Jim Cramer Blog
You Can Still Ride With YRC Worldwide
By Jim Cramer
9/23/2009 2:11 PM EDT
You see stocks like YRC Worldwide (YRCW) run, you know that it's been up pretty much every day since September began, and you say to yourself, did I miss it? Am I too late?
If the recent history of plays like this pans out, you still have a lot of points to run. Here's why. In the last month, the old Yellow Freight, the largest trucking company, has been able to undo some viciously bad labor agreements and credit agreements. In doing so, it avoided bankruptcy. Just by a hair, but it avoided it.
Until it got those agreements, which occurred at the beginning of the month, YRCW's survival wasn't assured. In fact it was pretty much of a given that it wouldn't make it. Which is why one-third of the company's stocks have been sold short.
But these stocks are binary. They are fabulous shorts if they don't solve their problems. They are the world's worst shorts if they do.
YRCW's solved theirs. So it is now a nightmare short.
Mind you, we have no idea what the normative earnings power of YRCW is. In the old days in a solid economy, I would have said it could earn $5 a share in a boom and $1 coming out of a slowdown. But that's when it had labor agreements that were about $1 billion more costly than they are now. So maybe you could argue it could earn $2 a share coming out of a recession.
Now, you start thinking, hmm, $2 a share, sells at $5. Who knows what kind of multiple you should give a company that was losing money hand over fist that can now survive? You can't give it the multiple, say, of Con-Way (CNW) , which is 30 times earnings!
But surely it is worth more than 3 times earnings.
So why stop here?
Of course, you could say, wait a second, the balance sheet is still terrible.
But I would counter with the following observation: If the company were to sell 20 million shares right here, it would be able to pay down even more debt and be even more valuable. We are in virtuous-circle mode.
My conclusion: You missed the bottom. You haven't missed the top. And the higher it goes, bizarrely, because of the ability to re-liquefy, the more valuable it becomes!
Random musings: Just so you know, our sister site has been doing all of these great articles about these low-dollar companies, and when I see them I try to puzzle over them, because it is certainly where the action is.
So tell me TX why does this pumping get to you so much?? How is it going to effect your life if people want to hit the lottery with this stock. I just want to know how this effects your life one way or the other. If it goes BK and disappears or if it hits $1.00 and isn't delisted. If you have NOTHING invested in it..
Good maybe he needs to visit John Stewart again.
He admitted he's a CEO suck up because if he doesn't be nice to them he won't get anymore CEO interviews!!
Yes he came out and said just that.
That was the day you should've stopped tunning into Cramer.
Just Google "Jim Cramer on the John Stewart Show!!!
doesnt anyone understand that when he says buy AFTER a day like today, he is getting ready to short the hell out of it?
when he is short a position either he, or one of his stooges at tsc writes negative articles on that position.
it is pure manipulation, while hiding behind the first amendment.