Cramer's Mad Money - Home Depot: There Is Life After Nardelli (8/18/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday August 18.

Home Depot (HD), Lowe's (LOW)

Cramer gives Home Depot the award for the best name in home improvement while Lowe's trails behind after reporting a bad number and blaming the consumer for its problems. Home Depot doesn't have issues with the consumer, and delivered a strong quarter with raised guidance. Home Depot has blossomed after the departure of failed CEO Bob Nardelli, and the Frank Blake is doing a superb job of cutting costs, improving customer service and keeping inventory under control. Lowe's is having difficulty moving its inventory and is still making the mistake of stocking higher-end merchandise the average consumer can no longer afford. Cramer sees shares of Home Depot reaching $30.

Target (TGT), Home Depot (HD), Apple (AAPL), Hewlett Packard (HPQ), Citigroup (C)

Just when Monday's declines seemed to confirm the bearish thesis, Tuesday's upturn refuted the doomsayers. Those who thought back-to-school sales were slow got a surprise from Target and Home Depot, which performed well. Strength in tech is far from over, as demonstrated by Apple's iPhone sales and Hewlett Packard's solid quarter. Rumors of China's slowdown have been exaggerated; why would China buy oil at $70 a barrel if it was cutting back on resources? Citigroup says it sees the number of credit card defaults declining, and GM is able to put employees back to work thanks to the government's Cash for Clunkers program. Those who saw doom in the healthcare sector were given pause for thought on news the government's healthcare reforms might be stalled. Concerning the market's change from Monday to Tuesday - what a difference a day makes.

Off the Charts: Treehouse Foods (THS)

Technicians disagree about Treehouse Foods. One technician, Alan Farley, says the company's move from $32 to $38 and back down to $36 is a sign the company is taking a breather before going higher. Dan Fitzpatrick, on the other hand, says the stock is wandering too far away from its 200-day moving average to be a buy. Cramer uses the fundamentals to settle this dispute; Treehouse is not only a recession play, but its private label brands are increasingly in demand. The company is trading at a multiple of 16 but has a 26% growth rate, which indicates it is a cheap stock. Cramer also likes the fact Treehouse has 13 potential acquisitions and put a $45 price target on the stock.

CEO David Wenner: B&G Foods (BGS)

David Wenner discussed B&G Foods' success at snapping up winning brands such as Cream of Wheat and Ortega from struggling companies, and is happy with the company's ability to acquire quality names at a discount. He discussed issues with the company's maple syrup products because of problems with crops in Canada, but looks forward to an improved season. B&G made the controversial decision of cutting its dividend, but Wenner said the move was meant to restore confidence in the dividend it currently offers. He discussed the company's hybrid security trading under the symbol BGF which has paid $9 in interest and dividends so far. Wenner admits, however, BGF has a limited shelf life. Cramer is bullish on the regular stock and the hybrid security.

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Comments

[Stockpickin...:]

totally agree with the HD and the inventory! They are running a leam machine!

Aug 19 09:20 AM

[billd10:]

Cramer has been pushing Home Depot for a few months now. Last year, he was pushing Lowe's. I think he uses his bully pulpit (he does think he is a god, after all) to push stocks he owns in order to make a profit for himself. When the recession is over and home improvement makes a comeback, Lowe's might look pretty smart for expanding on the cheap during the recession. Home Depot is shrinking itself and closing stores and reducing inventory to make the quarter look good. Is it a good long-term strategy? Only time will tell.

Aug 19 11:22 AM

[User 478216:]

As a home depot associate I can assure you that we are not cutting our inventory on the floor, only in the overheads. Our out of stocks are under 200 shelf outs on average and with stores carrying over 100,000 skus there's a pretty good chance you'll find what you need. We've just stopped "stacking it high", you won't find crammed overhead racking but you will see fully stocked shelves. I do beleive that this is a good long term strategy. We focus on carrying just enough inventory to meet our customers needs, who wants to buy the dirty old box thats been stored up top for a year anyway


On Aug 19 11:22 AM billd10 wrote:

> Cramer has been pushing Home Depot for a few months now. Last year,
> he was pushing Lowe's. I think he uses his bully pulpit (he does
> think he is a god, after all) to push stocks he owns in order to
> make a profit for himself. When the recession is over and home improvement
> makes a comeback, Lowe's might look pretty smart for expanding on
> the cheap during the recession. Home Depot is shrinking itself and
> closing stores and reducing inventory to make the quarter look good.
> Is it a good long-term strategy? Only time will tell.

Aug 27 08:45 PM