Jim Cramer's charitable trust, Action Alerts PLUS, recently traded American Express, SunTrust Bank and Unilever. We asked an independent analyst to evaluate the stocks.
NEW YORK (TheStreet) -- Jim Cramer, founder of TheStreet and host of CNBC's "Mad Money," has made more moves recently in his charitable-trust portfolio. Cramer either bought or sold shares in American Express (AXP - Get Report) , SunTrust Bank (STI - Get Report) and Unilever (UN) . Let's take a look at the merits of each one.
American Express shareholders can't be pleased with the stock's performance so far this year. The shares are down 11.4% at Tuesday's close of $82.40. And the New York-based credit-card company is the second worst performer in the Dow Jones Industrial Average, which is down only 2.4% year to date. But new investors should be salivating for American Express shares. The stock has an average analysts' 12-month price target of $98, suggesting a gain of almost 20% from its current level.
What's more, the shares the cheap, trading at a trailing price-to-earnings ratio of 14. That is six points lower than the average P/E of companies in the Standard & Poor's 500 Index. And with the company recently announcing a 6% cut in its workforce to control expenses, profits should increase in the quarters ahead. The stock has a dividend yield of 1.2%, and the bad news seems to be priced in already, and so there is minimal risk buying a cheap stock that has underperformed the market.
Shares of SunTrust are up almost 3% since Jan. 16, when the Atlanta-based bank reported fourth-quarter earnings that topped estimates by 10 cents a share. But year-to-date, the stock is down 6.5% at Tuesday's close of $39.19, and the shares are down more than 8% during the past month. Given SunTrust's impressive earnings report, the market is not appreciating the company's true value.
During the fourth quarter, the bank delivered on every key metric. Core earnings rose 18%, and adjusted earnings per share rose to 88 cents from 77 cents a year earlier as mortgage production income almost doubled, mortgage production volume rose 20%, and mortgage-servicing income increased 39%. Investment-banking income climbed 13.5%.
The bank reported its book value at $41.52 per share, which means the stock is trading more than 5% below the value of its assets. And analysts' average 12-month price target of $43 is 10% above the current price.
Unilever is appealing as long as the company continues to focus on higher-margin and higher-growth businesses. It has a lot of similarities with Procter & Gamble (PG - Get Report) , another consumer-products conglomerate that is shedding brands. Unilever's American depositary receipts, which are up 8.5% so far this year, are beating the broader markets. The ADRs, which closed Tuesday at $43.91, have gained 30% during the last three years and 42% during the last five years.
The company has produced the stock gains, even with a low-margin food business. The segment, which accounts for about a quarter of Unilever's sales, has the lowest margins among the company's businesses. So imagine what the company can do if it focused more on higher-margin businesses.
With an improved global economy, Unilever's home-care and personal-care product segments should grow accordingly. All told, Unilever -- whose dividend yield is 3.5% -- is a solid long-term investment.
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