Cramer's Mad Money - Forrest Capital Out of the Woods (1/22/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday January 22.

Out of the Woods: Forest Labs (FRX)

Forest Labs saw an upswing on its earnings beat and raised guidance, only to see its price fall back again on a Goldman Sachs’ downgrade. However, a Stanford Bernstein analyst reiterated his buy on Forest Labs. So who is right? Cramer thinks the Goldman analyst got it wrong; the bad news about product expirations is already priced in. Forest does not have a weak pipeline; it has five products in stage three testing and two in advanced stage two testing. Forest trades at a mere 7 times earnings, has a clean balance sheet and is flush with cash. The Goldman analyst just doesn’t understand small pharma, said Cramer.

Nobody’s Perfect: Alfac (AFL), State Street (STT), Suntrust (STI), Fifth Third (FITB), Microsoft (MSFT)

The sellers seem to think it’s hunting season, and are bringing down companies that were once considered secure. Cramer considered Alfac “one of the best run companies in the world” and a “role model for corporate compensation.” However, this model company is now in trouble because of risky investments. State Street’s fall made headlines this week, and even Suntrust, which was very conservative about lending money, has reduced its dividend a staggering 84% because of loan defaults. Fifth Third is now trading at just $2.85, and Microsoft, which Cramer has called a bank with Windows, is seeing a crack both in Windows and in its bank part. So how to invest when it seems that even the most stable of names are making mistakes? Cramer urged viewers to look at balance sheets of favorite picks and stick with companies that don’t need cash.

Sell Block: Con Agra (CAG) Released

Cramer inspected his Sell Block and released ConAgra, which had been incarcerated since June 12 on concerns about sky-high raw costs which were hurting the company. However, the decline in commodities has been good news for Con Agra; wheat prices have fallen 33% and corn is now 48% cheaper. CAG’s stock price is down 26% and it has a generous yield of 4.5%, which is sustained by the company’s abundant cash. ConAgra’s biggest customer is the stable, retail giant Wal-Mart and CAG trades at a mere 10 times earnings. “It’s time to start liking ConAgra right now,” said Cramer.

CEO Interview: Glenn Tullman, Allscripts-Misys (MDRX)

While other stocks have languished, Allscripts has risen an impressive 51% since October. This may be in part due to Obama’s pledge to devote $20 billion of his ambitious stimulus plan to healthcare and to make health records electronic and accessible to doctors even when they are not in the office. Tullman discussed Allscripts’ new iPhone application that will give easier access to medical records. When Cramer raised concerns that these new records may put privacy at risk, Tullman said the company is committed to safeguarding privacy and exceeds government and industry standards. When asked about the effects of hospital cutbacks on the stock, Tullman replied that most of Allscript’s business does not rely on hospitals, apart from smaller purchases. Cramer said he is bullish on Allscripts.

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Comments

[zug:]

For someone who's been so wrong so much of the time, Cramer sure is prolific. Hey Cramer: when do we sell all of the bad picks you've been advising us to buy? If he gave half as much advice about when to sell ,his portfolio (and mine) might be down only half as much as it is...

Jan 25 09:36 AM