Cramer's Mad Money - Stability Is Not Enough (10/26/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday October 26.

Apple (AAPL), Google (GOOG), Amazon (AMZN), Marvel (MRVL), Intel (INTC)

"Our business is stabilizing, albeit at lower levels."

That has been the catchphrase of this earning season, and contains within it good news and the bad news. While this may have been music to the ears of investors when the Dow was at 8,000, at 10,000, a "stabilizing" business is not enough, and the "lower levels" comment may indicate a coming decline. Cramer thinks the Dow's current level of 10,000 is unsustainable unless companies indicate that business is accelerating; Apple, Google, Amazon, Marvel and Intel have been discussing concrete improvement. Tech is out in front, but other sectors are going to be left behind if they don't report growth; "I fear the market will soon stabilize, too,” Cramer said, “albeit at lower levels than where we are at this very moment.”

CEO Interview: Rob Gross: Munro Mufflers (MNRO)

Cramer said Munro's (MNRO) earnings were a "genuine beat and raise" and was pleased to see the stock up 18% after he recommended it in May as a play on closing auto dealerships. The stock rose to $34, but fell back to $31, and Cramer would set a price target for the $32-$34 range, or even higher. Rob Gross says as smaller competitors are stalled, Munro has tremendous growth potential. Cash for Clunkers did not adversely affect Munro's business, and the company's tire sales continue to increase.

The Battle between Northrop Grumman (NOC) and Lockheed Martin (LMT)

While many sectors are stumbling, defense is standing firm, but not all defense stocks are created equal. Cramer compared Northrop Grumman (NOC) to Lockheed Martin (LMT). Lockheed beat estimates by 22 cents per share, but revenues were off by 3%, its backlog declined 3.5% and outlook was less optimistic than analysts expected. Lockeed Martin's pensions are costing the company dearly and Cramer doesn't see the problem ending anytime soon. The government is shifting away from heavy war machinery and towards electronics and intelligence technology, which is Northrop Grumman's specialty. NOC was awarded $10 billion in contracts and an increase in orders which brought its backlog up to $71.5 billion. All of NOC's divisions saw growth, and Nothrop Grumman's multiple is at 8 while its growth rate is 12%.

Cramer is bullish on NOC; “Northrop Grumman is the better stock and the better company. Hands down."

Pennsylvania Governor Ed Rendell: Chesapeake Energy (CHK), XTO Energy (XTO), Range Resources (RRC), EQT (EQT)

Governor Ed Rendell explained in one word the reason for his decision not to tax natural gas: jobs. It's surprising that natural gas has been such a hard sell in Washington, given the fuel's potential to revolutionize the domestic economy; the state of Pennsylvania alone has enough natural gas reserves to rival an OPEC nation. If all federal vehicles used only natural gas, dependence on foreign oil would be reduced substantially, and the employment situation would be dramatically improved. The main obstacle is the coal lobby which pushes "clean coal" in spite of doubts about the efficacy of the technology. Natural gas produces 50% fewer emissions than coal and 30% fewer emissions than oil.

Cramer thinks the issue of natural gas touches on "the biggest themes we've got going right now" (unemployment and alternatives to foreign fuel) and his picks in the space include Chesapeake Energy (CHK), XTO Energy (XTO), Range Resources (RRC) and EQT (EQT).

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Comments

[Fthrof4:]

Amen on the gas and jobs. NY officials and Hinchy should get it through to them that this just might help the state. Create jobs - what a concept.

Oct 28 08:28 AM

[macthefloorguy:]

I watched Cramer's show last night and was impressed with Gov. Rendell's take on the future of natural gas and CNG. CNG is a tremendous solution for fleet users and urban commuters who don't drive a lot of miles. The biggest problem with CNG as a gasoline alternative is range on a tankful, and a limited number of fueling stations presently. CNG is an ideal "bridge fuel" as Boone Pickens suggested, until hydrogen, electric, and other technologies can be perfected. In Oklahoma, which is a huge natural gas producer and home of Chesapeake, legislation was passed years ago giving substantial tax breaks to both corporations and individuals willing to convert to CNG vehicles. When gasoline was sellling locally for $3.50 per gallon, CNG was less than $1.00, and when it was about $4.50 at peak pricing here, CNG was about $1.25.
In my humble opinion, outrageous energy prices did more damage to the economy than the mortgage crisis and "funny money" derivative shell games which were allowed to operate under the "laissez faire" policies of the prior administration. Average Americans were completely sucked dry of any disposable income at the gas pump. I own a small business and at the peak was paying $200 per WEEK to fuel a 6 cylander pickup, versus less than $50 per week in the summer of 2000, when gasoline was selling locally for $0.79 per gallon.
I hope Pickens was wrong last night when he predicted oil breaking through last years' $150 per barrel. I don't think we need to be reminded of the pain of those days to implement a comprehensive, diverse national energy policy based on eliminating our dependence on foreign oil.
Brazil should be an example to us regarding the effects of breaking the shackles of oil. Brazil has completely converted to ethanol, but they are making it out of fibrous waste products, not food crops. Brazil does not import ONE DROP of foreign oil, and they enjoyed prosperity while the US and Europe suffered through a severe recession.
Regarding "Clean Coal" for producing power, I don't think that coal is a viable alternative due to the enormous cost to scrub the sulfur and carbon dioxide. The only reason this fuel is being considered is political. Electricity generated by "clean coal" will have to sell for about $0.25 per kwh, compared to natural gas and wind generated power at about $0.08. Nuclear might be a viable alternative, but I don't want to live near a nuclear plant built with maximum profits in mind and inadequate government safety regulation. Another concern I have with nuclear power is the possibility of a terrorist flying an airliner into the plant. I've never heard this possibility addressed.
The point is, we have been driven to our knees far too many times by foreign states which, as Boone Pickens says "don't like us very much." Sadly, I believe, there are "enemies within" who, if given the chance, will manipulate oil prices with phony shortages, scare tactics ("there is a hurricane coming!"). Remember Bush's ties with Enron who brought California to it's knees by manipulating energy prices and Halliburton (who under Cheney's leadership moved their "headquarters" to the Cayman Islands and now pay NO TAX WHATSOEVER). Halliburton has vast control of what happens in the middle east, right down to feeding our troops at $10 per meal, and then padding the bill even more by billing for millions of meals that were never delivered.
It is way past time to throw off our national chains and shackles imposed upon us by an oil economy. There will be a huge dividend in new jobs, the environment will improve, and when we no longer have to "walk on eggs" when dealing with the middle eastern countries, I think we will find they will be easier to deal with and wars such as Iraq and Afghanistan may be less likely to occur.

Oct 28 03:31 PM