government issues, some tax issues, but those all come with the territory of working in emerging markets. I think you always have to be worried that the government just expropriates the darned mines or jacks up its take. It could be a minor headache or a total nightmare. But if China turns? This is the first stock "they" will grab.
If oil breaks down again, I wonder about the cash flows of this heavily indebted company. But again, if you think oil's going to bounce back, this one's got the leverage that so many crave.
How about the yield? Until this downturn I think you would say, holy cow, 5.5% for the highest quality player in the group. However, after what we've seen with the oil drilling companies, after what we witnessed with the iron companies, and after Freeport cut its dividend during the Great Recession, how can we bank on it?
Again, though, if you think things are going to stabilize around here and the dividend is therefore safe, then you can buy the stock with the idea that you are being paid to wait for a U.S.-led turn in the economies of the world.
Freeport McMoran Copper & Gold: better than any call or put on commodities out there. Bull or bear, you have to love FCX.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, had no positions in the stocks mentioned.
Willing to Bet on the Consumer
Posted at 3:48 p.m. EDT on Thursday, Dec. 11, 2014
The banner headline in today's USA Today, "Falling Oil Threatens Recovery," totally captured the zeitgeist of yesterday's trading. But it completely missed the theme of today's rally, namely that the cheap-gasoline fueled consumer might be able to repel any weakness that the producers of oil in this country may cause is. I say might because the market was up much more for most of the day until still one more oil decline curtailed the rally. Now we're ultimately staggering into the close with some mild gains as I write this entry.
Remember the battle here. Will the credit woes of the now stretched American oil companies kybosh the strength that could come from shoppers benefiting from a cheap-gasoline stimulus plan?
Or, to put it in terms we all understand, will the consumer cavalry arrive in time to save the pilgrim economy from the vagaries of the freebooting wildcatters, even with oil continuing to come down as it did today?