Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday November 15.
Never buy a stock just because it has come down too much. J.C. Penney (JCP) has declined 53% for the year, and many wonder if it can really go lower, but Cramer thinks it can. The company reported its third terrible quarter in a row. While Cramer was initially hopeful when Ron Johnson, architect of the Apple (AAPL) Stores took the helm of JCP, it soon looked like Johnson was not the right man for the job; Cramer told investors to get out of JCP in May, when it was 10 points higher than it is now. Johnson executed a series of bad moves; he alienated those loyal to JCP by getting rid of coupons and special deals for “every day low prices.” Customers left JCP in droves. The balance sheet is now in terrible condition, and JCP cannot pay for its radical remodeling projects. Same store sales declined for the 5th consecutive quarter. Sales were down 26%; Cramer said that not once in his career has he seen a retailer recover with such a dramatic decline in sales. While turnarounds are not accomplished in one day, JCP has had plenty of time to create some kind of upside and it has failed to deliver. JCP remains a sell.
Coca-Cola (NYSE:KO), General Mills (NYSE:GIS), Verizon (NYSE:VZ), Lockheed Martin (NYSE:LMT), BP (NYSE:BP), Linn Co (NASDAQ:LNCO), Teavana (TEA), Starbucks (NASDAQ:SBUX)
Despite the most robust data from homebuilders in 5 years and bullish news from the aerospace industry, the Dow sank 29 points. Uncertainty about the fiscal cliff is going to put a cap on stocks for the near-term, and Cramer discussed 3 things investors should keep an eye on in the coming months.
1. The TV indicator. Every time the President or another major figure in government speaks on television, stocks may see a dip on renewed worries about the fiscal cliff.
2. Lockheed Martin (LMT) is a perfect barometer for how stocks in general are going to behave, since it is in the defense sector, which may see cuts, and has a high 5% yield. Many dividend investors are worried about holding high dividend stocks because of the possible increase in taxation. If LMT is sold, so goes other defense and high-dividend stocks.
3. There are 3 stocks that reported strong numbers that should indicate where stocks are going: Coca Cola (KO), General Mills (GIS) and Verizon (VZ). If these decline, so should other stocks in their categories.
Amgen (AMGN) is a biotech that will do well regardless of fiscal cliff worries. The company has a diverse pipeline of drugs that treat cancer, kidney disease, bone disease, arthritis and many other ailments. AMGN has 7 products awaiting Phase III approval early next year, and according to some estimates, the company could double its earnings per share in 8 years. The company beat earnings estimates by 20 cents with a 9.5% rise in revenue. The company initially rose, but is now down 6.3%. AMGN sells for a multiple of 12 with a 10.5% growth rate. “I have never seen Amgen so cheap,” Cramer said.
Heartland Payment Systems (HPY) reported a 5 cent earnings beat with revenue up 17.5%, but with profound economic worries, can the company keep up its strong performance? The CEO discussed how the company has grown in earnings and in influence; it was once rated 62 in the industry, and now occupies the position of number 5. Heartland processes credit card transactions, and was faced with a cyber hacking challenge; Heartland took a leadership role in rectifying the damage, owning up to the problem and finding an encoding system that would prevent repeat incidents. HPY worked together with its competitors to protect customers’ private information and for that, “We earned respect.” HPY has its own data center and sales department, and is more fully integrated than other companies in the sector.
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