Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday June 18.
Retro Tech Plays: Hewlett-Packard (NYSE:HPQ), Intel (NASDAQ:INTC), Microsoft (NASDAQ:MSFT), Micron (NASDAQ:MU), Cypress Semiconductor (NASDAQ:CY). Other stock mentioned: Apple (NASDAQ:AAPL)
Tech should be fine regardless of what the Fed decides, and tech stocks have often risen when interest rates went higher. The death of the PC, responsible for the pummeling of many old-fashioned tech stocks, may have been exaggerated. While PC sales are declining 10% per year, some of this decline might be reversed by new PCs that have touch screens and super long battery life. Hewlett-Packard (HPQ), a stock which had been left in the ditch, has made a comeback, and has gone from the worst performer to among the best performers in the Dow. Its balance sheet is clean, and HPQ is innovating. Microsoft (MSFT) and Intel (INTC) are cheap and have the advantage of low street expectations. Micron (MU) has flash and DRAM, Cypress Semiconductor (CY) is the anti-Apple (AAPL), and handles everyone else's touch screens. While some of these stocks may disappoint on earnings, there may be some upside in the names until they report.
Starbucks (NASDAQ:SBUX), Google (NASDAQ:GOOG), Boeing (NYSE:BA), General Electric (NYSE:GE), Visa (NYSE:V), MasterCard (NYSE:MA), V.F. Corp (NYSE:VFC), LinkedIn (NYSE:LNKD), Sony (NYSE:SNE)
The direction of stocks the next few days is likely to be determined by the Fed announcement. Any indication of higher rates or a slowdown in bond buying would create a buy signal for Starbucks (SBUX), Google (GOOG), Boeing (BA), General Electric (GE), Visa (V), MasterCard (MA), and V.F. Corp (VFC). REITs and bond equivalent safety stocks are likely to continue the decline that began last week. Investors should stay away from emerging markets stocks.
Cramer took some calls:
LinkedIn (LNKD) is investing in its business to improve its bottom line. Investors should be patient; "They should be going into LinkedIn, not out of it."
Sony (SNE) is "drastically undervalued."
With the help of the technical analysis of Toni Hansen at RealMoney.com, Cramer discussed the charts of two laggard stocks that may have some upside. Intuitive Surgical (ISRG) was a "hot"momentum stock until it had what technicians call a 100% price extension, meaning that it rallied by the same amount twice in a row. When this happens, a stock usually runs out of steam, and ISRG has been trading sideways for a year. Hansen notes this is a normal pattern for ISRG, sees a floor of support at 482 and at 464 with a possible upside to 534, 561 and eventually 580.
Potash (POT) has given up half of its gains from a former rally. The gentle decline and the low volume indicates that most of the sellers are out of the stock. Hansen sees a floor of support at 39 and thinks Potash could rise as high as 56 in the next year.
While Cramer admits that ISRG and Potash are not stocks he has been bullish on for a while, there might be something to these charts. He would recommend Potash only for investors who believe the global economy is going to make a comeback. He would wait for a decline before buying ISRG.
Defense contractors have been moving higher in spite of worries about sequester. Harris (HRS) has been left behind, ironically, because it doesn't have enough exposure to defense. While around 70% of its revenues come from defense, this percentage decreases each year as its commercial segment grows. Harris makes equipment for communication for ships and planes and also makes satellites and antennae. The defense portion of Harris is holding back the faster growing commercial segment. Cramer thinks the two parts should be separate companies. He thinks a spinoff could mean a 27% gain for Harris.
Cramer took some calls:
Johnson Controls (JCI): Management is "cleaning up the company. Now is the time to buy."
Occidental Petroleum (OXY) will be worth more on a breakup although "the stock is acting like a dog right now."
CEO Interview: Mike Molinini, Airgas (NYSE:ARG). Joined by former CEO and current Chairman, Peter McCausland. Other stock mentioned: Air Products (NYSE:APD)
Airgas (ARG) famously rejected a lowball takeover offer of $70 by Air Products (APD) in 2010. Cramer praised the move and said ARG could perform better on its own. The prediction was correct; the stock rose to $101, but has declined to $96 on remarks made by management about the slowness of residential construction. When asked about the rejected bid in 2010, former CEO and current Chairman, Peter McCausland, said the bid was made in a low point of the recession, and given how much ARG had invested in growth, management knew ARG could make a comeback without APD. Current CEO Mike Molinini said that while currently construction is slow, there is a significant backlog of projects that should be set in motion soon. McCausland admitted that sequester has affected ARG because some of its clients in the military are worried about spending. Nevertheless, the company saw 9% earnings growth and 14% growth in free cash flow last year. "I am more excited about the company than I ever have been," said McCausland. "Airgas will benefit inordinately from the industrial renaissance in this country," Cramer said.
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