Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday February 2.
Cramer warned investors not to get suckered in by yet another “bogus” tech rally that doesn’t have legs. While Cramer said the four horseman of tech are back: Google, Amazon, Research in Motion and Apple, their success is yet a clearer indication that their competitors are not worth buying. Good news for Google is bad for Yahoo. Amazon’s great quarter is killing eBay. Semiconductor stocks have still been searching for a bottom; Applied Materials is not worth buying even though it is cheap, and the same goes for Intel. However, Qualcomm, according to Cramer, might have bottomed. With large inventories and weak end markets, tech stocks will probably report bad quarters, and the entire sector will likely be downgraded, said Cramer. In the meantime, beware of “amputee” tech rallies that don’t have legs.
The jury is still out on whether Obama might come to embrace natural gas. Cramer is wary, but Chesapeake CEO Aubrey McClendon pointed out the President’s support of tax credits for the use of natural gas powered vehicles when he was a Senator, and Cramer once supported the thesis that natural gas may be used as a transition fuel until non-fossil alternatives could be developed. Cramer cautions any investment in natural gas is purely speculative. Fuel Systems Solutions is down 36% since August, not least because many of its customers were in the troubled infrastructure and auto sectors. However, with the European Union’s plan to have 20% of the world’s cars powered by liquefied petroleum by 2010, Fuel Systems has an enormous potential for growth overseas and 77% of its sales are international. With Fuel Systems drop from $61 to $26, it trades at a 12.7 price-to-earnings multiple, half its growth rate. The company expects to continue to beat earnings estimates, in spite of a challenging 2009. Fuel Systems Solutions has very little debt. Since Fuel Systems is a speculative play, Cramer recommended waiting a bit before buying and using limit orders.
According to conventional wisdom, a company should make drastic cutbacks and lay off staff to survive a recession. Instead, Cramer revisited Union Square Hospitality Group CEO Danny Meyer’s theory that hospitality breeds customer loyalty and will help a company survive more than other factors. In 2007, Cramer favored Chipotle Mexican Grill over Starbucks based on Meyer’s theory and in the downturn, Starbucks has declined 72% and Chipotle has only dropped 16%. As a further test of the theory, Cramer formed the Danny Meyer Hospitality Index comprised of companies that put their customers first: Google, Apple, Goldman Sachs, American Express.
Medicare could save a bundle if it used mail-order pharmacies, and Medco fits the bill. Medco CEO discussed the ways in which his company improves patient care and prevents expensive delays. The company already manages drug benefits for 60 million Americans and will benefit from the $90 billion worth of drugs going to off patent between now and 2015. Since Medco deals with generics, the heavy move to off-patent is a bullish sign for the company.
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