Cramer's Mad Money - Why I'm Bullish On Airlines (3/5/13)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday March 5.

Why Cramer Likes Airlines: US Airways (LCC)

Cramer has famously been bearish on airlines until recently. He says his hatred of the sector began when he was a trader at Goldman Sachs and lost money investing in American Airlines. From then on, he believed that there was too much competition in the sector to make it worth investing in. However, recent consolidation has limited the competition, and US Airways (LCC) will be a major beneficiary. The company announced a merger with American Airlines, which means that LCC may become the world's largest airline. However, the stock is trading sideways until the merger receives approval from the Justice Department. Cramer is confident the merger will happen, and would buy the stock now, since it is expected to rally hard on the news, which is expected in LCC's third quarter. The merger will create a huge fleet for LCC and will result in $1 billion worth of savings; "I'm seeing a bull market in airlines and the best is US Airways."

What Would Mark Haines Think Of This Rally? Google (NASDAQ:GOOG), Novo Nordisk (NYSE:NVO), St. Joe (NYSE:JOE)

With the Dow at an all-time high, rallying 176 points, Cramer wondered what Mark Haines, a former CNBC host who passed away in 2011, would think about such a dramatic rise. Cramer valued Haines' skepticism and warnings about the euphoria in the era. However, Haines did have his bullish moments; Cramer noted that he called the bottom in the market 4 years ago. Haines suggested viewers look for a "whoosh" in stocks, when a decline is sudden, and urged them to find a "crescendo moment," when most of the sellers have been exhausted, as the right time to buy.

If Haines were alive to analyze the current market, Cramer believes he might still find reasons to be bullish. While he decried the exaggerated multiples of stocks during the era, the same case cannot be made against Google (GOOG), for instance, which is trading at a multiple of merely 15. This rise is not 2007 all over again; this time, the right sectors, including transports, are moving up, whereas the 2007 rally left the transports behind.

Cramer took some calls:

Novo Nordisk (NVO) is a diabetes play and is a terrific stock; "You have a winner there."

St. Joe (JOE) has too much exposure to areas of Florida that "aren't coming back anytime soon."

Facebook (NASDAQ:FB), LinkedIn (NYSE:LNKD)

Facebook (FB) might just have a second chance, or at least that is the story the chart is telling. Technical analyst Scott Redler of was right when he predicted stocks would experience a long-term rally when the S&P 500 was at 1350 last year. He saw the index rising to 1700 by 2015, and in just one year, the S&P has jumped 14%. Cramer thinks Redler might be correct about Facebook (FB), even though it was down on a bullish day for stocks. He compares it to the performance of Linkedin (LNKD); this chart shows that big money has been getting into the stock aggressively on every decline. Since LNKD has broken through its former ceiling of $127, it has been running up, and is now sitting at $176.

Redler thinks Facebook could have a similar fate, as it is showing a bullish cup and handle formation, and could have a 14 point upside into the $38-42 range. Redler predicts this may take a few months, but it is poised to break out. If Facebook goes to $29.20 and holds that level, it could march higher. Carolyn Boroden of thinks that if FB breaks through its ceiling to $28.32, the next stop is $34. Cramer's position is that the fundamentals agree with the charts, since FB has seemed to fix problems with the transition to mobile. The only part of the technical analysis provided by Redler and Boroden he would disagree with is the notion that investors should wait for key levels before buying. Cramer thinks FB can be bought now. However, if FB falls below $26, all bets are off for the bullish story.

CEO Interview: David Jaffe, Ascena (NASDAQ:ASNA)

Cramer was bullish on Ascena (ASNA), a house of brands featuring pre-teen and plus sizes, until the company missed its quarter. He put the stock in the penalty box for a while, but its most recent quarter saw a 3 cent earnings beat with revenues up 43.6%. While same store sales rose only 2%, e-commerce sales were up 123%. Part of the reason the company performed so well this quarter and not so well the previous quarter was the Charming Shoppes acquisition. This acquisition involved a significant transition period which resulted in some short-term pain, but now Charming Shoppes is creating significant value for ASNA. While CEO David Jaffe sees a "choppy" environment, the company is well-positioned for continued strength, and is developing a new clothing concept for boys. Cramer thinks Ascena is a buy and is now "ready to advance.


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