Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday February 5.
Netflix is trouncing Disney, which reported a disappointing quarter, and Cramer ascribes this to the fall of the DVD. The soon-to-be dinosaur DVD costs an average of $14 while a subscription to Netflix is a mere $8.99 per month. While Cramer thinks Netflix is the perfect trade the decline of the DVD, he would be cautious, since he has gotten the stock wrong before; on October 23 he called the stock a “sell” and it has risen 80% since then. The shorts and longs are battling it out and Cramer thinks Netflix’s multiple of 20 is a tad high. However, with a 15% growth rate, some investors might think the multiple is not excessive. Cramer suggested investors wait on the idea, especially since the stock has climbed so far so fast.
Is it graduation time for online education stocks? Cramer looked at both the fundamentals and the technicals. According to Apollo’s chart, there seems to be a “double top.” The first peak caused heavy volume, but there were fewer buyers in the smaller top, a “flat top” which indicates the new buyers are either late or can’t afford to buy more. In short, Apollo buyers are tired; value investors aren’t buying and momentum investors are selling. According to the fundamentals, the group is still sound, but it has risen 22% when the Dow has declined 37% in the same period. The thesis is a known one, and it might be time to leave these stocks, although Cramer would suggest selling in increments rather than dumping the stocks. One beef he has with the technical view, is that chartists would say Apollo would be a buy again if it were to rise to $90. So why is it a sell at $85 and a buy at $90 when the best strategy is to buy low and sell high? Cramer thinks American Public Education may still have some upside, since it focuses mainly on the military, and with a 7% gain, it still has room to run.
China Rules: Mosaic (NYSE:MOS), Deere (NYSE:DE), Nucor (NYSE:NUE), Schlumberger (NYSE:SLB), iShares FTSE/Xinhua China 25 ETF (NYSEARCA:FXI), Wal-Mart (NYSE:WMT), Mastercard (NYSE:MA), Apple (NASDAQ:AAPL), Research in Motion (RIMM), Google (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN), Qualcomm (NASDAQ:QCOM), Cisco (NASDAQ:CSCO)
It is no secret Cramer thinks Obama’s stimulus plan is a “a complete and utter disappointment.” The $400 billion proposed spending in infrastructure has been shrunk to a mere $30 billion, and aid for the economy has been transformed to pork. Cramer said China, not the U.S., was responsible for the rally on Thursday. China is using a “by any means necessary” approach to save its economy. The fact that China is spending more money on telecommunications than Obama has reserved for his entire infrastructure package may be a reason Qualcomm and Cisco were up in spite of bad news. Chinese demand may bring up agriculture and oil, the Baltic Dry Index has doubled since the beginning of the year and the Chinese stock market has jumped 15%. Not only will copper be back when China recovers, but iron ore will also be in demand. Cramer thinks it is time to buy Mosiac, Deere, Nucor, Schlumberger and FXI. With the new China thesis, Cramer is not as excited about domestic plays such as Wal-Mart, Mastercard and even his four tech horsemen: Apple, RIMM, Google and Amazon.
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