Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday December 17.
Real Worries, Phony Worries. Stocks mentioned: Vivus (NASDAQ:VVUS), Apple (NASDAQ:AAPL), Wells Fargo (NYSE:WFC)
With the Dow surging 100 points, Cramer asked, "Do we worry too much?" While there are plenty of things to be concerned about, Cramer discussed real worries versus "phony" worries.
1. Fiscal Cliff: Apparently neither side wants to compromise, least of all the President. Few believe now that there is going to be a resolution to the fiscal cliff before January 1. What is likely to happen is that we will go over the fiscal cliff, and when people start balking, legislation will likely be put in place to ease the pain. Cramer calls this the "Superbowl deal;" instead of an agreement by New Year's, it will likely be discussed by the time of the Superbowl. The market may decline 4-5% before the American public gets so angry that Washington will have to make a deal.
2. Fed Policy: Fed Chairman Ben Bernanke wants to keep interest rates very low until unemployment declines to 6.5%. While many are worried about inflation, they should be more concerned that the U.S. will not hit that 6.5% target. With jobs exported and a failure to create enough new ones, employment should be a bigger worry than inflation.
3. Retail: This sector seems to have fallen off a gift cliff, and is hampered by Hurricane Sandy, unseasonably warm weather and fiscal cliff worries. With the turnaround in housing, Cramer would focus on retail housing plays, as well as financials that will benefit from the increase in mortgages.
4. China: While there are worries about slowing growth in China, Cramer thinks that China's economy has bottomed and will see further improvement.
5. Apple (AAPL): This stock declined dramatically, and some feel it is a "washed out" stock. Cramer thinks Apple's move down is "cathartic," and while its reign is probably over, this might be a good thing, since no one stock should be too dominant. A pullback may be good for Apple, because it means lowered expectations.
"We've gone from being complacent to overly worried," said Cramer, "and now it is time to be opportunistic."
Cramer took some calls:
Vivus (VVUS) is controversial. News is out that sales are good. While Cramer had told investors to get out of the stock a few months ago, it was to dodge a bad move. "I'm not saying Vivus is a buy. I'm just saying the news is positive."
Wells Fargo (WFC) is one of Cramer's favorite stocks, a major holding in his charitable trust and "will be one of the biggest stocks of 2013." WFC has 30% market share for mortgages, moderate international exposure and a clean balance sheet.
What the Heck? Gannett (NYSE:GCI)
On Monday's "What the Heck?" segment, Cramer focused on Gannett (GCI), a company that has confounded the widespread belief that newspaper and print are moribund. GCI owns USA Today, 81 daily newspapers and 500 magazines. It is surprising that such a print-oriented company's stock is up 35% for the year. How did GCI do it? GCI, unlike other newspaper companies, is not fighting the internet, but is embracing it; currently 26% of its revenues come from digital, and the USA Today App is one of the most popular news Apps around. Larry Kramer, formerly of Marketwatch, revamped USA Today, along with its website by focusing on quality content. GCI owns 23 local TV stations, and runs news on screens in elevators. The television segment saw a 38% increase in revenues, mainly on the strength of political ads. GCI was in good shape going into the recession; it paid down its debt before the hard times and continues to have a clean balance sheet. That is one reason GCI could increase its dividend by 150% for a 4.4% yield. Cramer is bullish on GCI.
Brunswick Corporation (NYSE:BC), Cummins (NYSE:CMI), Caterpillar (NYSE:CAT), Tractor Supply (NASDAQ:TSCO), Oshkosh (NYSE:OSK)
Hurricane Sandy, in addition to destroying many homes and vehicles, was the biggest destroyer of boats since the American Boat Association started keeping records in the 1960s. There were an estimated 65,000 recreational boats lost in the storm, and while these might be considered "toys of the rich," owners will want to replace them. Many are worried about discretionary and luxury stocks, especially with tax increases expected for the wealthy, Cramer thinks many of these worries are already baked into BC's stock. The great recession was a much bigger problem than the fiscal cliff will be, and through that crisis, BC stayed flat while competitors went out of business. BC was able to take market share and streamline its business.
Around 75% of BC's sales come from boats; other items sold include billiard tables, bowling items and gym equipment. BC has very limited European exposure, around 18%, while 58% of revenues come from the U.S. BC has a sizeable exposure to Brazil, the fourth largest boat market in the world. Even if wealthy consumers do tighten their wallets, the extensive boat destruction by Hurricane Sandy will create sufficient demand to offset macro-economic challenges. The company reported a 14 cent earnings beat in October and raised guidance for the full year. BC has the lowest debt in 7 years and has given a 27% gain since last year. BC sells at a multiple of 12 with a 12.5% growth rate.
Cramer took some calls:
Tractor Supply (TSCO) is a stock Cramer had recommended, but then it disappointed. Cramer thinks it is safe to buy TSCO again, because it seems to be coming back.
Oshkosh (OSK) is a position Carl Icahn has been cutting. "I wouldn't want to increase my stake. I don't want to bet against Icahn."
Globus Medical (GMED) is a pure play on medical devices for the spine. It has a 14.5 multiple with a 14% growth rate, but faces 3 headwinds: 1) as a recent IPO, it faces lockup expiration 2) the spine segment has been in a decline 3) GMED has declining gross margins. Cramer would buy Johnson & Johnson (JNJ) instead.
Northern Tier (NTI) has a yield of 12%, which is a cause for concern, but this oil refiner is taking advantage of the spread between the price of Brent crude and West Texas Intermediate. The stock has risen 72% since July and has steady margins. Cramer likes NTI, but prefers HollyFrontier (HFC).
Caseys General Stores (CASY): Cramer was once worried about this stock, because of margin pressure and competition, but it reported a solid quarter with increased same store sales. CASY is planning to become a REIT and is taking on an extensive remodeling program. Cramer thinks CASY offers an "intriguing entry point," and would consider buying it.
Limited (LTD) is a stock Cramer likes.
SodaStream (SODA) is controversial because it tends to be a battleground stock between the shorts and the longs. However, it may be a trade for the Superbowl, since it will have a major advertising spot. Cramer would not stay in SodaStream after this quick trade, because it is too risky.
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