Cramer's Mad Money - The Best Thing That Ever Happened to Lear (11/20/09)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday November 20.

Lear (NYSE:LEA), Gentex (NASDAQ:GNTX), Magna (NYSE:MGA)

While filing bankruptcy may be the kiss of death for many stocks, so is coping with insurmountable debts. Lear (LEA) emerged from Chapter 11 on November 9th as a stronger company and Cramer thinks filing for bankruptcy was "the best thing that ever happened," to Lear.

The auto parts company created a strong capital structure, reduced its gross debt from $3.5 billion to $1 billion, grew its backlog by almost half a billion dollars, and is expected to have $1.5 billion in cash by the end of the year. This places Lear in the ranks of Gentex (GNTX) and Magna International (MGA) – the only other auto parts companies with net cash. Lear's sales margins are rebounding after taking a beating during the recession. Cramer commented; “Just imagine how much money this company is going to make when the economy recovers.”

While 81% of Lear's revenues are from car seating, it is expanding its electronics projects which comprise 60% of its backlog. Cramer thinks estimates are too low and notes that Lear trades at an 18% discount based on cash flow compared to similar companies. Even though Lear has already bounced 26% after emerging from bankruptcy, "it can go much higher," said Cramer.

Hewlett Packard (NYSE:HPQ), J.Crew Group (JCG), Deere (NYSE:DE), Frontline (NYSE:FRO), Wellpoint (WLP)

With Thanksgiving coming up and only four trading days in the week, investors need to keep their eyes open to make money. Cramer would pay attention to Hewlett Packard's (HPQ) earnings report on Monday, since the stock tends to rise straight up into its report and then sells off, regardless of how strong the quarter is. While Cramer says Hewlett Packard is "one of my favorite technology stocks" and will most likely give a good number, he thinks profits will be taken on Tuesday morning, and a decline is a buying opportunity. Cramer thinks J.Crew (JCG) will behave the same way; it should run up until Tuesday night's report followed by a selloff Wednesday morning, when J. Crew can be bought at a discount.

Cramer has said that agriculture is back, and he would buy some Deere (DE), but in increments; he advised picking up half a position before its report on Wednesday and half a position after earnings. Heinz (HNZ) is "the ultimate weak dollar stock" and already has been benefiting from its overseas sales. Cramer would buy prior to its report on Tuesday, at around $42, because he expects the stock price to rise and predicts an analyst will upgrade Heinz.

Investors should sit tight through Frontline's (FRO) report on Friday. Shipping stocks have risen substantially, and Cramer suggests listening to Frontline's call to see if the trend is expected to continue.

Although the Senate will be making headway on healthcare reform, these measures will be only a shadow of Obama's original proposals and will not have a major impact on HMOs, although headlines next week will suggest otherwise. Cramer would buy Wellpoint, which should dip on bearish news next week.

CEO Interview: CEO Chris Viehbacher, Sanofi-Aventis (NYSE:SNY)

Sanofi-Aventis (SNY) CEO Chris Viehbacher admits his company has “a big patent-expiration problem;" 41% of the pharmaceutical company's 2009 sales are generated by drugs such as blood thinner Plavix and Lovenox which are going off patent in the coming years. However, this problem is not insurmountable; the company has a diabetes drug, Lantus, Multaq for irregular heartbeats, the world's leading vaccine division and strong potential in cancer treatment. Sanofi-Aventis' breast cancer drug is in Phase III testing and is effective at treating various kinds of tumors.

Viehbacher discussed Sanofi Aventis' malaria treatment which cures the disease in three days and costs just a dollar per adult and fifty cents for children; it is expected to become a necessity in third world countries. The company is also expanding into screening and disease prevention as well as treatment.

Curtis Arledge, BlackRock (NYSE:BLK) co-head of US Fixed Income

When asked about investing in bonds, Curtis Arledge said that while 2008 was about managing credit risk in the bond market, 2009 is about managing interest rate risk. Contrary to popular belief, Treasurys do carry risk and Arledge thinks other fixed-income classes might be better for the average investor. When Cramer asked Arledge about commercial real estate, the latter replied that while recovery will be gradual, there is some value in the sector.


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