Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday July 23.
What The Heck Do We Do With Sprint? (NYSE:S). Other stocks mentioned: Clearwire (CLWR), T-Mobile US (NYSE:TMUS), Cisco (NASDAQ:CSCO)
"What the heck do we do with Sprint?" Cramer asked. The stock was one of the stars of the S&P 500 last year with a 188% gain. Now that Softbank has purchased 78% of the company just as Sprint is closing on its Clearwire (CLWR) acquisition, what should be done with the stock? Sprint has become a battleground with upgrades and downgrades; the warring analysts can't seem to agree. Sprint reports in a week, and earnings are not expected to be very good, mainly because it is still trying to deal with the Clearwire acquisition, it is in the middle of building out 4G wireless and the company has more moving parts than ever. Cramer thinks if Sprint gets banged down after earnings, it could be a long-term buy for investors who can deal with short-term pain.
Before Softbank bought a huge stake in Sprint, CEO Dan Hesse was leading a turnaround in the company. Hesse will remain CEO following Softbank's acquisition, and he has been a master at cutting costs and attracting new subscribers. Thanks to Clearwire, Sprint will have Spectrum, which will maximize bandwidth. Bullish analysts think that Sprint could grow earnings by at least 25%. The bears worry that the Clearwire acquisition will be messy, but Cramer noted this is a short-term concern, as well as the apparent fall-off in subscribers which was caused by Sprint phasing out part of the underperforming Nextel segment. Some worry about the fact that T-Mobile (TMUS) has the iPhone, but Cramer doesn't think iPhone news moves stocks the way it used to.
Cramer would buy a bit of Sprint prior to its quarter and even more after earnings.
Cramer took some calls:
Cisco (CSCO) is going to gain market share because of its cyber security acquisition. This move was "the best use of their cash."
T-Mobile is a good stock with strong management. Cramer likes Sprint even better. He thinks it is possible that T-Mobile could get taken over.
United Technologies (NYSE:UTX), Travelers (NYSE:TRV), General Electric (NYSE:GE), Schlumberger (NYSE:SLB), Lockheed Martin (NYSE:LMT), Northrop Grumman (NYSE:NOC), CSX (NYSE:CSX), Union Pacific (NYSE:UNP), Johnson & Johnson (NYSE:JNJ), JPMorgan (NYSE:JPM), Wells Fargo (NYSE:WFC), Radian (NYSE:RDN), Genworth (NYSE:GNW), Alcoa (NYSE:AA), Coca-Cola (NYSE:KO), McDonald's (NYSE:MCD), Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOG), Dupont (NYSE:DD), MasterCard (NYSE:MA), Peabody (NYSE:BTU), Norfolk Southern (NYSE:NSC)
The companies that are performing the best have the least competition, observed Cramer, and he gave several examples. United Technologies (UTX) is an integral part of the aerospace bull market and is able to raise prices and have bigger margins. Traveler's (TRV) reported a strong quarter, but its stock was shot down because of management's comments about stiff competition, particularly for auto insurance customers. General Electric (GE) has backed away from more competitive segments and Schlumberger (SLB) delivered a stellar quarter because it has so little competition. Defense stocks, such as Lockheed Martin (LMT) and Northrop Grumman (NOC) have been leaders, and since so many deal with government contracts, competition is not much of an issue.
Railroads like CSX (CSX) and Union Pacific (UNP) have routes and cargo that are different enough that they aren't really competing. Johnson & Johnson's (JNJ) comeback is due partly to patent protection. Banking used to be a cut-throat industry, but with consolidation following the financial crisis, JPMorgan (JPM) and Wells Fargo (WFC) are thriving, particularly the latter with 30% market share in mortgages. On the same note, mortgage insurers don't face much competition; Radian (RDN) and Genworth (GNW) are two of Cramer's top speculative picks for 2013. Dupont (DD) is undergoing a major restructuring and is focusing on more proprietary products like enzymes while contemplating getting rid of more commoditized segments.
Cramer took some calls:
MasterCard (MA) tends to get hit after it reports. Cramer would wait until after earnings and then do some buying.
Peabody (BTU) can go higher, since coal seems oversold, but just to make sure, Cramer wants to listen to Norfolk Southern's (NSC) conference call and see what management says about coal before making a decision about BTU.
CEO Interview: Patrick Doyle, Domino's Pizza (NYSE:DPZ)
Domino's Pizza (DPZ) is a popular food company with a sound global strategy. However, the stock fell 6.57% in one session on perceived weakness. DPZ beat estimates by a penny with revenues higher than expected. Its same store sales were strong, with a 6.7% increase domestically and a 5.8% rise in international same store sales. DPZ has rallied 12% since Cramer last spoke with the CEO in April, and it has risen 530% since Cramer got behind it in 2010. Cramer asked CEO Patrick Doyle if he meant to sound somewhat "subdued about the industry" in the conference call. Patrick Doyle admitted that "there are more headwinds than tailwinds in the category," but DPZ has been successful through taking market share. "Our business is doing great," however, he added that the international segment is performing better than the U.S. segment.
Doyle pointed out that DPZ exceeded expectations for most of the numbers, but perhaps not to the level the street expected, particularly with margins. Commodity food costs were a bit higher, and a few other factors affected margins, but Doyle is confident that the company can deliver 20% EPS growth. The Domino's app fosters customer loyalty, and voice capability makes ordering easier. There were no big rollouts this past quarter, and Doyle says Domino's has gotten out of the "product of the month club" and is working on major but less frequent product releases.
Cramer thinks the street focused too much on DPZ's domestic business. He expects a few downgrades for DPZ, and when this happens, he would buy.
CEO Interview: Nicholas Pinchuk, Snap On (NYSE:SNA)
Snap On (SNA) beat earnings estimates by 5 cents with in-line revenues. The stock has seen an 18% gain since April and is up 41% since Cramer got behind the stock a year ago. CEO Nicholas Pinchuk expressed optimism about Europe and said that margins are strong because the company is able to make more money with fewer sales. As the average age of cars is getting older, now 11.5 years, there is going to be greater demand for Snap On products. While cars in China are newer, Pinchuk sees a great potential in a few years as the Chinese customer goes to Snap On to fix up a more mature vehicle.
"This is what you want in a stock right now and for many years to come."
Forgiveness Reigns Supreme: FedEx (NYSE:FDX), Starbucks (NASDAQ:SBUX), Netflix (NASDAQ:NFLX), 3M (NYSE:MMM),
This is a market where forgiveness reigns supreme. FedEx (FDX) was flying high at $109, fell to $91 on lackluster earnings and has returned to $108. Many were not happy with Starbucks' (SBUX) previous quarter, but it is about where it was before that earnings report. 3M (MMM) may be more problematic, but Cramer thinks it will prevail on rather low expectations. The resilience of stocks is one reason Cramer would avoid ditching Netflix (NFLX), even though there has been some disappointment. Cramer thinks it is possible NFLX could rebound along with these other stocks that were initially punished.
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