Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday January 7.
"It is time to turn off the 'risk-on' 'risk-off' babble," said Cramer, and to pay attention to themes that are going to work in 2013. Two areas Cramer expects to see growth are in regional banks and in autos. The most undervalued regional bank with the greatest potential is Keycorp (KEY), which will benefit from the economic resurgence in the Heartland. First Horizon (FHN) and BB&T (BBT) are also banks with potential upside. The increase in construction, small business lending and improved balance sheets will be catalysts for these stocks. The resurgence in loan growth will trump the scant amount made on each loan and could force interest rates higher, regardless of Fed policy.
Autos had a tough year in 2012, but Ford (F), which fell from $18 to $8, and General Motors (GM), which tumbled from $38 to $18, should roar back in 2013. While 15 million autos were sold in the U.S. in 2012, business in Latin America and China was flat, and both companies saw losses in Europe. With those three economies seeing increased growth and recovery, GM and Ford will start to rebound. Ford refinanced its debt and GM recently bought back a significant number of shares. Cramer thinks both companies will return to their 2011 highs.
Cramer took some calls:
Nvidia (NVDA) should be trading higher on the quality of its graphics and machines, but there is so much skepticism surrounding NVDA that Cramer thinks the stock is "stuck in the mud."
Illumina (ILMN) has plenty of hype surrounding it, and it is too high to buy. Cramer would wait for ILMN to drop to $45.
The JPM Healthcare conference is underway, with Celgene's (CELG) successful presentation on Monday that caused the stock to rise over $3. NPS Pharmaceuticals (NPSP) has a presentation on Wednesday. The stock has been a roller coaster, rising 31% after Cramer recommended it in September only to dip after Cramer recommended taking gains on the stock in late October. NPS has recently gained approval for its short bowel syndrome treatment, but the stock has not done much since the approval, so there might be a buying opportunity. Since this syndrome is rare, difficult and expensive to treat, the drug carries a heavy price tag. The drug could generate $350 million in revenues for NPSP, which has a market cap of only $750 million. Dr. Francois Nader explained that the drug is costly because short bowel syndrome is expensive to treat, and the medicine will actually save hospitals money in the long run. Many insurance companies have agreed to cover the significant costs of the drug. NPSP also has a drug in the pipeline to treat hypoparathyroidism. Cramer is pleased with NPSP's story because "its drug saves the system money."
Bank of America (BAC) rose 109% in 2012 and Home Depot (HD) gained 47% to finish the year as the top performers of the Dow. Cramer thinks both stocks will see more upside in 2013, but outlined the reasons why he slightly prefers BAC.
A sector determines 50% of a stock's movement, according to Cramer, and he sees a brighter year for banks than retailers. With the resurgence in housing, consumer lending and business investing, the financial sector is headed for a much-needed upturn. Europe is stabilizing, and with a temporary resolution to the fiscal cliff, panic is off the radar. BAC is settling its mortgage putback issues and is selling off some of its assets. The company is taking out excess costs, is cleaning up its balance sheet, and it might raise its dividend or buy back shares. In spite of its recent run, BAC trades at a 30% discount to book value with more room to run.
Home Depot (HD) is a best of breed retailer that will benefit from the rebound in housing and post-Sandy rebuilding. The stock is trading at a multiple of 18, just below its historical peak multiple of 19. While competitor Lowe's (LOW) has been an underperformer, especially with the recent downgrade, Cramer thinks it is not beyond the realm of possibility that LOW could give HD a run for its money in 2013. One reason BAC is the preferred stock over HD is that expectations for BAC are lower than they are for HD, which has more challenging comps to surpass.
Cramer took some calls:
Lumber Liquidators (LL) is a terrific company. Cramer is bullish.
Hewlett-Packard (HPQ) was the worst performer in the Dow for 2012, dropping 44%. Cramer is bearish on HPQ.
CEO Interview: Kevin Conroy, Exact Sciences (NASDAQ:EXAS)
Exact Sciences (EXAS) gives its presentation on Wednesday at the JPMorgan Healthcare Conference. The company will discuss its at-home diagnostic screening for colon cancer. While it doesn't replace the need for a colonoscopy, the test can detect a growth the size of a centimeter that can grow into a malignant tumor in a matter of years. The test also can determine whether someone needs a full colonoscopy, which is an uncomfortable procedure. The test has a 90% success rate in trials, and the FDA is expected to approve it by next year. EXAS is working on a single test to screen for pancreatic cancer and cancer of the esophagus. EXAS' stock has risen 37% since Cramer got behind it in 2010. CEO Kevin Conroy stated that the FDA has made the colon cancer test a top priority, since there are 150,000 new cases of the disease each year, and it is a very treatable condition if caught early.
Cramer talked about stocks that were hit after their weaker than expected quarters, but have bounced back since. Disney (DIS) dipped 10% after its quarter, but has come back with a vengeance now that its Star Wars acquisition is seen as a smart move for the company. Deere (DE) was punished after the quarter when it talked about slow sales outside of the U.S., but Deere has been on a tear. Cramer is usually cautious about holding Deere going into a quarter, because management tends to be conservative, and the stock often sells off. Deere should benefit from a strong crop report and a worldwide recovery. Discover Financial Services (DFS) is creeping up nicely after its not-so-hot quarter. eBay (EBAY) saw a 10% drop after earnings, but Paypal, a driver for the company is "on fire." Cramer thinks Alcoa (AA) is a company that is likely to get hit on earnings, in spite of the fact that the stock is levered to bull markets like aerospace and construction. The problem Alcoa faces is the worldwide aluminum glut. Those who believe AA can transcend this problem will likely have a buying opportunity after its earnings.
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