Cramer's Mad Money - The Fastest Growing Drug Company (10/9/09)

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Includes: AAPL, ABT, BAC, C, CHTT, CSX, CY, EBS, GOOG, GS, INTC, JNJ, JPM, NOK, NVLS-OLD, PG, WCRX, XLNX
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday September 9.

Warner Chilcott (NASDAQ:WCRX), Johnson&Johnson (NYSE:JNJ), Chattem (CHTT), Procter & Gamble (NYSE:PG)

While it is not yet a household name, Warner and Chilcott will see "tons of upside" even after its 47% jump when it acquires Procter&Gamble's drug division for a mere $3 billion. Procter&Gamble is not an enthusiastic seller; it has to spin off its pharmaceuticals division because of restructuring, and Cramer thinks Warner and Chilcott will have the same fate as Chattem, which is up 91% after acquiring five Johnson&Johnson products and a huge discount.

Warner and Chilcott trades at a mere 11% compared to its 22% growth rate, and that rate doesn't take into account the acquisitions. The deal may nearly double the company's earnings per share. After this deal comes through, Warn

Xilinx (NASDAQ:XLNX), Cypress Semiconductor (NASDAQ:CY), Nokia (NYSE:NOK), JP Morgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), Johnson & Johnson (JNJ), Intel (NASDAQ:INTC), Google (NASDAQ:GOOG), Abbott Labs (NYSE:ABT), CSX (NYSE:CSX), Apple (NASDAQ:AAPL)

An earnings report can be a kind of litmus test to indicate the health of a trend or a sector, not just a way to make quick money by speculating, said Cramer, who discussed which earnings to watch.

Xilinx and Cypress Semiconductors are a tell on how the mobile internet tsunami is brewing. Non-smart phone maker Nokia's numbers are a kind of counter-tell on the trend. Cramer expects Xilinx, which reports on Wednesday and Cypress Semiconductor, which reports on Thursday to give strong numbers while Nokia, reporting Thursday, will probably be weak and may bring down the sector. A decline will be a good opportunity to buy Apple.

Cramer expects good numbers from Johnson&Johson, which reports on Tuesday and Abbott Labs, which reports on Wednesday, but he predicts both stocks will be brought down because of worries over healthcare reform. This may create a good entry point, said Cramer

Intel is yet another tell on the mobile internet tsunami, and its results should be better than expected. Cramer expects a "monster earnings report" on Thursday from Google because of renewed spending on advertising. His price target for Google is $600 a share.

Of all the stocks mentioned, CSX is the one that has "its finger on the pulse of the global economy" since most important goods are transported by rail; “CSX knows the truth,” Cramer said. “They will teach us.”

Cramer thinks the banks are at the beginning of a multi-year turnaround and expects Bank of America and JP Morgan to blow away the numbers. At the same time, he predicts Meredith Whitney will make bearish comments and he would wait to buy until this happens. While the bears are expecting Citi to report a loss, Cramer thinks the bank will come closer to his $12 target for 2012. Cramer would buy Goldman Sachs if it gets hit because management isn't bullish enough. However, if it reports poor numbers, Cramer would be worried about the whole market, since Goldman is the "ultimate barometer."

Tech Spec: Novellus (NASDAQ:NVLS-OLD)

The growth of mobile internet and Chinese demand is driving chip sales up, and Cramer would take a cue from the upgrade of Applied Materials to be bullish on Novellus, even though it is as its 52-week high. Novellus' technology involves the use of copper to facilitate conduction and insulating films to coat chips. The use of copper is becoming more popular and demand is increasing; Novellus expects a booking increase of 40-55% for the third quarter.

The company has already cut costs and reduced staff, so it can now afford to expand, and with $587 million in cash and limited debt, Novellus could be ripe for a takeover. While it trades at a multiple of 26, Cramer thinks this is not so expensive, given the increase in orders, and he would buy the stock on Monday before Intel reports on Tuesday and possibly announces an increase in capital expenditures.

Mad Mail: Emergent BioSolutions (NYSE:EBS)

Cramer found a "catalyst worth speculating on"; the U.S. government is going to make a $500 million contract with Emergent BioSolutions for more of its exclusive anthrax vaccine. The amount is almost as much as the company's $530 million market cap. He urged investors to do research and use market orders before buying.

A viewer made the point that the 52-week high metric is not so useful, because a year ago, stocks were devastated and even if a company does nothing, it will automatically seem to have improved. Cramer agrees and says he is using historic highs or three year highs as a more reliable metric than the 52-week highs.

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