Cramer's Mad Money - The Only Thing We Have to Fear Is Fear from Fund Managers (7/24/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday July 24

Microsoft (MSFT), American Express (AXP), Amazon.com (AMZN)

After "horrible" numbers from Microsoft, American Express and Amazon.com, one would have expected stocks to get hammered, but instead, the market rallied. Fear is at play not only on down days, but also sometimes when unexpected rallies happen. How? “There are simply too many money managers out there who cannot afford to sell," said Cramer. Because fund managers are under pressure not to miss the next rally, they were talking down the market early on Friday so they could bring down share prices and find the ideal entry point. However, those dream levels never happened; because everyone wanted to buy at once, the market rallied even as bellwether companies reported dismal numbers. Right now, it is not the fundamentals of stocks that matter, but "the fundamentals of the money management business," said Cramer.

Starbucks (SBUX), McDonald's (MCD)

Cramer thinks Starbucks will be a comeback story, similar to McDonald's in 2003, especially since a new group of value investors are interested in the leading coffee chain. With the return of CEO Howard Schultz, Starbucks has cut costs dramatically by closing 800 stores and reducing expenses. These savings accounted for the company's earnings beat, in spite of a 6% reduction in same store sales domestically. Starbucks is redesigning stores to fit the atmosphere of local neighborhoods, is introducing healthier offerings, cheaper coffee and may reinvent instant coffee with its VIA product. Cramer thinks Starbucks, trading at 19.5% 2010 earnings with a 18% growth rate, is a buy.

First Solar (FSLR), Suntech (STP), Yingli Green Energy (YGE)

Cramer's mantra that First Solar is the only solar stock he will recommend is familiar to Mad Money viewers, but this is finally going to change; Cramer now likes Chinese solar stocks Suntech and Yingli Green Energy as speculative plays. Why? The Chinese government has begun an initiative to fund 50% of the capital costs for solar installations. Two main beneficiaries will be Suntech and First Solar, which have a lot of upside potential but also carry some risk, given falling oil prices, earning disappointments and inventory problems. However, given the Chinese government subsidies, Cramer thinks these solar companies, in spite of their problems, have nowhere to go but up.

Mad Mail: RINO International (RINO), Skyworks Solutions (SWKS), American Electric (AEP), Dominion (D), Excelon (EXC), Google (GOOG), Microsoft (MSFT), Yahoo (YHOO)

Cramer conceded that RINO, a Chinese green stock, is hot, but up 500% since March, it needs to cool down before it can be bought. He told another viewer to take profits on Skyworks which rose 30% after its earnings report, but to hold the rest because "this thing is for real." Concerning rumors of new talks between Microsoft and Yahoo, Cramer thinks Microsoft has "moved on," and while there may be collaboration, there won't be a merger. Google will "sink or swim based on internet advertising" not on a merger between its competitors, and Cramer added Google is cheap at 19 times earnings. Cramer thinks American Electric is not a good green play; Dominion and Ecelon are better choices.

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Comments

[HATEFEEBAY:]

This market is TOO high, DISMAL forward earnings at best with unemployment going a LOT higher and Obizzle trying to tank capitalism! The US paper dollar is a joke, I am buying physical silver and SLW and not put addl funds into the stock market since 2008.

Jul 26 10:04 AM

[Chabsentia:]

The whole market is not too high. The Economy is 70% consumer driven. The Saving rate of Consumers has increased from 1.3% to 6.9%. This is a big jump. What it means is that we have a contracting Economy.This is basic Economics. There has only been 65 Billion of the 787 Billion Stimulus package spent as of this date. The Majority of it has been Food Stamps, Medicaid, Extended Unemployment and Tax Incentives such as the $400/$ 800 reduction and direct payments of $250.00 to Disabled veterans and retired seniors. These are not Job creating moves. If the rest of the Stimulus that was promised 6 month ago for the hundreds of thousands of Shovel ready jobs comes about along with pent up savings when people finally feel comfortable with their cushions then you are going to see a great deal of release of a pent up demand. Meanwhile ignoring Job creation in a contracting Economy that is 70% consumer driven means more Unemployment.There are still some companies doing well.

Jul 26 03:12 PM

[ebworthen:]

We really do need suckers to throw more money into the market before it crashes again. Buy, buy, buy Cramerites!

John Thain needs a golden toilet.

Jul 27 02:14 PM

[Razer:]

Does anyone actually track Cramer's picks and his stocks in his charitable fund? The guy has no clue about economics. He's just a pump and dumper, which he admits to being earlier in his life.

Jul 27 11:08 PM

[Alexander Li:]

It is not too high. Contrast to Chinese stock market which is 2 times higher of its bottom.And DJI is just surpass 40 percent.

Aug 25 12:46 PM