Cramer's Mad Money - Urban Outfitters, The New Concept Incubator (8/17/09)

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Includes: ADCT, AMT, BBT, CNB, ED, EDE, URBN
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday August 17.

Urban Outfitters (NASDAQ:URBN)

There is no good reason Urban Outfitters' stock is down; the company reported a great quarter and is a "new concept incubator," with enough cash to develop those new concepts and sell them. The retailer is poised to expand in Europe and Asia with 50 new stores. Urban Outfitters limits its inventories so it doesn't have to dilute its margins with discount sales. There is a rumor that management is going to make an announcement later in the week, so for those who are already interested in buying, it may be worth getting in now. Cramer predicts Urban Outfitters may add 50% to its stock price. Urban Outfitters is selling at a discount at a multiple of 20 rather than its historical rate of 27; this an even greater value when taking its 25-30% growth rate into account.

Shallow Correction

While Cramer called Monday a "day of pain," the pullback is a break the stock market needs. Investors were fearing "parabolic" rises followed by a sudden fall, and Cramer says brief declines can offset the risk of an extreme drop. He predicts a "shallow correction" of about 3-5%. The bullish signs are still there; companies are generally performing much better than they did in March, bottoms are forming in housing, retail and industrial stocks, and back-to-school sales were only down 5-7%, which is pretty good considering last year's sales were buoyed by stimulus checks. In short, stocks are down but not out, according to Cramer.

BB&T (NYSE:BBT), Colonial BancGroup (CNB)

Cramer would buy BBT's stock offering on Tuesday as a chance to get into a great bank stock while it is cheap. Just as smaller banks grew from the ruins of fallen banks during the S&L crisis in the late 80s, banks like BB&T are poised to buy up assets of financial institutions that have folded, but without the risks.

BB&T is going to buy $22 billion of Colonial BancGroup's assets but will have no legal liability for accounting irregularities in the mortgage unit. The deal has the advantage of boosting earnings per share, and Cramer predicts an "enormous upside" for BB&T. He urges viewers to buy the offering on Tuesday, but to use caution, since the stock rose 10% the last time the bank sold new shares. Investors who can't get in early should wait until the price dips again.

American Tower (NYSE:AMT), ADC Telecom (ADCT), Con Edison (NYSE:ED), Empire Electric (NYSE:EDE)

When a caller asked Cramer why he doesn't recommend American Tower as part of the mobile internet revolution, Cramer says he is not dead set against American Tower, but he thinks tower builders usually lack momentum. He prefers ADC Telecom. Another viewer suggested taxing stock market trades; Cramer says this would encourage a buy and hold tendency which is ultimately a losing strategy. Cramer told another viewer that he likes Con Ed because it doesn't have to deal with issues other utilities like Empire Electric have when they hedge natural gas costs.

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