Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday May 21.
Home Depot's (HD) Treasure Trove of Investing Ideas. Other stocks mentioned: Whirlpool (WHR), Cree (CREE), General Electric (GE), Masco (MAS), Fortune Brands (FBHS), Stanley Black & Decker (SWK), Lumber Liquidators (LL), Wendy's (WEN)
Home Depot (HD) not only delivered a knockout quarter, its conference call provided a "treasure trove of investing ideas." Management spoke about strength and growth as well as new trends. Sales in California were strong, areas like Las Vegas, which had been very sluggish, are showing signs of life. Professional customers drove growth, and this hasn't been true for a long time; the trend has been that sales from consumers have exceeded sales to professionals. This is an indication that housing and small businesses are coming back, and hiring might pick up.
HD management identified strong areas, which have implications for other stocks. Sales were strong for appliances, which is good news for Whirlpool (WHR). Faucets and kitchen items were in demand, and Masco (MAS) and Fortune Brands (FBHS) might be buys. LED lightbulbs are popular items; Cree (CREE) is the stock for LED, but Cree needs to be careful about competition. Tools are in demand, and Stanley Black & Decker (SWK) looks good, in spite of its European exposure. Finally, increasing sales of wood may be a sign to buy Lumber Liquidators (LL) on a pullback. Cramer thinks HD can be bought because the bullish trend in housing and small businesses is just beginning, and HD is shrinking the float with a significant buyback.
Cramer took some calls:
Wendy's (WEN) can go higher, but so can its competitors, who are likely to rise higher than WEN.
Walter Robb, Co-CEO of Whole Foods (WFM)
Whole Foods (WFM) redeemed itself in its most recent quarter, which saw a 3 cent earnings beat on a 13.4% rise in revenues and a 6.9% increase in same store sales. After its previous earnings in February, the stock had run up ahead of the quarter, management reported some disappointing numbers, and the stock fell 9 points. After the more recent successful quarter, WFM has risen from $92 and has hit an all-time high of $105. WFM has delivered a 15% gain since Cramer last spoke to co-CEO Walter Robb in December of 2012 and has risen 64% since he first got behind it in 2011.
Walter Robb said that cutting costs, working on inventory along with accelerated sales produced its winning numbers. WFM is expanding stores rapidly with an aim of 1,000 new locations. Opportunities abound, since the healthy eating trend is gaining steam, particularly with the controversy over HMOs. WFM aims to have full transparency about HMOs, and since it is one of the first movers in the healthy supermarket movement, it is a name customers trust. While regular grocery stores are carrying more organic and healthy products, WFM has "the widest and deepest selection." WFM's key concepts are "differentiation and value," said Robb. There are promotions and competitive pricing, in addition to the high quality standards of the WFM brand, seen particularly in perishable items, where quality difference is noticed more by customers. "The game has just begun," in the healthy eating movement, said Robb. Cramer is bullish on WFM.
May has been the busiest month of IPOs since 2007. Wall Street is "giving money away" with these IPOs by pricing them low, making few shares available and orchestrating dramatic one-day pops. Those who got in on Tableau Software (DATA) last week at $30 saw a 51% gain in one day. The stock has moved even higher. Cramer thinks 2 IPOs on Thursday could also be successful.
ChannelAdvisor (ECOM) is a software as a service play reminiscent of Salesforce.com (CRM). ECOM provides solutions for clients to sell across multiple online channels with a single integrated user interface. Cloud-based enterprise software is a very hot area, and Cramer says investors might expect a dramatic one-day pop. Cramer would agree to pay up to $17 for the IPO, but would avoid it if it prices higher.
Ply Gem (PGEM) is a housing play that sells exteriors for residential properties. Since 50% of its sales are to new houses, it is likely to have a dramatic rise because of the increase in construction. Cramer would consider paying up to $20 for the IPO, but if it prices at $22, it is better to give it a pass.
Cramer took a call:
Newcastle (NCT) is spinning off its healthcare segment. Cramer would hold both stocks.
Off The Charts: eBay (EBAY)
Cramer consulted the technical analysis of Bob Lang of TheStreet.com to see where eBay (EBAY), a holding in Cramer's charitable trust, is headed. The stock has not been behaving well lately. Its daily chart shows a head and shoulder pattern and a reverse head and shoulder pattern. The former is a bearish sign, the latter is a bullish sign, and Lang thinks they cancel each other out. The many dips and gaps show the volatility of the stock, given recent downgrades. However, the stock is holding above its 200 day and 50 day moving averages. Lang thinks that if eBay can break above $57, it can go to $60.
A more bullish story is told by eBay's weekly chart, which is showing higher highs and higher lows. eBay is showing a similar consolidation pattern to the one it showed in the second half of 2011 before it rallied 68% the following year. The MacD indicator shows that eBay might make a bullish crossover. Cramer thinks the technicals and the fundamentals agree. With Paypal and its modest valuation (17 multiple and 15% growth rate), Cramer thinks eBay is heading higher.
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