Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday March 11.
Seller's Remorse: Boeing (NYSE:BA), McDonald's (NYSE:MCD), Wells Fargo (NYSE:WFC), Southwestern (NYSE:SWN), General Electric (NYSE:GE)
With the averages hitting new highs, many investors are experiencing seller's remorse. Cramer recounted stocks he sold recently for his charitable trust, only to see the stocks go higher.
Boeing (BA) is a stock Cramer sold when there were questions about the Dreamliner, when the stock was in the $60s. Since then, more bad news has hit Boeing, including failed batteries and fears of sequestration, but the stock has unaccountably rallied to $82.
McDonald's (MCD) had missed a few quarters and was downgraded, so Cramer's charitable trust sold it on the prediction the stock was going back to $85. Since then, even after negative numbers, the stock has hit $98.
Wells Fargo (WFC) was one of Cramer's holdings, but after a few tepid quarters, Cramer sold the stock, which has recently broken out to $36, even though it didn't impress during the Stress Test.
Southwestern Energy (SWN) is a stock Cramer thought was a sell because it has too much exposure to natural gas. Since then, the stock has run $3.
The bottom line: the market has been very forgiving, even of stocks with fundamentals that are faltering. If the underlying company is basically solid, Cramer recommends thinking twice before selling.
Cramer took a call:
General Electric (GE) is a buy on a decline, since it is a quality company with a good yield.
The Best Of Asset Management: BlackRock (NYSE:BLK), Carlyle (NASDAQ:CG), KKR (NYSE:KKR), Apollo (NASDAQ:AINV) and Blackstone (NYSE:BX)
With stocks going en fuego, IPOs performing well and real estate coming back, Cramer would look to private equity. However, it is difficult to invest in these companies directly unless one has a lot of money he or she is prepared to lock up for a long time. The key to investing in this sector is to buy asset management companies which have exposure to private equity. Asset management companies have a fee-based business related to the size of assets they manage and the assets' performance.
One strong asset manager is BlackRock (BLK), which has diversified holdings and is a stock Cramer's charitable trust owns. BLK is the largest asset manager in the world, with $3.8 trillion in assets managed. BLK is heavily biased toward stocks and is the largest manager of ETFs; it owns iShares and recently acquired the ETF business from Credit Suisse. ETFs are increasingly popular with investors who want to focus on profiting from bull markets in specific sectors. BLK has seen a 30% growth of funds into ETFs and a 84% growth in emerging market ETFs. The company boosted its dividend by 12%, and it currently yields 2.7%.
One drawback is BLK has only 5% to private equity. Companies with greater exposure to private equity carry more risk, but they tend to have higher yields. Cramer discussed Carlyle (CG), KKR (KKR), Apollo (AINV) and Blackstone (BX). Carlyle yields 6.8%, but "doesn't have enough of a fee-based business to interest me." KKR has a dividend of 6.7%, is stable and well-run, but doesn't have huge upside. Apollo yields 7.9% and is a good stock to buy for those who feel the economy will decline, since it tends to buy up distressed assets. Cramer's favorite is Blackstone, which yields 5.5%; its dividend is lower because of stock appreciation. Cramer recommended buying it in December, when many were worried about the fiscal cliff, and since then, it has rallied 30%. The company gave a bullish picture in the last conference call, and management said it plans to take profits on some assets. The company has 24% exposure to private equity, and significant real estate holdings. The company sponsored 8 IPOs last year and plans to sponsor 8 additional IPOs this year. Cramer's picks in the group are Blackstone and BlackRock.
PetSmart (NASDAQ:PETM) Out of the Doghouse
PetSmart (PETM) is down 9 points from its December highs and has been in the doghouse for a long time. The stock ran 364% in four years Cramer has been behind it, and he thinks PETM can make a comeback. The departure of the CFO and the CEO has caused investors to feel nervous, in addition to its lackluster quarter. While the company beat earnings by 3 cents, it was considered a low quality beat on tax decreases and equity income. Revenues were slightly worse than expected, same store sales rose 4.6%, but not as much as The Street expected and management gave cautious guidance. The stock saw a 6.5% decline in 24 hours.
Cramer thinks The Street's expectations were too rigid and didn't take into account of Hurricane Sandy and the fiscal cliff worries. Cramer doesn't think PETM's guidance or growth rate were bad for 2013. Pet adoptions are increasing, and this might have something to do with the recovery in housing; when people buy new homes, they often buy a pet to go with them. The company has expanded stores, and expects to increase the number from 1,300 to 1,800. The company specializes in premium items, including organic or gourmet pet food, and has seen rising demand in this area. With a multiple of 14 and a 14% growth rate, Cramer thinks PETM is cheap enough to buy.
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