Cramer's Mad Money - The Obama-Proof IPO (9/23/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday September 23.

The Obama-Proof IPO: Select Medical

While many investors are worried about the impact Obama's proposed reforms may have on health care, Cramer found an Obama-proof IPO. Hospitals are not as vulnerable as other healthcare stocks and have been "red hot," in some cases doubling or tripling since March. Cramer thinks Select Medical, whose IPO is on Thursday and will trade under the symbol SEM, "is a real company with real earnings. It’s a powerhouse in its industry.”

Select Medical specializes in long-term specialty acute-care hospitals and outpatient rehab centers; with 92 centers, it is second only to HealthSouth (HLS) in size. These expensive, necessary procedures are lucrative and Washington is less likely to punish companies that deal with life-saving treatments. Select Medical runs 948 outpatient facilities for physical and speech rehabilitation, and is the leader in the industry. Select Medical plans to cut costs by placing its inpatient and outpatient facilities in close proximity, so the administrative offices can be centralized.

Select Medical is offering 33.4 million shares at between $11 and $13 a share. This is a hefty premium to most hospital stocks, but Cramer would take into account the high quality of its services and the fact that it is stronger than other hospital companies. He would buy the stock in increments until $17.

VFC Corp (VFC) CEO Eric Wiseman

In spite of dire predictions for the fall and whisperings of slow back-to-school sales, the retail sector has been strong. Cramer thinks VFC Corp, creator of popular brands Wrangler and North Face is going to continue its upward march; it has already gained 31% since February.

CEO Eric Wiseman thinks the future looks brighter for retail, and expects to see less dramatic declines. VFC focuses on keeping its inventory lean, so the company doesn't have to discount very many items. Wiseman says VFC is expanding into China and concentrating on developing its brands. He expects success even in a slow economy because customers don't abandon quality. Cramer says he is reiterating his buy recommendation for VFC.

Is it Hedged? EQT (EQT)

Cramer is an outspoken advocate for natural gas, but what should investors look for in a company? While its 2% dividend is modest yet meaningful, EQT is an aggressive cost cutter, producing natural gas at just $1.14 per thousand cubic feet of shale (almost half of the industry average of $2.16) and says it can cut this amount to $1. Cramer would look at how much of the natural gas production is hedged to lock in low prices before they increase; EQT has 31% hedged for 2009 and 41% for 2010.

EQT CEO Murray Gerber said this hedging shouldn't be a gauge of the company's view of where production costs are headed, because hedging is a practice the company has had in place for years. He discussed EQT's horizontal air drilling technology, which can enable the company to drill enough natural gas to provide the country's fuel needs for 120 years and reduce imports of oil by 75%.

Cramer says Gerber and EQT are "winners."

A Tech Sale: Ciena (CIEN), Sandisk (SNDK), Skyworks Solutions (SWKS), Apple (APPL), Palm (PALM), Research in Motion (RIMM)

Wednesday's pullback is the beginning of a 3-5% decline that will create a buying opportunity for companies caught in the "mobile internet tsunami." Cramer's mobile internet index is up 16% compared to the S&P's modest 7% gain for the same period. The biggest movers include Ciena, Sandisk and Skyworks. A change in accounting rules will benefit Apple, Palm has raised $325 million in a secondary offering after it sold 800,000 Pre handsets and RIMM is up 105% for the year on the strength of the Blackberry. While these stocks have moved, Cramer thinks the mobile internet trend will be strong for years.

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Comments

[whisperonth...:]

Obama-proof... will ANYTHING prove to be Obama-proof? And if we really believe there is something Obama-proof, are we fooling ourselves?

Sep 25 09:09 AM