2 Jim Cramer Stock Picks To Buy in June

Jim Cramer is one of the most well-known Wall Street figures. He hosts CNBC’s Mad Money, and whatever your views may be on Cramer, he does have significant sway over many investors. There’s little evidence that he can outperform the market consistently, but some of his picks are worth taking a deeper look at.

One Wharton‑backed analysis of his charitable‑trust portfolio even found annual returns trailing the S&P 500 total by roughly 2.2%. This was also with a slightly higher standard deviation. That mixed record does not dim his influence because millions still tune in for a digest of earnings calls and sector rotations. And he very often does come up with great stock picks.

Here are two stocks that he has good conviction in this month:

Cintas (CTAS)

Jim Cramer has loved Cintas (NASDAQ:CTAS) for a long time, and it has gone quite well for those who have bought. The stock is up 237.5% in the past five years, and if you’ve never heard of it before, you’d think this is a software stock. However, the company just sells uniforms, mats, mops, and similar products.

The company has a solid megatrend behind it since businesses are increasingly outsourcing their non-core functions like uniform management, maintenance, and safety compliance. Cintas is often one of the top bets, and it has been the biggest beneficiary of this outsourcing trend. On top of that, these “non-core” solutions are actually pretty essential for these businesses, since companies still need their facilities taken care of. As such, Cintas’ contracts are long and sticky. This is mainly why Jim Cramer likes it as a long-term story.

Cramer said, “…Cintas is not necessarily considered a subscription business. Hey, but their standard contract is five years for you to bring your company uniforms, first aid products, along with fire protection and safety gear. Sure, the stock typically goes down if we [sic], you think we’re headed for a slowdown, but Cintas can’t join the new high list without robust blue-collar hiring. The fact that it’s up here is a terrific sign, actually, for the broader economy.”

As long as companies keep hiring and growing, so should Cintas. Recent labor market data has continued to be strong, and recession odds have dropped as a result.

CTAS stock changes hands at 46 times forward earnings. You’re paying that much for a 3-year annual average revenue growth rate of 12%, and an EPS growth rate (minus non-recurring items) just 2% higher than that. That’s certainly a massive premium for “meh” growth if you compare it to software and tech companies, but investors are fine paying that much due to the safety they are getting. Defensive stocks generally trade at 25 times to 30 times earnings with low single-digit growth, so CTAS stock is slightly overvalued, if not fairly priced.

CTAS stock also comes with a 0.69% dividend yield, and it is 8 years away from being a Dividend King. I expect the yield to rise significantly as the bottom line is growing fast. The forward payout ratio is also at just 29.29%.

RELX PLC (RELX)

RELX (NYSE:RELX) is a stock that Jim Cramer has given “two thumbs up” to. During a lightning round, a caller asked Jim Cramer for his opinions on RELX, and he answered, “…you know what, finally, someone asked me about the old Reed Elsevier, which I’ve always liked. They’re putting up great numbers. That’s one of the reasons why people want to go to Europe to buy stocks. No controversy. Reed Elsevier, RELX, two thumbs up.”

RELX is a company that sells specialized data and analytics. The core business sells journals, databases, and analytics software. It is quite well-diversified, since revenue is split between a Scientific segment, a Risk segment, and a Legal segment. There’s also an Exhibitions segment, though it is much smaller than the three.

The three major segments have shown solid growth over the past years. The margins are also great. Its operating margin is nearly 34%, and is better than 94.5% of companies in the Business Services industry. Growth is also in the low double digits, with solid bottom-line growth for the coming years.

Analysts see EPS growth for the rest of this decade at around 14.5% annually. If investors hold the premium, this should lead to RELX stock comfortably outperforming the market.

European stocks are hot right now, so they could see more buying action in the coming months. It also comes with a 2.11% forward dividend yield.

Keep in mind that the premium being paid here does make the stock quite expensive. You’re paying 40.6 times earnings for a stock that has historically traded at around 29 times earnings. The price-to-sales ratio is also at 7.8 times. However, if you’re investing for the long term and expect the market to remain strong, RELX stock is still worth considering.

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