Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday April 16.
What does the street expect from banks? After the sector has been "hit over the head," do analysts want the CEOs to make bullish and aggressive statements? JPMorgan (JPM) blew away its numbers with its wealth management business and strength overseas, but because it didn't lend enough to homebuilders, the stock sold off. Wells Fargo (WFC) is performing well with its cross selling business model, but its mortgage business, which is responsible for 13% of its revenues, was a bit slow. U.S. Bancorp (USB) reported solid numbers, but because management couldn't provide certainty about the second half of the year, the stock fell. Goldman Sachs (GS) got hit dramatically, in spite of its earnings beat, because of macro worries. These banks are performing well, but because their CEOs can't afford to sound sanguine, much less bullish, the stocks get punished. This is one reason why banks are hard to own right now.
The Dow rose 150 points after the dramatic sell-off on Monday. The rally was driven by in-line earnings from Johnson & Johnson (JNJ) and strong earnings from Coca-Cola (KO), which rose 5.7%. Even though JNJ's numbers were merely in-line, the sell-off was so dramatic on Monday, that even "just okay" results were enough to cause a collective sigh of relief, and in any case, it has been ages since JNJ has reported an earnings beat. Consumer staples and housing-related stocks rebounded. Added to good news from the market leaders on Tuesday were two upgrades for Sherwin Williams (SHW), an upgrade for Owens Corning (OC) and news that Whirlpool (WHR) boosted its dividend by 25%.
Cramer took some calls:
Netflix (NFLX) is a complicated story, because there are a lot of shares sold short. Cramer thinks Netflix may attract a takeover bid. It has risen so much, that it is likely to see a pullback, but Cramer likes the stock; "In the interim, it is fine."
Home Depot (HD) has been performing well. Cramer's charitable trust recently took some profits in HD.
What is Happening With Gold?
After a decade of outperforming every other asset class, gold has been on a steady path of decline since October, and dropped dramatically last week, losing 9% in a single session. Cramer thinks gold should still be part of every investor's panoply, as portfolio insurance and as an alternative to currency. He believes the decline has been because of forced margin selling. Hedge fund managers often buy gold on the margins, and when they can't provide sufficient collateral, margin clerks sell automatically. The question is: when will gold stop falling?
Cramer consulted the analysis of Carley Garner of TheStreet.com. According to the weekly Commitment of Traders Report that tracks long and short positions on commodities, gold has the lowest number of net-long positions since 2012. The last time this happened, gold rebounded and gained 17%. Garner thinks this pattern might happen again. The dramatic selloff began when Goldman Sachs released a bearish note about gold last week. $1,450 was the starting point of the rapid decline, which brought gold down to the level of $1,350. The RSI momentum indicator dipped below 30; this indicates that gold is in a dramatically oversold situation. Garner sees a floor of support for gold at $1,320, and an additional floor at $1,305. Garner doesn't rule out the possibility that gold could fall as far as $1,285, but it it is more likely that it will bounce back to the $1,450 level, and after that, could reach $1,500 and perhaps as high as $1,670. The pain in gold may not be over, but Garner and Cramer think it may be set to rebound.
IPOs Worth Getting Into: SeaWorld (SEAS), Fairway (FWM). Other stocks mentioned: Safeway (SWY), Cedar Fair (FUN), Six Flags (SIX), Whole Foods (WFM), Zoetis (ZTS), Marin Software (MRIN), Pinnacle Foods (PF).
Cramer discussed upcoming IPOs.
Seaworld (SEAS) has 11 locations and diverse theme parks. Cramer likes the amusement park space, and thinks SEAS may be a faster growing way to play this sector. Given high barriers to entry, these companies face little competition. SEAS' IPO should price between $24 and $27. Cramer would not consider paying more than $27. It has faster revenue growth, at 7.2%, than the competition, but has more debt than its peers. Six Flags (SIX) offers a 5.1% yield, Cedar Fair (FUN) yields 6% and SEAS has a dividend of just 3%. Cramer thinks SEAS' payout will be raised. For those who are nervous about SEAS' debt and want a good yield, Cramer would buy FUN, which has returned 165% since Cramer got behind it in 2011.
Blackhawk Network is going to be spun off by Safeway (SWY). Blackhawk sells pre-paid gift cards and pre-paid phone cards. Safeway will still own a majority of the company after its IPO, which is expected to price between $20 and $22. Cramer would consider buying Blackhawk at the higher end of the range, and Safeway is also a good stock to buy, since it will benefit from Blackhawk's success.
Fairway (FWM) is a high-end grocery chain that plans to grow aggressively beyond the New York area. However, the company is not yet profitable, has substantial debt, and its current same store sales have risen just 2.3% compared to Whole Foods' (WFM) same store sales increase of 7.2%. However, FWM has enough of a cult following that it may be worth paying attention to.
HD Supply is a diversified industrial distributor Home Depot sold to private equity in 2007. HD Supply recently filed for an IPO, and Cramer would keep an eye out for this deal.
Cramer took some calls:
Zoetis (ZTS) has seen some profit-taking, but Cramer thinks the animal health business is great; "I am a buyer of Zoetis."
Pinnacle Foods (PF) is a stock Cramer's charitable trust has been buying for its high yield and terrific management.
Marin Software (MRIN) is a "Buy" up to $16 to $17.
Halcon Resources (HK) CEO, Floyd Wilson, is a master at turning around companies and selling them at a substantial profit. He was CEO of Petrohawk, which got taken over by BHP Billiton (BHP) for a 69% premium in 2011. His new company, Halcon has the same ticker symbol as Petrohawk had, and he is likely to do the same thing with Halcon that he did with Petrohawk. The company has unconventional, high-growth assets in the Bakken, Eagle Ford and Utica shales. In the Bakken, production is up 40% higher for HK than it was last year. The new wells have more oil than gas, and Wilson is committed to building infrastructure to bring oil and gas to the most profitable markets.
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