Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday June 21.
14 Things to Watch in the Week Ahead: Lennar (NYSE:LEN), Carnival Corporation (NYSE:CCL), Walgreen (NYSE:WAG), Paychex (NASDAQ:PAYX), Bed Bath & Beyond (NASDAQ:BBBY), General Mills (NYSE:GIS), McCormick (NYSE:MKC), ConAgra (NYSE:CAG), Nike (NYSE:NKE), Accenture (NYSE:ACN), BlackBerry (NASDAQ:BBRY). Other stocks mentioned: Stratasys (NASDAQ:SSYS), Weyerhaeuser (NYSE:WY).
Dallas Fed President, Richard Fisher, gives a talk. He has been a "one man wrecking crew" for stocks and has been trying to encourage Bernanke to cut bond buying because he is worried about inflation. Concerning the economy, Cramer told viewers: "It's the bond market, stupid." In a higher interest rate environment, the TNX Index, which measures the 10-year Treasury, is a significant indicator of the direction of stocks. If it goes up, stocks tend to go down and vice versa.
Case Shiller Index: The housing market has gotten hot. If this number is strong, the TNX will roar and stocks are likely to get hit. If the number is tepid, housing stocks will be punished.
Lennar (LEN) has been the butt of massive selling lately, but business seems to be good, as it might indicate in its earnings report.
Carnival Corporation (CCL) has been "disaster free" lately, but is a target for shorts. Cramer would not buy it.
Walgreen (WAG) is a trade going into its earnings if it is down on Monday.
Paychex (PAYX) is a gauge for small business growth, and it has been indicating that this aspect of the economy isn't strong. Cramer wants to hear more on its conference call.
Bed, Bath & Beyond (BBBY) has disappointed in recent quarters, but the stock has rallied. Cramer would buy into weakness if the stock gets hit after earnings.
General Mills (GIS) along with other consumer packaged goods, has been hit the last couple of weeks, but recently bounced. Cramer wants to know if this is just a dead cat bounce or if business is really strong.
McCormick (MKC) and Conagra (CAG) report: They have the same story as General Mills, and have gotten hit because they are bond equivalents, regardless of the fundamentals. Cramer would pay attention to MKC, CAG and GIS following earnings to see how they perform relative to the TNX. If the TNX goes up, but these stocks decline, the movement indicates that consumer packaged goods are hostage to the TNX.
Nike (NKE) reported a strong quarter last time, and business is good in the U.S., but Cramer is uncomfortable with Nike's significant exposure to China, given its economic problems.
Accenture (ACN) has said that business in Europe is stabilizing, and was performing well even when Europe was weaker than it is now. Cramer would buy ACN if it declines ahead of the quarter.
BlackBerry (BBRY) "receives far too much attention from everybody versus its importance," perhaps because people believe it will be taken over. Cramer would buy if it hits $12 and would sell at $15.
Chicago PMI: If it is strong, the TNX may rise and stocks may fall. If it comes in over 55, it might be a sign that Bernanke waited too long for "tapering."
Cramer took some calls:
Stratasys (SSYS) is "our favorite of the group" and held up well. However, it is the kind of stock that goes down when interest rates rise, "so be careful."
Weyerhaeuser (WY) is owned by Cramer's charitable trust and has been hammered because lumber prices have gone down and people think the housing boom is over. It has been one of the worst performers in the S&P 500. Said Cramer, "I expect it to reverse, but not anytime soon."
5 "Pick Among The Rubble" Stocks: Healthcare REIT (NYSE:HCN), Healthcare Trust of America (NYSE:HTA), Liberty Property Trust (LRY), American Realty Capital Properties (NASDAQ:ARCP), Linn Energy (NASDAQ:LINE). Other stock mentioned: Berry Petroleum (NYSE:BRY).
- Healthcare REIT (HCN) owns medical office space and senior facilities. It has declined 22% and yields 4.9%.
- Healthcare Trust of America (HTA) owns medical office buildings, has declined 22% and has a 5.2% yield.
- Liberty Property Trust (LRY) has fallen 10 points and yields 5.4%.
