Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday January 29.
Not all direct sellers are scams. Many people might shy away from the concept in the recent scandal over whether Herbalife (HLF) is a pyramid scheme, but Tupperware CEO Rick Goings explains why the classic direct seller is different from an MLM scheme (he did not mention any company by name). Basically, the latter are "wholesale buying clubs," in which most of the customers are the salespeople. Goings thinks that many other companies have the scheme of recruiting loyal customers who sell a few products now and again. He pointed out that only 10% of Tupperware customers are actual salespeople; 90% of Tupperware customers do not sell the product themselves.
Tupperware reported a strong quarter with a 2 cent earnings beat and revenues up 5.2%. The company saw strength in Europe and powerful growth in emerging markets. "We are a cash generating machine," said Goings, who recently increased the dividend by 72% to 3.3% and instituted a buyback. The company now has a health and beauty division to take market share from Avon (AVP) and has seen great success with sales of time-saving kitchenware.
Skepticism, Not Cynicism: Bank of America (NYSE:BAC), Pfizer (NYSE:PFE), Johnson & Johnson (NYSE:JNJ), Merck (NYSE:MRK), Home Depot (NYSE:HD), IBM (NYSE:IBM), Alcoa (NYSE:AA), 3M (NYSE:MMM), IBM (IBM), Hewlett-Packard (NYSE:HPQ), General Electric (NYSE:GE), Sony (NYSE:SNE), AT&T (NYSE:T), Verizon (NYSE:VZ)
While the averages have surged since January, Cramer doesn't think a sell-off is necessarily imminent. Although stocks are reaching the highs reminiscent of 2000 and 2007, the levels were artificially high then, and Cramer thinks many major players are actually undervalued. Even though Bank of America (BAC) has doubled, it is still not expensive compared to its book value. Pfizer (PFE), Johnson & Johnson (JNJ) and Merck (MRK) have stronger cash flows than their share prices would indicate. AT&T (T) and Verizon (VZ) are not up significantly. Hewlett-Packard (HPQ) declined 44% on the lagging PC, but Cramer doesn't think, even with the poor prospects, that HPQ deserves to be as low as it is. Home Depot (HD) is going to continue to ride the wave of the housing recovery, and Cramer is buying the stock for his charitable trust. IBM (IBM) may seem high, but its earnings have doubled, and it should see $20 by 2015. Alcoa (AA) is unfairly low, given its decent cash flows. 3M (MMM) is a strong company with an innovative product portfolio, but is cheap and General Electric (GE) has become increasingly profitable.
Cramer took a call:
Sony (SNE) is going to be helped by the direction of the yen, but the company doesn't have earnings momentum. Cramer would sell SNE on any lift.
Can the S&P 500 Go Higher?
Scott Redler, technical analyst at RealMoney.com, predicted the S&P 500 would rise from 1350 in February 2012 to 1700 by 2014. Now it seems the index may reach that level ahead of Redler's prediction, since it has crossed the crucial 1500 level. Looking at charts of the S&P 500 from the 1970s until now, Cramer pointed out that there have been entire decades (the 1980s and 90s) when the S&P 500 went higher and higher. Since 2000, the S&P 500 has been range-bound, but its recent breaking of the 1474 ceiling to 1500 was significant. Redler points out there is very little resistance for the index between its current level and 1700; however, if it does not stay above its 8 and 22 day moving averages, it could drop back down.
With shares of Hess (HES) rising 10% on news of a potential splitting of assets, Cramer thinks the stock may return to its $86 level. He discussed other companies that need to make positive changes. Alliant Techsystems (ATK), a defense contractor and bullet maker, would be a good takeover target. Manitowoc (MTW) should split its food service division from its crane segment. Johnson & Johnson (JNJ) is pruning divisions that aren't working and is likely to split itself up. Hain (HAIN), while a good company, has seen its share price topple. Carl Icahn owns 15% of Hain and might insist on some kind of reform; either a buyout or taking the company private. Deckers (DECK) has stumbled as its flagship brand, Ugg boots are not as hot as they used to be. Cramer thinks a company could buy Deckers and turn it around. Fortune Brands (FBHS) could be bought by Masco (MAS) to take advantage of the housing comeback, but FBHS is also doing well on its own without a takeover.
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