Tuesday, January 17, 2012

Cramer’s Sell Block on Legg Mason Redemptions (LM, AIG, CFC, COF, EK, GOOG, UNH, S)

On CNBC’s MAD MONEY tonight, Jim Cramer did his SELL BLOCK where he makes calls for selling winners or losers.  Tonight he focused on legendary portfolio manager Bill Miller of Legg Mason (NYSE: LM).  Miller had outperformed for many years but 2007 was another year of underperformance after an underperforming 2006.  With mutual fund redemptions rising (investors withdrawing cash from stock funds) Cramer believes that this will hit Legg Mason (NYSE: LM) fairly hard and he thinks that is resembling a sell here.
Legg Mason shares closed up almost 2% today at $73.43, but the 52-week trading range is $68.35 to $110.17. More importantly, Cramer gave some of Legg Mason’s top holdings that could get hit hard if the redemptions come flying in:
  • Out of the financial sector, Cramer thinks that AIG (AIG), Capital One (COF) and Countrywide (CFC) are all large holdings of Miller and they could see added liquidations from Legg Mason.
  • Eastman Kodak (EK) is also vulnerable to Miller selling to meet redemptions as it is 19% held by Legg Mason, although it sounded like Cramer was positive if it pulled back too much.
  • Google (GOOG) could also see some selling as Legg Mason holds a 1.5% stake there, although we all know Cramer would like to assign a $1000 target on GOOG.
  • UnitedHealth (UNH) is one that Cramer also noted because Legg Mason is the largest holder with more than a 7% stake.  Cramer has been positive on this one lately.
  • Lastly was Sprint Nextel (NYSE:S) with Legg Mason holding a 5.3% stake there, although he said it has gotten oversold and cheap enough that he is inclined to buy hat stock now with a manager that still might be able to acquire it.
Backward & Forward, Cramer In 2007 To 2008 is a full list of our top Cramer summaries with his 2007 calls that are pertinent or due for updates in 2008.
Jon C. Ogg
January 3, 2008

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