Cramer’s EU Picks: Philips Electronics (PHG, TSM)

On tonight’s MAD MONEY on CNBC, Jim Cramer said his new weekly feature will be to add Eurpoean stock picks into his portfolio.  The markets in Europe are hot despite higher taxes and rising interest rates.  Cramer said the easy play is the European ETF’s, but then he took his stance that ETF’s are just another product scam to him.  He’d rather focus on best of breed names.

The Netherlands has Philips Electronics (NYSE:PHG), and that is one of Cramer’s top picks for the series.  The company was a dead money stock a few years ago without much going on, but now they have pared back operating picks.  He thinks the company is worth 20% more than it is listed as right now.  It has four segments and the non-core operations and investments/stakes that could be worth yet another $10.00.  One such holding is Taiwan Semi (NYSE-TSM). 

This call is hard to argue against, even if you took the ‘anti-Cramer stance’ no matter what.  As a value stock, you could even make the argument that this one could have been in one of his Top Value Picks for 2007 (even though it wasn’t). The company still has Billion’s it owns in stakes of public companies.  It has been able to keep winning medical equipment business and its green business initiatives have been getting good press.  It also has been trying to focus on more and more core-operations so it can more easily derive value.  It has even been able to hedge its currency risk with business in the US and the weak US Dollar.  Lastly, this large cap is fairly liquid and somewhat widely held for an ADR.  Shares did trade down almost 2% today after earnings were released, so barring any major downgrades tomorrow the specific event risk has largely been taken out of the stock.

Jon C. Ogg
July 16, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.