Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday February 20.
Beware Of Takeover Rumors: Joy Global (NYSE:JOY), Kohl's (NYSE:KSS), Best Buy (NYSE:BBY) Staples (NASDAQ:SPLS), OfficeMax (NYSE:OMX), Office Depot (NASDAQ:ODP), Berkshire Hathaway (NYSE:BRK.B), Heinz (HNZ)
While there is healthy activity in the world of mergers and acquisitions, Cramer would beware of investing based on takeover rumors, since stocks tend to plummet when the hearsay is proven wrong. Some see a potential takeover of Joy Global (JOY), but its fundamentals are not strong; the company has been reporting weakness domestically and in China. Rumor has it that Kohl's (KSS) might be taken over in a leveraged buyout at a premium of up to 30%, but Cramer thinks "you could get hurt on that rumor." Whispers of a takeover for Best Buy (BBY) have been heard for a while, but Cramer thinks the rumor is baked into the stock. "Don't get taken in," Cramer said. However, Staples (SPLS) could benefit from the reduced competition if OfficeMax (OMX) and Office Depot (ODP) pair up, and the company could do a leveraged buyout. Cramer thinks the stock has more upside than downside. Berkshire Hathaway's (BRK.B) purchase of Heinz (HNZ) will be great for the company, and Cramer, who has long been bullish on BRK.B, says the company is "the best it has ever been."
Wednesday's 108 point pullback of the Dow is not a reason to panic. While there are some things to worry about, stocks were due for a dip. The bears are concerned that the Federal Reserve may raise interest rates. Some are not so optimistic about the housing rebound, with Toll Brothers (TOL) down in spite of a good quarter (Cramer would buy it on the pullback). Lennar (LEN) and Owens Corning (OC) also saw declines. Mining is a hard place to be, and with the poor performance from Freeport McMoRan (FCX) and copper in general, there may be concern that China might not be so strong. However, Cramer thinks the decline on Wednesday was a much needed "bit of rain," and stocks are still a good place to be.
Cramer took some calls:
Dynavax Technologies (DVAX) is a stock Cramer admits he got wrong when he recommended it and it fell 50% after the FDA denied approval of its drug. He doesn't feel like betting on the second round.
Sourcefire (FIRE) is in a sector that tends to get crushed on any bad news. Cramer would stay away.
CEO Gary Evans, Magnun Hunter (MHR)
Magnum Hunter (MHR) is a small $650 million oil and gas company that Cramer recommends as a speculative stock. It has assets in the Bakken, the Eagle Ford, Utica and Marcellus, and in spite of promising fundamentals, the stock has fallen 40% in the last year. The company has been moving away from natural gas, and now 63% of its revenues come from oil. MHR has seen a 137% increase in production growth and has doubled proven reserves. MHR is selling off some of its assets in the Eagle Ford, and is building 5 new wells in the Utica shale. CEO Gary Evans said the company is creating value that is not yet reflected in the stock price. "This is going to be a great year for Magnum Hunter," he added.
CEO Interview: Herbjorn Hansson, Nordic American Tankers (NYSE:NAT)
The shipping industry has been hard hit in recent years because of an oversupply of ships. Nordic American Tankers (NAT) is trading at $8, when a few years ago, it was sitting at $25. The dividend was cut by 46%, but NAT still has a 7.3% yield for those who want to be paid to wait while the industry turns itself around. CEO Herbjorn Hansson insists that shipping is finally bottoming, and sees an increase of oil transport. NAT is buying ships while they are at depressed prices. While there is a reason to be skeptical about how quickly the industry can turn around, the CEO says, "It is coming together now."
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