- American Realty Capital Properties (ARCP) has a 6.4% yield and has declined 20%. Its tenants not only have to pay rent, but insurance and tax. It rents mainly to restaurant chains and has a 100% occupancy rate.
- Linn Energy (LINE) is an oil and gas MLP that yields 8.7%, the highest in the industry. It has been targeted by short sellers and is down 20%. Barron's published articles critical of Linn's accounting, and Cramer thinks there are those who want to knock the stock down so that Berry Petroleum (BRY) will decide to back out of its planned merger with LINE. However, Berry's management has said that it has no issues with LINE's accounting and is "committed to the deal." LINE has switched its dividend payment schedule from quarterly to monthly to further discourage the shorts.
The 5 Best S&P 500 Performers: Netflix (NASDAQ:NFLX), Micron (NASDAQ:MU), Hewlett Packard (NYSE:HPQ), Advanced MicroDevices (NYSE:AMD), Best Buy (NYSE:BBY). Other stocks mentioned: Caterpillar (NYSE:CAT), Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Sony (NYSE:SNE).
Last week, Cramer discussed the best performers of the previous quarter. Even though such stocks have had huge moves, they may be worth buying at the end of the quarter as money managers look for "window dressing" stocks or winners to impress their clients. Cramer discussed the 5 top performers of the S&P 500 for the year to date.
- Netflix (NFLX) is up 134%. The company is generating its unique content and has 36 million viewers. Cramer thinks it is a good takeover target and has more room to run.
- Best Buy (BBY) has risen 126%. It faced a management shift last year and was thought to be merely a "showroom for Amazon (AMZN)." BBY has been roaring back because of reduced costs and little competition, at least among brick and mortar retailers.
- Micron (MU) is up 119%, and is an "old fashioned" semiconductor stock with DRAM and flash memory. It is making acquisitions that are accretive to earnings and that lessen competition in the space.
- Advanced Micro Devices (AMD) has risen 67%, and is benefiting from the gaming sector because it provides technology to Sony's (SNE) PlayStation and Microsoft's (MSFT) Xbox.
- Hewlett Packard (HPQ) rose 70% after having been "left for dead" late last year on fears of the decline of PCs. Since then, management has cut costs and reported a stellar quarter, which sent the stock up 7% in a single session.
Cramer took a call:
Caterpillar (CAT) is in a faltering industry, but it has made a series of company-specific blunders. Even though the numbers don't look good, and it hasn't been performing well lately, Cramer would buy it when it drops so it yields 3%, because it will then be cheap on a long-term basis.
What the VIX Is Saying About The S&P 500
Technical analyst Mark Sebastian of Optionpit.com predicted a selloff in the S&P 500 a few weeks ago based on the behavior of the VIX. When the VIX rises, stocks tend to fall. He noted a pattern of the VIX climbing while the S&P 500 was stalled. Not surprisingly, stocks sold off hard. Cramer checked back with Sebastian to see where the S&P 500 is headed now. Sebastian predicts more pain ahead. He sees a pattern similar to the decline in 2011 where the VIX kept going higher until the S&P finally dived. This preceded the downgrade of U.S. debt, and stocks were in a state of decline from August of that year until October of 2011, when the S&P 500 made a lower low while the VIX failed to make a higher high. That was the "buy" signal.
Comparing the S&P 500 to the chart of 10-year Treasury futures also creates a bleak forecast. Usually when bonds go lower, stocks go higher, but in the last 6 weeks, there has been a "new normal" of the S&P 500 dropping along with Treasurys. The reason for this is that as long as bond yields were low, investors piled into high yielding stocks instead. As bonds decline, their yields rise, and those who bought the high yielding stocks are dumping their holdings in favor of bonds.
While there is pain ahead, Sebastian doesn't think the S&P 500 will give up all of its gains for the year and when 2014 arrives, it could flirt with new highs.
Jim Cramer's Action Alerts PLUS: Trade right alongside a Wall Street pro! Start your 14-day FREE trial today.
Get Cramer's Picks by email - it's free and takes only a few seconds to sign up.