Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday April 17.
Analysts keep beating dead horses with Johnson & Johnson (JNJ), Intel (INTC) and Yahoo (YHOO) and often ignore their growing strengths. JNJ keeps getting reminded of weakness of its medical device sector and the recalls, while its drug and consumer business is seeing substantial growth. JNJ's stocks did not decline on analysts' worries. Intel (INTC) is a top manufacturer and is investing in its business. Analysts are concerned that Intel is spending too much on its future and have not been assuaged with spending reductions. For Yahoo (YHOO) the issue is user engagement, although management is delivering strategies for organic growth. These dead horses beaten repeatedly by analysts, "destroy the narrative management is trying to deliver." JNJ seems to have weathered this equine pummeling; unfortunately for INTC and YHOO, to some degree, analysts' criticisms seemed to cast a shadow over the stocks.
Celgene (NASDAQ:CELG), Regeneron (NASDAQ:REGN), Whirlpool (NYSE:WHR), Sherwin Williams (NYSE:SHW), Wells Fargo (NYSE:WFC), Intel (INTC), Freeport McMoRan (NYSE:FCX), Caterpillar (NYSE:CAT), Kellogg (NYSE:K), Apple (NASDAQ:AAPL), Cabot Oil & Gas (NYSE:COG), Cirrus Logic (NASDAQ:CRUS), Core Labs (NYSE:CLB), Cliffs Natural Resources (NYSE:CLF)
There are two kinds of companies: those who can do no right and those who can do no wrong. With the Dow falling 138 points on Wednesday, it seems that the companies that can do no right outnumber the ones that can do no wrong. In the latter category are companies whose raw costs are going down and yet have pricing power. Drug companies like Celgene (CELG) and Regeneron (REGN) have this advantage. Low natural gas and declining raw costs in other commodities are good for Kellogg (K), Procter & Gamble (NYSE:PG) and Coca-Cola (NYSE:KO). Companies that supply homebuilders, like Sherwin Williams (SHW) and Whirlpool (WHR) have the combined advantage of housing exposure and low commodity costs.
Even though Wells Fargo (WFC) reported a great quarter, with strong profits and a dividend boost, the stock fell. It seems that no matter how well banks do, they get punished because they are banks, in addition to the legal problems many financial stocks face and the challenge of low interest rates. Intel (INTC) is outperforming its peers with its microprocessors and servers, but because it is connected to PCs, it did not rise following earnings. Apple (AAPL) is still in free-fall mode, and lost 23 points.
Despite the oil drilling boom in the U.S., these stocks are falling. Analysts continue to cut numbers for mineral and industrial stocks like Freeport McMoRan (FCX) and Caterpillar (CAT). Someday these unloved stocks will be low enough to buy, but that day hasn't come yet.
Cramer took some calls:
Cabot Oil & Gas (COG) is up huge. Cramer would take half off the table and let the rest run.
Cirrus Logic (CRUS): "When you live by the Apple sword, you die by the Apple sword," said Cramer, commenting on the fact that CRUS is a major supplier to Apple. "Until Apple pulls out of its tailspin, you can't own CRUS."
Cliffs Natural Resources (CLF): "This stock is not terminal," Cramer said. It still can produce a lot of iron ore, but the commodity has been weak. It is very low, at $17, and has fallen too far to sell.
CEO Interview: David Demshur, Core Labs
Cramer likes to think of Core Labs as a "technology company that happens to be in the oil service patch." The company beat earnings estimates by 7 cents on higher than expected revenues that rose 11%. CLB raised guidance, but in spite of its strong quarter, the stock fell 2.6%. Core Labs' stock usually declines following earnings, and Cramer thinks the decline might be a buying opportunity, especially since it returned 109% since he got behind it in 2010 and 11% since CEO David Demshur last appeared on Mad Money in January. The company provides technology that allows drillers to find the best locations to drill and to recover more oil and gas from reservoirs. Core Labs has developed a process that involves injecting certain gases into poorly performing reservoirs, and has seen a 100% increase in recoverability in certain locations.
Demshur discussed the opportunity in Mexico; "Mexico has not yet really exploited deep water deposits in the Gulf of Mexico," and CLB will assist oil companies in making the most of these assets. Analysts are concerned about competition for CLB in the area of reservoir description, but Demshur noted that the last 3 years have seen dramatic margin expansion for CLB in reservoir description, and he added that he doesn't see significant competition in this area. Since CLB has significant international exposure, it is more stable than companies that deal only with North American clients. The company has continued to generate significant free cash flow and to return capital to shareholders in the form of buybacks. Cramer is bullish on CLB.
CEO Interview: Richard Smith, Realogy (NYSE:RLGY)
Realogy (RLGY) is the largest franchiser of real estate, and last year, it was involved in 25% of home sales involving a broker. Last October, Realogy had a successful IPO; Cramer's charitable trust has seen a 24% gain in the stock since the deal. Its sales volume is expected to increase to the low to mid teens, but the company issued guidance the Street felt was disappointing. Those who bought RLGY's secondary offering last week have already profited from the investment. CEO Richard Smith said the housing comeback is just beginning, and the vicious 7 year decline is unprecedented. Smith said the housing shortage is much more profound than he expected, and homes are increasing in value 25-30% in many areas. Cramer is bullish on RLGY.
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