Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday March 7.
Bank of Montreal (BMO), Bank of Nova Scotia (BNS), Canadian Imperial Bank of Commerce (CM), Royal Bank of Canada (RY), Toronto Dominion Bank (TD), JP Morgan (JPM), Goldman Sachs (GS)
With all the negative press about American banks and the overhang from Fin Reg, investing in domestic banks is "like getting a never ending root canal with no anesthetic," said Cramer, who would look north to an economy that is growing faster than that of the U.S. and has lower unemployment. Canada did not have a serious financial crisis when the financial sector in the U.S. was reeling a few years ago. This is thanks to Canada's relatively conservative lending policies that made bad loans rare. Not a single Canadian bank had to cut its dividend while the U.S. was in the depths of a recession.
Canadian banks are an "embarrassment of riches;" there are many good ones and investors need to decide where to put their money. Cramer discussed five Canadian banks worth watching.
Bank of Montreal (BMO) bought up small, "bad" banks and turned them into good ones. It is a value play with a 4.6% dividend. However, BMO is not Cramer's favorite, since he doesn't consider it the highest quality stock.
Bank of Nova Scotia (BNS) is an international bank with 50% of the company's earnings coming from outside of Canada. However, Cramer would not recommend it so close to its 52-week high and would wait for a pullback.
Canadian Imperial Bank of Commerce (CM) got hit the hardest of the Canadian banks because of its exposure to the housing market and it lost $2.5 billion in Enron-related litigation. This bank has had a tough decade. This is Cramer's least favorite Canadian bank.
Royal Bank of Canada (RY) is the largest Canadian bank and is like the Great White North's version of Goldman Sachs (GS) or JP Morgan (JPM). RY is making major inroads by expanding capital markets, but Cramer thinks it is too volatile.
Toronto Dominion Bank (TD) is the most bankable of the Candian banks and it boosted its dividend recently by 8% after an 11 cent earnings beat. The company is a conservative, deposit-rich bank with a significant exposure to commodities. TD has a strong balance sheet and is growing its business in the U.S.; 25% of its revenues are from its southern neighbor. In fact, Cramer thinks TD might be one of the best ways to play the U.S. recovery. TD bought the $6.3 billion Chrysler acquisition, which will add 12 cents to TD's earnings per share.
"If you want to own banks with no headline risk, go North, young man," said Cramer.
CEO Interview: Alan McKim, Clean Harbors (CLH)
Natural gas has been taking a lot of heat lately as the media says the fracking procedure to extract the fuel might harm the environment. A good play on this story is a company that will clean up the mess made by extracting natural gas, Clean Harbors (CLH), which also played a leading role in the Gulf of Mexico cleanup last year. The stock is up 33% since Cramer got behind it in June and 7% since January. Bears worry that Clean Harbors won't be able to duplicate last year's performance, but the concern over fracking creates a whole new space for Clean Harbors. The company is already in the Marcellus shale and management has indicated the problems with fracking will be solved within a year.
Clean Harbors deals with various kinds of waste disposal and has 65% share of the nation's incinerators and 60% of the landfill space. Barriers to entry are very high and there have been no new incinerators built in the past 15 years. A full 85-90% of sales are from long term contracts, so the company has significant earnings visibility and CLH recently beat earnings by 10 cents on stronger than expected revenues, up 20% over last year.
Alan McKim thinks fears of pollution from fracking are overblown, and mining natural gas can be clean and safe if the fracking water is disposed of carefully. Clean Harbors devises ways to recycle frack water to ensure the precious resource is not wasted and to prevent pollution. "I don't think any other company has the services we do," said McKim.
What Will Make Stocks Rise 1,000 points stock mentioned, Ciena (CIEN)
Gaddafi is messing up the stock market, but more because of rumor than reality. Stocks were volatile on stories the dictator might be removed, and on the subsequent confirmation that these rumors were false. The situation is like that of Saddam Hussein in the '90s, when rumors of the tyrant's death or departure were greatly exaggerated and took stocks up and down right along with them. In spite of the market's own problems, such as Ciena's (CIEN) disappointing outlook which sent down the tech sector, a sudden departure of Gaddafi would send stocks up 1,000 points, but only given the following conditions: 1) stocks first go down and stay down, 2) there is at least on successful NATO action, 3) we make peace with the kings of Bahrain and Saudi Arabia.
"Until then," Cramer said, "while it is not worth chasing the market, it is not worth being too negative."
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