Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday December 4.
Starbucks (SBUX), Teavana (TEA). Other stock mentioned: Chipotle Mexican Grill (CMG)
Starbucks is hosting an Investor Meeting on Wednesday, and Cramer thinks it is worth paying attention to what management has to say. The stock is ten points off its high for the year, and the information discussed at the meeting could spark a rally for the stock. One of SBUX’s main strengths is that management does not engage in “idle chatter” about its goals; the company has a reputation of delivering on its promises. SBUX has expanded successfully into China, and India should be the next leg up. In addition, SBUX is likely to revolutionize tea the way it has transformed coffee consumption with its acquisition of Teavana (TEA).
SBUX is “a high quality growth stock in a growth world.” The company continues to improve efficiency, and has its own coffee pods for the Keurig. High coffee prices were a headwind, but the reduction in the cost of the commodity, down 30%, is now a tailwind for SBUX. Cramer says he looks forward to hearing about what management reports at the Investor Meeting on Wednesday.
Cramer took some calls:
Chipotle Mexican Grill (CMG) is a stock everyone seems to be giving up on, but it has a new concept with the planned expansion of the Shophouse Southeast Asian Kitchen. Cramer thinks the stock may go from $235 to $250.
Darden (DRI), Gap (GPS), Ford (F), Toll Brothers (TOL)
The fiscal cliff is looming, and uncertainty is rife. Darden (DRI) discussed a weakening consumer, and the stock finished down 8.9%. Such stocks might not even be salvaged because of their strong yields, because there is a concern about the dramatic rise of dividend taxes with the fiscal cliff. Gap (GPS) is down 10% on lackluster sales. While Cramer thinks some retailers are worth buying, there is negativity on The Street about the sector. Cramer would buy stocks levered to bull markets and trends that are headed up. Although Cramer has not been a fan of Ford (F), because of its international exposure, now “Ford is the one to watch.” Hurricane Sandy has made replacing cars a necessity, and Cramer sees signs of a turn in Europe that could be good for Ford. Toll Brothers (TOL) will benefit from the turnaround in housing, since the housing numbers have been strong. Cramer would buy these stocks on the way down. There is no hurry to get in, because the general market outlook may continue to send stocks down, and investors may get plenty of buying opportunities.
Retail: Strong or Weak? Market Vectors Retail ETF (RTH). Other stock mentioned: Home Depot (HD)
Retail could suffer a huge blow with the fiscal cliff, with the curtailment of consumer purchasing power. With higher taxes, expiring unemployment benefits and possible layoffs, the uncertainty seems bad for retail. Reports show that retail sales have declined 3%. Hurricane Sandy caused a stoppage in shopping, and many stores were closed for weeks rather than just days. Although there have been bright spots in retail, like Home Depot's (HD) strong earnings, other retailers are reporting disappointing quarters. With the help of Ed Ponsi, technical analyst at Realmoney.com, Cramer discussed the fact that the charts of retail stocks are showing a faint glimmer of hope. In fact, according to the charts, “retail might be the most attractive area to own in this entire market.”
Market Vectors Retail ETF (RTH) pulled back 50%, but has moved up. The RTH has remained above the 200 day moving average, and Cramer mentioned that the 200 day moving average is a benchmark he often used when analyzing stocks at his hedge fund. Ponsi thinks that if the RTH moves past its $45 level, it could be in the “sweet spot.” However, Cramer said he is worried that the ETF hasn't closed above $45 already. He added that he is worried about the fundamentals of retail, especially with companies like Gap missing numbers. However, if retail pulls back, there might be individual stocks in the sector worth buying.
CEO Interview: Russell Goldsmith, City National Bank (CYN)
“Never underestimate the importance of banks,” said Cramer, because no stock rally has legs unless the banks also rally. City National (CYN) is a bank that caters mainly to wealthy clients, who may be worried about possible tax increases with the fiscal cliff. Cramer spoke to CEO Russell Goldsmith about this issue, and he replied that he sees two groups of clients: those who are “sitting on their hands” and calling off deals, given the uncertainty, and those who are taking advantage of opportunities. “We have a full array to meet the needs of our clients,” said Goldsmith, the risk-takers and those who are more conservative. Goldsmith discussed positives in the economy, such as job creation and healthy state budgets in a few areas. The company is making acquisitions and is seeing significant loan growth. When asked about how low interest rates are affecting the bank, Goldsmith replied with the hope that Fed Chairman Bernanke might make some changes in the coming year, but low interest rates are not a significant obstacle as long as business keeps growing.
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