Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday June 5.
The Dow fell 270 points on Wednesday, and the possible weakness in housing is to blame; "housing is at the fulcrum of what is crushing this market," said Cramer. He noted that stocks started dropping when the Case-Shiller index showed that housing prices were increasing. This price increase will lead to higher mortgage rates, which will reduce demand for new homes. While homebuilding comprises 10% of the economy, so many supplies are needed to build homes that the impact on the rest of the economy is huge. With the lack of commercial construction, government cuts because of sequestration, and woes overseas, housing was the primary reason stocks were so strong, and now with housing weak, there isn't much left to create a rally. The drop in stocks like Home Depot (HD) and Lowe's (LOW) are indicators of housing weakness, but other sectors will continue to be affected.
Cramer took some calls:
Lululemon (LULU) has run up in anticipation of a better quarter than the last time. Cramer would let it come in before buying, "Lululemon is priced for perfection in a market where nothing is perfect."
Toyota (TM) is "terrific," although there are concerns about the yen. Cramer is not worried about TM's recent recall, and would consider using the weakness to buy.
Pandora's (P) business could easily be replicated by Apple (AAPL), and Cramer would stay away from Pandora. "I don't want to go against a wounded Apple. That is like going against a wounded tiger, and those tigers are the most dangerous."
CEO Interview: Jonathan Bush AthenaHealth (ATHN)
AthenaHealth (ATHN) is a cloud-based company that manages the business side of healthcare, including billing, accounts receivable and Medicare and Medicaid reimbursements. ATHN has been a high-flying stock, but in its last earnings report, management said that fewer doctors had signed on. Guidance was lower than expected because a new acquisition may not be as immediately profitable as management initially expected. The stock fell from $95 to $86 in a single session and has since declined to $82. However, CEO Jonathan Bush expects the number of doctors using ATHN to increase, thanks, in part, to Obamacare. He explained that the company needed the recent acquisition to increase privacy protection of its information from clients; "We need this extra investment, and it is going to pay off in spades." Demand for ATHN among doctors is likely to increase, because the company's software eliminates the need for paperwork and allows doctors to concentrate more fully on their patients. ATHN is a high multiple stock, but it grows at a rate of 30%. Cramer thinks ATHN is a buy on the current drop in price.
Utilities Select Sector SPDR ETF (XLU), iShares Dow Jones US Real Estate ETF (IYR), Consumer Staples Select Sector SPDR ETF (XLP), Ventas (VTR), Federal Realty (FTR), Duke (DUK), Conoco-Phillips (COP), American Capital Agency (AGNC), Annaly (NLY), Hatteras (HTS), Walgreen (WAG), CVSCaremark (CVS)
With bond yields expected to rise, bond equivalent high-yielding stocks have been the victims of sector rotation and have been hit hard. Looking at the technical analysis of Tim Collins of RealMoney.com, Cramer concluded that most of these stocks have farther to fall. Utilities Select Sector SPDR ETF (XLU) has a head and shoulders pattern, which is one of the most reliably bearish technical patterns. It has fallen 10%, but it may have farther to fall. iShares Dow Jones US Real Estate ETF (IYR) has sold off hard, and is down 11% in a matter of weeks, but Collins thinks it is a falling knife, even though bulls might read a bottom in the chart. Consumer Staples Select Sector SPDR ETF (XLP) has shown a double top formation and the risk/reward isn't good.
Cramer discussed a few stocks in this sector Collins thinks can be bought on declines. Ventas (VTR) needs to decline 3% where it would have a 4.2% yield before it is worth buying. If Federal Realty (FTR) falls 3%, it can be bought. Duke Energy (DUK), when it dips $2.50 to yield 4.7%, may be a good choice, as well as ConEdison (ED) after it falls $2 to yield 4.4%. However, for most stocks in these sectors, there is more pain ahead.
Cramer took some calls:
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