Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Friday December 5.
Although many worried about the unemployment number, the 6.7% drop in jobs, while bad news, wasn’t a catastrophe. The market even rallied 259 points by the end of the day on lower gas prices and more reasonable mortgage rates, according to Cramer. While half a million lost jobs in November was not exactly a bullish sign, it was far below the 650,000 jobs lost in November of 1980 and a million in 1974. Cramer noted even once-beleagured insurers and housing stocks performed well last week; Hartford Financial reported a good quarter and doubled and Toll Brothers rose 7%. I any case, Cramer thinks the unemployment number is a lagging indicator and follows the market rather than leading it. He predicts 3 to 6 months of more volatility before things calm down again.
While investors feel better about retail, given strong Black Friday sales, many retailers had to slash prices to get customers in the stores, which means smaller profits. However, suppliers like VF Corp did not lose out on slashed prices. VF Corp is behind popular brands such as North Face, Wrangler and Nautica, and has $600 million in cash. After purchasing North Face, sales of the brand rose from $250 million to $1 billion. Long term earnings growth projections are at 10-11% and VFC offers a nice 4.3% dividend. Cramer would buy the stock in increments as the price comes down.
Not only are investors looking to buy while prices are low, but many companies are very cheap and ripe for acquisitions. BHP was expected to buy Rio Tinto in 2007, but now it should consider taking over Freeport, which has been knocked down to $16.6 billion, which would be a considerable value, given the fact FCX bought Phelps Dodge for $25.9 billion in 2006. Speaking of Rio Tinto, it shelled out $38.1 billion for Alcan in 2007 when Rio really had its eye on Alcoa. Rio could have a virtual monopoly on aluminum if it acquires Alcoa for just $15.8 billion.
Now this is nuts: Diamond Foods reported a great quarter and beat its estimates, yet the stock dropped 7 points. However, Michael Mendes said this may be a “great entry point” for the stock, because the company has accelerated earnings growth and is constantly investing in the Diamond brand and new products. When Cramer asked Mendes about a problem in the walnut crop, the CEO replied the walnut harvest was delayed for only a week, and sales were affected somewhat, but Diamond is currently leading other brands. Cramer said Diamond is “too good to pass up” regardless of how fast or slow the economy moves.
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