Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday January 22.
Cramer discussed the bull market in food packaging, a segment that might not be very interesting, but it is profitable. The main player in the space has been Bemis (BMS), which yields 2.8%, and is a stable, conservative company. Berry Plastics (BERY), which fell 5% the first day of its IPO, has been red hot since, and has risen 25%, but is still just below its IPO price. Bemis has risen 10% in the last few months, and both companies are benefiting from low natural gas prices. For a conservative investment, Cramer prefers Bemis, and Berry Plastics is higher risk/reward. BERY has a poor balance sheet and might run into some risk if Apollo Investment sells its large stake in the company. BERY sells at a multiple of 13 with a 13.5% growth rate, and is a good choice for investors who are willing to handle the risks.
Cramer outlined three examples demonstrating how volatile earnings season can be and cautioned investors not to trade according to the headlines. Verizon (VZ) was trading up prior to earnings, but when earnings per share seemed disappointing at first glance, shares traded down. However, VZ's stock recovered by the end of the day when many felt that the numbers were not so bad.
Johnson & Johnson (JNJ) was sent down on lower than expected guidance, but since JNJ is planning to break itself up, guidance is not as relevant as it would be for a company that will remain intact. By the end of the day, shares of JNJ were trading up.
Dupoint (DD) disappointed last quarter, but this time, reported an 11 cent earnings beat, when The Street expected 7 cents. Although there were worries about the fact that DD produces commodity chemicals that can be easily duplicated and produced in China, shares closed up.
With the roller coaster action in the above mentioned and many other stocks, Cramer would just stop, look and listen instead of trading based on earnings headlines.
Off the Charts: Where Is The S&P 500 Going?
Cramer noted that Carolyn Boroden, of FibonacciQueen.com, has accurately predicted the movement of the S&P 500. She recently "nailed" a 100 point move in the index over the past 2 months. In November, Boroden observed the S&P 500 had bottomed and predicted it could go to 1510. With the S&P 500 20 points away from that level, Carolyn Boroden now predicts that if the S&P 500 hits 1510, its next stop will be 1551 or 1555.
As many companies report that they have ample cash on the books, M&A activity is likely to pick up, according to Cramer. This might be especially true of the defense industry, where defense budget cuts, which may not be as dramatic as initially feared, may still be substantial enough to affect the bottom line of most defense companies. While such a situation may be a challenge for organic growth, defense companies can still find growth opportunities through acquisitions. Cramer thinks Alliant Techsystems (ATK) might be an ideal takeover target. The company makes weapons, ammunition and has an aerospace segment. ATK recently beat earnings by 41 cents and has a significant backlog. Management raised guidance, boosted the dividend by 30%, and announced it is making a significant buyback. ATK is trading at a 37% discount to its historical level, and is too cheap to ignore, even if it isn't taken over.
Cramer took some calls:
Harris (HRS) - I think this stock has many good points. Cramer thinks it could break itself up.
AeroVironment (AVAV) has a spotty earnings record, and Cramer doesn't have conviction in the stock.
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