Cramer's Mad Money - Cramer's Lovin' McDonald's (1/26/09)

Stocks discussed on the in-depth session of Cramer's Mad Money TV Program, Monday January 26.

Brinker International (EAT), Darden Restaurants (DRI), McDonald’s (MCD), Starbucks (SBUX)

McDonalds has proven yet again it is one whopper of a company with its impressive earnings. The classic fast food company beat estimates by 4 cents a share, operating income was up 11% and December same-store sales increased by 6%. McDonald’s coffee is even creaming Java giant Starbucks, and this is only the beginning of the McDonald’s coffee story, since only 30% of stores have it on the menu so far. When Cramer asked CEO Jim Skinner what the secret is, Skinner replied “It’s all about fundamentals.” The company is focused on delivering value for customers, creating more variety, better service and extended hours. Cramer remarked that he likes McDonald’s dividend and Skinner said the company can easily maintain the yield. McDonald’s also has the advantages of international strength and an ability to compete not only with other food retailers but with at-home dining, given its low prices. Skinner said McDonald’s coffee will continue to grow and soon frappes and smoothies will be on the menu. Cramer congratulated Skinner on a remarkable quarter and said McDonald’s is “The best-run major international company in the world.”

Five Reasons to Like Darden (DRI) and Brinker International (EAT)

While many instinctively recoil from restaurant stocks in a recession, Cramer thinks Brinker, owner of Chilis and On the Border, and Darden, owner of Red Lobster and Olive Garden, are worth owning. While he would wait for a drop in these two names which are up on good performance, Cramer gave five reasons to be bullish on these stocks.

1. Survival of the Fittest. The restaurant sector doesn’t receive TARP money. This means that companies in this sector are locked in a Darwinian struggle for survival. The best of breed names, Darden and Brinker, will survive.
2. Commodities are Down. Chicken and beef are cheaper and dropping prices at the pump mean more cash in the consumer’s wallet.
3. Talent retention. People tend to guard their jobs during a downturn, so managers at the stores are less likely to use their positions only as a launching pad for something bigger.
4. Advertising costs are lower. This is important, since an ad can make or break food retail stocks.
5. Low prices. Olive Garden provides all-you-can eat salad, breadsticks and soup, and its generosity has paid off; The Olive Garden reported its 57^th straight quarter of growth.

Cramer reminded viewers to wait for a pullback before buying Darden and Brinker

It’s Housing, Obama!

While President Obama has been talking a lot about unemployment, the market demonstrates housing is at least as important. The Dow closed up 38 points on a 6.5% increase in housing prices. This gain occurred in spite of news of hefty layoffs from Sprint-Nextel, Caterpillar and Home Depot. While Obama is concentrating on fixing unemployment, he should not neglect housing. Cramer’s plan includes giving a one-time tax credit for homebuyers to bring new consumers into the market. He would combine this with further decreases in mortgage rates to make homes more affordable.

Leave Steve Jobs Alone! Apple (AAPL)

With all of the deceit and corruption the Securities and Exchange Commission could investigate, Cramer thinks it is “outrageous” that SEC is treating the alleged concealment of Jobs’ illness as if it were Watergate. Should the SEC really be upset that Jobs, on discovering he had pancreatic cancer, didn’t immediately run and tell all the shareholders? And what is more important, earnings or medical tests? Were the shareholders supposed to say, “Who cares about iPod sales, we demand Jobs’ urine sample!” Cramer urged giving Jobs the benefit of the doubt. Perhaps he was waiting for a second opinion, needed time to digest the news, or just got sicker over time. In any case, Apple has 32,000 employees and Apple’s brilliance does not depend on just one man. “Can’t we just wish him the best instead of hounding him?” Cramer asked, and added Apple is a “buy, buy, buy!”

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Comments

[User 265729:]

No wonder they are making money. Have you been to an actual McDonald's lately?

Bathrooms: Filthy

Employees: High school education or GED?

Building Maintenance: Absent

Meals: Small, to smaller, to smallest

But, it will get you a profit – in the SHORT TERM.

Cramer does it again with his incredible "insight."

Jan 27 03:12 PM

[dsrtwriter:]

"McDonalds is even creaming Starbucks" . Come on. Sure Starbucks has its problems,primarily overexpansion and was probably overly generous offering health care coverage to even part time employees, and I get tired of Starbucks obsession with all things Africa, from music CDs to novels.

But having said that, I go to McDonalds sometimes to get a burger and fries and bring it home. I don't enjoy the plastic furniture, the kids and their single moms in the "playplace". Their food is a good value as take out.

For coffee, you are not going to find me or many other Starbucks customers fleeing to the horrid atmosphere of a McDonalds. I like to get some reading done; the price of an espresso at Starbucks is a good deal for me, since I truly use Starbucks as the "third place" to spend a little wind down time.

As usual, Cramer overhypes and exaggerates.

Jan 27 04:09 PM

[Cal D:]

Steve Jobs and Apple - your right; leave it alone.

Jan 27 04:11 PM