Cramer's Picks: Pride Goes Before Yahoo's Fall (11/6/08)

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Thursday November 6.

Not as Bullish as Buffett: Toyota (TM ), Caterpillar (CAT), Verizon (VZ), AT&T (T)

While Cramer enjoys hitting the ‘buy, buy, buy” button and often agrees with master investor Warren Buffett, Cramer admits he cannot be bullish on the U.S. market until Europe, China and Latin American cut their interest rates. Although he was one of the most outspoken critics of Ben Bernanke and the Treasury Secretary, Cramer now says the U.S. has done all it can do to stimulate recovery, and the rest of the world should follow suit. He applauded the British who made a 1.5% cut but was disappointed that the European Central Bank reduced rates by only half a percentage point. Weak consumer confidence at home is only making things worse and results from Toyota bode ill for the domestic auto industry. Cramer would stick with high-dividend recession-resistant names such as Caterpillar, Verizon and AT&T.

CEO Interview: Rick Goings, Tupperware (TUP)

While companies like Avon and Tupperware usually perform well in a recession as people look for second or replacement jobs, the famous kitchenware seller’s stock took a hit after it guided down, despite beating its recent estimates. Although this drop buoyed the dividend to 3.5% Cramer asked Rick Goings if his company was getting weaker. Goings replied the stock price did not reflect Tupperware’ growth potential (56% of the company’s revenues are from emerging market countries) or its stock repurchase program. Expensive oil-based resins comprise a mere 17% of the company’s costs while Tupperware’s gross margins are 70%. Cramer concluded Tupperware is still a great company, but it is getting treated roughly. It trades at a cheap 8 times earnings and the multiple averages at 13 to 14. Cramer would buy.

Sell Block: Foster Wheeler (FWLT), USO (USO), Marathon Oil (MRO)

Cramer devoted Sell Block to discussing the analysts rather than stocks. “Joe the Analyst” from “Insomnia Bank” was bullish on Foster Wheeler all the way from $79 to $23 where he altered his call from a “buy” to a “hold.” Cramer wondered how a stock can be cheap at $79 and expensive to $23. While he doesn’t think Foster Wheeler has bottomed, it is too late to sell the infrastructure name, particularly since the company has $1.3 billion in cash, a huge buyback and trades at just 6 times earnings. In addition, Mad Money friend CEO Ray Milchovich is delaying retirement and Foster Wheeler is looking forward to eight major projects. Concerning Joe the Analyst, he is not the exception to the rule but behaves like almost all Wall Street analysts “The system is rotten,” said Cramer, “the whole system belongs in the Sell Block.”

Cramer told a caller he likes the ETF USO as a way to play, but prefers Marathon.

Yahoo’s Wall of Shame: CEO Jerry Yang, Yahoo (YHOO), Microsoft (MSFT), Disney (DIS)

Pride goeth before the fall in the case of Jerry Yang, Yahoo’s infamous CEO who turned down a takeover bid from Microsoft at $31 only now to admit the merger “makes sense” now thatYahoo’s stock price has plummeted to $14. While Yang already graces Cramer’s Wall o Shame, Cramer says he deserves a more prominent position for his foolishness and says the company will be lucky to fetch $17 a share from the deal.

On a side note, Cramer says Disney is now low enough to buy.

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Comments

[James Wilson:]

Now more than ever is the time for people like Jerry at Yahoo to think in the terms of STAR TRECK instead of old hack with Technology. Since few corporations are spend a lot on R & D this only makes sense.

We must get industry to release technology instead of hording it for slow releases and attempts to max profits with each release.

Allow consumers and young people to devolpe new products without beign chained to the futures process of profit and loss of the corporate world.

Corporation can then tap those new products for profit without investments in R&D.

2008 Nov 07 06:24 AM

[MrBuzz:]

There is more to a company than stock price. YAHOO is one of these. The focus on Jerry Yang has been to drive him into the ground. But, this Chief Yahoo has been trying to keep his ship together for the workers, the investors and partners. Every Yahoo Mail and Yahoo 360 person is or should be considered a part of the extended family of Yahoo.

The reason YAHOO has been in trouble is because they have stupid MBA types ignoring the base customer. The Yahoo mail user, the Yahoo 360 writer, the Yahoo Finance people who are dedicated to the company products. If I were in charge, this company would grow, and eventually go private.

2008 Nov 12 11:33 AM