Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday March 4.
Berkshire Hathaway (NYSE:BRK.A), (NYSE:BRK.B), Heinz (NYSE:HNZ), Transocean (NYSE:RIG), Yahoo (NASDAQ:YHOO), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX), Barnes & Noble (NYSE:BKS), Vitamin Shoppe (NYSE:VSI), Hess (NYSE:HES), GNC Holdings (NYSE:GNC)
Warren Buffett believes in the market; in an interview, he said that stocks should be bought because they are a good value and buying government bonds is not a good move. His acquisition of Heinz (HNZ) was at a premium, which demonstrates how much value this iconic brand can bring to Berkshire Hathaway (BRK.A), (BRK.B). Hess (HES) is another company Cramer thinks should either be broken up or purchased. Currently, it is unlocking value by splitting its refining and its main business and is buying back stock. Hess, with its significant assets in the Bakken, could fetch a buyout offer for $100 a share.
Transocean (RIG) raised its yield to 4.3%, but activist Carl Icahn thought RIG should have raised it higher. He also seems to have faith in an upside for Herbalife (NYSE:HLF), despite the verbal beating the company has taken from Bill Ackman. Cramer notes Yahoo (YHOO) has gone in a straight line upward since Marissa Mayer took the helm. Apple (AAPL) does not seem to listen to David Einhorn or anyone else these days. Cramer suggested Apple buy Netflix (NFLX), but the stock has been horrendous. Cramer also thinks the company should be buying back $1 billion of shares a week, but he doubts the CEO Tim Cook will listen.
Cramer took some calls:
Barnes and Noble (BKS) is a sell because its core business is faltering, even if it is taken over.
Westport Innovations (NASDAQ:WPRT), Clean Energy Fuels (NASDAQ:CLNE), Chart Industries (NASDAQ:GTLS), Apache (NYSE:APA)
Cramer was pleased to hear Warren Buffett advocate switching engines over to natural gas, at least for locomotives. Westport Innovations (WPRT) is the company to produce these engines, but its prospects are too far away. The speculative natural gas technology companies, like WPRT and Clean Energy Fuels (CLNE), have done poorly, with WPRT down 35% in the last few months and CLNE, which converts fuel stations to natural gas, down 32% in the past year.
One natural gas company that is turning a significant profit is Chart Industries (GTLS), which transforms natural gas into LNG or liquified natural gas. The company makes the technology to complete the process and produces storage and transport tanks for LNG. It also has bioMed and industrial gas segments, so it is protected from price fluctuations in natural gas. China is dramatically increasing its use of natural gas; the fuel meets only 4% of China's energy needs currently, but the Chinese government wants to increase that number to 10% in the next few years. GTLS' revenues in China increased 50%. Chart beat earnings by 5% with revenues up 38.4%. Orders were up 19% and the backlog rose by 26%. The stock rose 5 points in a single session. Even though Chart has doubled since Cramer got behind it 2 years ago, the stock trades at a multiple of 23 with a 26% growth rate. He would buy it on a pullback.
Apache (APA) is a stock Cramer backed away from 30 points ago, because he didn't like the instability of its Egyptian property, and it has too much natural gas and not enough oil.
The market is forgiving, but once a company cuts its dividend, shareholders tend to sell. Atlantic Power (AT), with a 10% yield, should have seemed like a red flag to investors. AT slashed earnings per share guidance and announced a 65% dividend cut. The stock fell 28%, then an additional 17%. No one needs to be blindsided by a huge dividend cut, because there are signs. The payout ratio was close to 100%, which is not a sustainable level. Another classic tell that a cut is imminent is when the dividend is bigger than the earnings. Since AT is a utility, dramatic growth is unlikely to make up for this oversized payout. There were also warnings about the business slowing down, from statements made by management a few months ago.
CenturyLink (CTL) is another company that slashed its sky-high dividend by 26% and the stock saw a 23% decline. Even though CTL bounced back, there was no need to go through that drama, since a red flag would have been that CTL's dividend rate exceeded its earnings per share, which is not a healthy sign. With its capital expenditures and labor contract issues, the fundamentals were problematic enough to have kept cautious investors away. Frontier (FTR) was a dividend slashing that many people saw coming, with its outsized 17% yield, which it cut by 46% last year. The stock had already declined, so when this expected dividend cut happened, the stock did not suffer much. While FTR now yields a slightly more reasonable 9% and the stock has dropped, Cramer doesn't think it is a buying opportunity.
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