Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday February 5.
Mad Money viewers often hear the phrase "mobile internet tsunami." Cramer has found another perfect storm: the 3-D Typhoon, and he would play the trend with Cinemark (CNK). With recent hits like Avatar, more people are going to movie theaters, and 3-D is drawing them away from their DVD players. Cinemark is the third largest movie theater operator in the U.S. and the largest in Brazil, whose economy is rapidly growing. The worldwide 3-D dollar potential is $20 billion and by 2015, half of all movie tickets will be for 3-D films. Cinemark also is superior to its rivals Regal (RGC) and AMC Entertainment in stadium seating. Although IMAX (IMAX) is suing CNK for its Extreme Digital XD theatres, Cramer thinks CNK will go ahead with the project successfully.
Cinemark offers a rich 5% dividend and is trading at a 15.6% multiple compared to its historical level of 20. Although the stock is close to its 52 week high, he would buy, although he cautioned investors to use limit orders and to be patient, since it is a long-term play.
Cramer urged Airgas (ARG) not to sell itself short as Air Products (APD) has threatened a hostile takeover. However, Airgas is clearly the superior company and should fight the deal. In the depth of the recession, Airgas CEO Peter McCausland was confident that the company would deliver, and it has. In the last five years Airgas is up 75% and 471% over the past decade, whereas Air Products has only risen 21% in five years and 139% in the last decade. Cramer's message to Airgas shareholders? “I implore you not to accept this bid. Be patient and allow an independent Airgas and an independent Mr. McCausland to make you even more money over time.”
CVS Caremark (CVS), Electronic Arts (ERTS), Vulcan Materials (VMC), Disney (DIS), Coca Cola (KO), L-1 Identity Solutions (ID), Sprint-Nextel (S), Discovery Communications (DISCA), Marriott (MAR), Treehouse Foods (THS), FLIR Systems (FLIR), Viacom (VIAB), Chipotle Mexican Grill (CMG), Panera Bread (PNRA), Cheesecake Factory (CAKE), Ultra Petroleum (UPL)
The market has been volatile lately, but not because of fundamentals. On Friday, the Dow dropped 168 points only to end up in positive territory by the end of the day because the hedge funds stopped selling. Recent earnings hardly merit such a reaction; of companies that have reported so far, 74% have beat their earnings estimates and 47 S&P 500 companies have raised their dividends. “Eventually the positive fundamentals always win out,” Cramer said. “And the fundamentals of companies trump the sell-off-inducing fundamentals of the money-management business.”
What is the game plan for the coming week? On Monday, CVS Caremark (CVS), Vulcan Materials (VMC) and Electronic Arts (ERTS) report. CVS is an undervalued company, so Cramer would buy if it reports good news. He would pay attention to Vulcan Materials (VMC) for news of stimulus money, and Cramer thinks the fact Electronic Arts didn't decline despite bad news last month is a bullish sign, and he likes the company's exposure to social gaming.
While L-1 Identity Solutions (ID) is a play on the counter-terrorism theme, Cramer has yet to find a reason to get behind this stock and thinks its report on Wednesday may give him a catalyst. Similarly, if Sprint (S) shows signs of a turnaround, he may get bullish and he already likes Discovery Communications (DISCA) which is a pure play on cable.
On Thursday, Cramer would pay attention what Marriott (MAR) has to say since the company has raised its dividend. He predicts good news from FLIR Systems (FLIR) and Treehouse Foods (THS) and thinks Viacom (VIAB) should be higher. Three favorite discretionary food plays, Panera Bread (PNRA), Cheesecake Factory (CAKE) and Chipotle Mexican Grill (CMG) report on Thursday, and while Cramer thinks Panera has run too much, he would pay attention to the three conference calls to gauge the health of the consumer.
Ultra Petroleum (UPL), which reports on Friday has been weaker than usual, and since Cramer is a fan of the natural gas story and thinks the stock will go higher, he would buy it ahead of the quarter and pick up more on Monday if it declines.
CEO Interview: Harold Braun, Aviat Networks (AVNW)
Cramer got behind Aviat Networks (AVNW) as a speculative play on the internet tsunami in September. Since then, this producer of microwave backhaul radios that facilitate the connection between cell towers and wireless networks has reported one of the worst quarters Cramer says he has seen so far this year. The stock declined 12.5% after reporting lower-than-expected revenues and giving disappointing guidance. If the problem is with demand, Cramer's internet tsumani thesis is flawed, or could it be a problem with the company itself?
Harold Braun said the company has not yet realized the revenue from its many deals initiated in the fourth quarter. He thinks it will take a few quarters before revenue is accurately reflected, but insists the fundamentals are in place and demand is strong. Cramer told investors to proceed into Aviat only with extreme caution.
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