Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday December 6.
CEO Interview: Tom Farrell, Dominion Resources (D)
Since the U.S. government doesn't seem ready to back natural gas as a fuel for surface vehicles, the possibility of exporting the fuel in the form of Liquefied Natural Gas [LNG] is another option that companies are considering. Dominion Resources (D), a utility company, is building an LNG plant and has all of the infrastructure ready, except for the liquefier. The company, since it provided a needed service in the form of utilities, is not as vulnerable to the fiscal cliff as other companies. The stock yields 4% and has a history of raising its dividend. CEO Tom Farrell said that rate payers will not pay more because of this LNG plant. When asked about environmental concerns. Farrell responded that Dominion has worked with the Sierra Club in the past, and has usually been able to work things out. Cramer is bullish on Dominion.
As Apple (AAPL) moves, so does the market. This is true even for indexes that don't contain Apple's stock. The Dow was up and Apple also rose 8 points on Thursday. The reason Apple has been selling off is that investors want to take gains ahead of the fiscal cliff worries about taxes. Unfortunately, some have assumed that the sell-off has to do with Apple's fundamentals, and this belief is fueling further selling. The stock should continue to decline until the fiscal cliff issue, however it is resolved, is over. Then it will be clear that iPhones and iPads are selling well, and the stock should rally in 2013. Cramer thinks a good place to buy Apple is the low $500s.
Cramer took some calls:
Activision (ATVI) has had some good news, but this news is baked into the stock already. ATVI needs another catalyst before it is worth buying.
Lumber Liquidators (LL) is a major retailer of hardwood floors. The stock ran up 200% for the year, but has pulled back to 6 points off its high. The company reported a strong quarter, with 12% same store sales and raised guidance, but The Street is worried that the momentum can't be maintained, and LL was downgraded. LL is in 46 states, with a concentration in the Northeast. CEO Tom Sullivan said that, contrary to what many believe, there is not a lumber shortage, and LL has no problem obtaining supply. When asked how LL compares to other home stores, like Home Depot (HD), Sullivan replied that LL can offer sometimes half the price of HD, LL can get the stock to the store very quickly, and because it specializes in floors, has very knowledgeable staff. The company is adding tools to its offering and is innovating brands. When asked about a possible economic slowdown, Sullivan said he isn't worried, because customers tend to do smaller projects in such an environment, but don't eliminate them, and may even undertake projects to improve their home if they cannot afford to move.
Ascena (ASNA) is a company that has been successful at making acquisitions to expand its brand offerings. In addition to Dress Barn, Justice and other brands, the company recently acquired Charming Shoppes, which features plus-sized attire for women. The stock fell 4.3% after its quarterly report, even though it beat earnings by 3 cents, revenues were in-line and it reaffirmed guidance. The stock had risen 35% for the year going into the quarter, and analysts were expecting a flawless quarter. CEO David Jaffe discussed the challenges of managing a diversity of brands, and noted that not all necessarily have the same level of performance in any given quarter. For instance, sweater sales at Dress Barn were weak, but there were strengths in other areas. Justice's "flash sales" are generating large sales volumes and are improving gross margins. Most retailers have suffered in November from Hurricane Sandy, but stores like Justice continue to take market share from retailers like Wal-Mart (WMT). Cramer said the decline in ASNA's stock is an event he has been waiting for, because investors can now pick up a great stock at a discount.
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