Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday December 1.
Which Pins Will Fall Next: Altera (ALTR), Xilinx (XLNX), Intel (INTC), Microsoft (MSFT), Novellus (NVLS), Applied Materials (AMAT), AMD (AMD), Cypress Semiconductor (CY), Guess? (GES), Ralph Lauren (RL), VF Corp (VFC), J. Crew (JCG), Phillips-Van Heusen (PVH)
The first pin to fall on Tuesday was Altera, and that motion set off a rally in tech which spread to Novellus (NVLS), Applied Materials (AMAT), AMD (AMD) and Cypress Semiconductor (CY). Although Intel (INTC), Microsoft (MSFT) and Xilinx (XLNX) reported good news recently, it was Altera that led tech stocks upward.
This pattern wasn't confined to tech. Guess? (GES) reported a strong number on Monday and brought Ralph Lauren (RL), VF Corp (VFC), J. Crew (JCG) and Philips-Van Heusen (PVH) with it. Oil, natural gas and agriculture were also strong. The financial sector seemed to be the only group left out of Tuesday's rally.
There are several reasons for the rally; retail is moving up for the holiday season, mutual and hedge funds may want to build positions before the end of the year, and those who shorted stocks after the Dubai fiasco might have been running to cover their positions. The bottom line is that investors are flocking to stocks. Cramer would stick close to tech, and identified Hewlett Packard (HPQ), Apple (OTC:APPL), IBM (IBM), and Oracle (ORCL) as "other pins that look ripe for knocking."
The retail sector is strong, and home goods in particular are flying off the shelves. Cramer asked Martin Franklin, CEO of Jarden, the reason for this trend, and mentioned that on his last visit to Target (TGT) approximately 46% of the appliances he saw on the shelves were Jarden brands like Oster, Sunbeam and Crock-pot. "How can one company be so dominant?" asked Cramer. Franklin replied that once such brands become household names, "That's all that matters" - consumers keep coming back to trusted products. One reason for the recent demand is that people are entertaining at home rather than going out. The company is up 6.7% since November 2nd, and Franklin thinks 2010 will also be a "pretty good year" for the company.
Even though J.Crew (JCG) is up 397% since last year, there is still room for upside on the fundamentals, and the technicals agree. The charts indicate that J.Crew is on the way to $50 from its current $44, but may take a detour down to $38 first. Cramer thinks the predicted decline is a buying opportunity, especially with Mickey Drexler, who made Gap (GPS) into a fashion and business force, at the helm of J.Crew.
The company reported an increase in same-store sales and a decrease in inventory going into the holidays, but these facts matter less than what Cramer calls "The Mickey Drexler quotient" - the CEO's talent for keeping his company in the public eye. First Lady Michelle Obama appeared on the Tonight Show wearing J.Crew apparel, and her daughters are regularly photographed in J.Crew clothes. Cramer recommends buying half a position at its current price and the second half when the stock dips.
A viewer asked if Abercrombie & Fitch (ANF) is a buy after an upgrade, and Cramer recommended J. Crew (JCG) instead. When asked about Tekelec's (TKLC) less-than-impressive chart, Cramer responded; “I don’t ever, ever, ever care about the chart on a company like Tekelec. Because it’s a long-term buy as part of the Internet tsunami."
Cramer received a rather macabre trading idea from one viewer:
"In 2010, the estate tax will be completely eliminated. However in 2011, the estate tax will jump back up to 55%. With that much money on the line I am willing to bet that greed will be responsible for an abnormal number of deaths in 2010 … I know it sounds awful, but what do you think about Service Corp. International (SCI), the funeral services firm.
Cramer responded that he researched a similar scenario the last time the estate tax laws were changed, found that there was not an unusual increase in the death rate among the affluent and didn't see a reason to buy Service Corp. "I’m not buying the Service Corp. thesis. Because I’m probably the only person in America who’s done that study.”
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