Wall Street is overlooking the long-term value of many Club holdings, creating opportunities for investors to buy seven of these “franchise names,” according to Jim Cramer. Jim sees seven companies that currently fall into this camp: TJX Companies (TJX), Caterpillar (CAT), Foot Locker (FL), Starbucks (SBUX), Advanced Micro Devices (AMD), Meta Platforms (META) and Disney (DIS). “Franchise names, doing well, undervalued in the portfolio,” Jim said during the Club’s Morning Meeting on Thursday. “I would buy them.” What turns a company into a franchise? Companies that are well-established leaders in their respective industries with strong competitive moats, and an ability to raise prices without denting their loyal customer bases. These qualities bolster their attractiveness to investors, but they won’t always be fully reflected in the stock prices. For the seven Club names, which Jim highlighted, this happens to be one of those times when the stock price doesn’t tell the full story. TJX 1Y mountain TJX Companies’ 12-month stock performance. Off-price retailer TJX this week announced a double-digit percentage dividend increase — it’s the 26th time in 27 years that the company boosted its quarterly payout. The 13% raise takes TJX’s quarterly dividend to just over 33 cents per share, up from nearly 30 cents. Jim noted, the parent company of T.J. Maxx and Marshalls reaffirmed its plans to spend between $2 billion to $2.5 billion on share repurchases in its fiscal 2024. At the midpoint, that buyback guidance translates to roughly 2.5% of the company, based on its market cap Thursday. Despite the strong capital return program and underlying business strength, TJX shares have been trading roughly 8% below their all-time high of $82.72 each in early January. “I don’t get it,” Jim said. CAT 1Y mountain Caterpillar’s 12-month stock performance. Caterpillar remains perfectly positioned to benefit from the federal government’s major infrastructure investments in the coming years. The machinery maker got hit with a downgrade by Baird on Monday . Analysts at the firm expressed concerns about tighter credit conditions dampening nonresidential construction activity and inventories at Caterpillar dealers. We shrugged off that call Monday, and Jim reiterated Thursday that he still feels that Barid’s premise doesn’t shake our broader investment case. FL 1Y mountain Foot Locker’s 12-month stock performance. Foot Locker is another Club stock that’s not getting its due in this current market environment, Jim said, referencing what we think is a misguided sell call from UBS on Wednesday. Newly installed CEO Mary Dillon, who previously turned around Ulta Beauty (ULTA), is “putting a great franchise together,” he said. Foot Locker is our newest holding, with a 350-share purchase on Monday’s initiation. Had we not been restricted, we would have bought more on Wednesday. SBUX 1Y mountain Starbucks’ 12-month stock performance. Starbucks shares have backed off their recent highs of around $109 in January and early February, but Jim said he believes fresh attention on the coffee chain’s opportunity to grow in China could serve as the stock’s next catalyst. We trimmed our Starbucks position around $107 per share in mid-January, citing our discipline in locking in profits. AMD 1Y mountain Advanced Micro Devices’ 12-month stock performance. AMD’s data-center business has been relatively resilient during a tough period for chipmakers, and Wells Fargo analysts said Thursday they believe its opportunity in that segment is broadening out. “AMD is starting to move up because people realize, if Micron is good, AMD is better,” Jim added, referring to Micron Technology (MU), the memory-focused chipmaker who reported earnings Tuesday night. Micron jumped 7% on Wednesday as investors bet its inventory woes were nearing a bottom. The Micron move boosted AMD shares, which have jumped more than 50% year to year, and Club holding Nvidia (NVDA), which has soared more than 85% in 2023. Last year was a brutal year for the semis. META 1Y mountain Meta Plaforms’ 12-month stock performance Investors have rushed back into Meta Platform’s this year, cheering on CEO Mark Zuckerberg’s “year of efficiency” strategy, which is undeniably unlocking shareholder value. With the social media giant seemingly downplaying its metaverse ambitions, Jim said investors should instead recognize the untapped value in the company’s messaging unit, WhatsApp. “We should be looking at the franchise value of WhatsApp. This is a company that I think could easily be worth, maybe, more than one-fifth of what the entire company is worth, and nobody is even talking about it,” Jim said. Meta, which also had a rough 2022, has powered more than 70% higher year to date. DIS 1Y mountain Disney’s stock price over the past 12 months. Disney shares should be trading much higher than their current levels under $100 each, Jim said. “This stock is worth substantially more than people realize,” he said, acknowledging that some people may struggle with valuing Disney because of its presence across industries such as theme parks, cruises and movies. However, Jim said he’s confident in CEO Bob Iger’s conviction to ultimately demonstrate to the market just how valuable the Disney franchise is. Iger’s previously announced cost-cutting plan, including layoffs, kicked in this week. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
AMD Chair and CEO Dr. Lisa Su delivers a keynote address at CES 2023 at The Venetian Las Vegas on January 04, 2023 in Las Vegas, Nevada.
David Becker | Getty Images
Wall Street is overlooking the long-term value of many Club holdings, creating opportunities for investors to buy seven of these “franchise names,” according to Jim Cramer.
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