Cramer's Mad Money - Selling Las Vegas (2/27/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday February 27.

Sell Block: Las Vegas Sands (LVS), Wynn (WYNN), MGM Mirage (MGM), International Game Technology (IGT)

Sanford Bernstein’s buy rating on Wynn and Las Vegas Sands couldn’t be more wrongheaded, according to Cramer; the reasoning is that Las Vegas Sand’s new casino in Singapore will be the second Macau and a recovery in the second half of 2009 will bring people to the casinos again. However, nothing is indicating that there will be any signs of life in gaming stocks. These companies are down from 75%-97% since last year and December 2008 was the worst month for Wynn in the entire year. Macau wasn’t looking much better. The cost of building the new casino in Singapore is skyrocketing and Las Vegas Sands already has $10 billion in debt, while MGM and Wynn are negotiating their debt. The rating provided only one good thing for shareholders: an opportunity to cash out of a losing game.

Oil’s Back: Chevron (CVX), BP (BP), ConcoPhillips (COP), Permian Basin Royalty Trust (PBT)

With cuts in production from OPEC and in the U.S., it looks like oil is headed up once again. That may mean it’s time to buy the regular favorites such as Chevron, BP, ConcoPhillips, but it may mean looking for something new; Permian Basin Royalty. What makes PBT unique is it is a master limited partnership, which means it is required to share its profits with shareholders in the form of a dividend. Another advantage is MLPs rises steadily with oil prices but drops less when oil declines. While the stock has dropped to $8 from $27, Cramer expects it to rise once again now that oil is going up, and thinks of the stock as a kind of barometer that measures the price of oil. He said if oil is up 34% from its 52-week low, PBT will also be up more than $1. The dividend will also rise along with oil prices. Cramer would buy but warned he is only bullish at $8 and not higher.

Keeping Away from Obama’s Radar: Humana (HUM), United Health (UNH), Cigna (CI), Aetna (AET), Eli Lilly (LLY), Genzyme (GENZ), Procter & Gamble (PG), SPDR Gold Shares (GLD)

Obama’s spending plan will devastate healthcare stocks: Humana and United Health will become glorified charities; Cigna and Aetna’s margins will suffer and once-stable companies Eli Lilly and Genzyme will feel the pain. There is no knowing which sector Obama’s reforms will strike next, so Cramer’s game plan involves having at least four and half years’ worth of cash to deal with the unexpected. CDs are a great place to keep a nest egg, since they are insured by the FDIC. Cramer would stick with defensive names that can raise their dividends like Coke and Procter& Gamble as well as gold. However, the defensive stocks are not a foolproof way to make money, and the strong dollar is hurting sales of soft-goods abroad, but Cramer expects that to change. In any case, consumer staples seem to be the only sector that is relatively safe from the Federal government.

Mad Mail: Allscripts-Misys Healthcare Solutions (MDRX)

On the government’s plan, Cramer says the FDIC should inject more money into banks and hold off on a stress test to give the banks room to take care of the problem themselves. Another viewer asked Cramer if he should hold on to MDRX after its run, since it seems to be a stock that will thrive from Obama’s healthcare plan. However, Cramer says it isn’t safe to hold onto stocks that have had big gains in this market and suggested selling some and buying back lower.

Cramer discussed his mortgage plan with a third viewer; “Mine's a universal plan. Anybody can refinance. The government gets in and guarantees mortgages for 18 months. Anybody who wants to refincance or buy gets a 4%-40 year mortgage. We’ll get out of this mess like that. Yes, you have to cut the principal. [FDIC Chairmwoman] Sheila Bair didn’t think you had to. Trust me, I think you have to, to get this whole thing done. Because you need the CDOs in it, too.”

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Comments

[capital pains:]

The "clown" is actually right this time. The proverbial "broken clock" Cramer is correct when he sells, sells. sells this horrid group of gaming stocks.
Not since Dan "wrongheaded" Ahrens published his absurd prognostications on gaming right here in Seeking Alpha months ago, has an analyst loook dumber than the dolts at Sanford Bernstein.
Cramer is just a tad late, like 1 year too late. After MGM, BYD, MGM, WYNN
crashes Cramer gets this revelation. How enormously helpful Cramer, as usual !

Feb 27 08:14 AM

[Bacco:]

Cramer is basically a fundamentalist and cannot be expected to recommend investments in stocks or sectors near price bottoms. The market is already reflecting that gaming is currently a losing sector. I give credit to Bernstein for making this speculative investment recommendation at $2+ per share and at least looking at the glass as a "quarter" filled. It is a speculative investment with a high risk and high return potental. I believe Vegas will be back with the ecomony. As to a specific company investments the key will be the extent that they can finance their growth to get through this difficult time. Bernstein opinion is that LVS is one of the survivors...I like that bet!

Feb 27 12:30 PM

[Richard Col...:]

Metzinger, why don't you think for yourself? You have been "Cramerized".

I have been to Manassas, VA to STUDY the "Battle of Bull Run".
I have been to Pamplona, Spain to SEE the "Running of the Bulls."
But, if I just want to LISTEN to the "Running Bull" I tune-in Jim Cramer.

Metzinger said, "However, nothing is indicating that there will be any signs of life in gaming stocks."

What speaks louder than current opinion is the HISTORY of the gaming industry. Are the people of the world going to give up entertainment?
...not in your lifetime.

If you are a REAL investor, "get a clue"
If you are a short term trader you have my deepest sympathy.

Richard Collins
Claremont, CA

Feb 27 12:42 PM

[Richard Col...:]

Bacco, when Singapore opens the end of the year and the profits start multiplying. At that time you will see LVS take off.
Sheldon Adelson said that due to times the price of building materials have decreased in Singapore.

Dan Kowkabany

Feb 27 01:00 PM