Cramer New Value & Momentum Picks (EMC, VMW, AYR)

On tonight’s MAD MONEY on CNBC, Cramer noted there are two ways to profit from a recovering market like we are seeing today.  After a 5-day rally, today was just profit taking.  He has picks for the Value Approach and the Momentum Approach….

MOMENTUM WAY: As a momentum investor you go after stocks hitting newhighs right after a big sell-off because those do that for a reason.Cramer said his best stock on yesterday’s list was EMC Corp.(NYSE:EMC), and that is because of the hype and promise of VMware(NYSE:VMW) after its IPO last week.  Cramer said it isn’t behaving likehe expected, but that is because not enough people are looking at ourEMC/VMware IPO Playbook we sent out to subscribers right ahead of the VMware IPO and becausepeople aren’t considering the dilutive effects after EMC starts tosell.  This is why just yesterday I noted a "VMware Conundrum" overthis on our free site.  Cramer said that hedge fund managers took the wrong side, althoughthey would have been on the right side of the EMC trade if they usedour playbook for how to play EMC going into the IPO.

VALUE WAY: The value list is comprised typically of the new lows list when you are looking at companies which weren’t damaged at all.  He was looking for strong stocks that were 20% off highs and dividend of more than 3%.  Air Castle (NYSE:AYR) is down 25% from highs and it has over a 7% yield from aircraft leasing operations.  Cramer thinks that this one was oversold and their dividend probably isn’t at risk since the dividend just went up.  The CEO also bought shares on the open market, although it was only about $63,000.00 worth.  All of its planes are leased out and it has either already renewed or extended its contracts.  You can see what we said about this one ourselves when it sold shares in a secondary to raise more operating cash for expansion early this year to see how this compares to prior prices.

We have our own take on EMC & VMware.  Many analysts and market pundits are talking up this EMC stock because they thought it was going to run more than it did.  They aren’t looking at enough history for the immediate post-IPO trading in these names.  We think EMC will ultimately go higher and that this won’t peter out entirely, but we knew that the morning the IPO was coming to market was going to be a top and a great chance for short sellers existed. 

Jon C. Ogg
August 23, 2007

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