Cramer's Mad Money - Why Private Labels Reign (2/9/10)

Includes: CLB, CVS, KO, OIH, SLB, WMT
by: Miriam Metzinger

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

Private Labels Reign: Wal-Mart (NYSE:WMT), CVS Caremark (NYSE:CVS)

While it is no secret private label brands sell well during a recession, Cramer notices a new trend; consumers are not switching back to regular brands now that the economy is improving; “Name brands are out, knock-offs are in,” Cramer said, “and you should invest accordingly going forward.” Private label products at Wal-Mart (WMT) and CVS Caremark (CVS) are still moving rapidly off the shelves and both companies have commented on this fact and plan to expand in this area. Cramer thinks consumers are getting tired of spending more money for basically the same product and believes knock-offs are a secular growth story.

Reasons Behind Tuesday's Rally: Coca-Cola (NYSE:KO)

With the Dow rallying 150 points and the S&P 500 up 1.3% on Tuesday, it seems there was a much-needed respite from the relentless sell-offs that began with European debt woes. Cramer says the recent decline in stocks shows how closely the U.S.'s economy is linked with Europe's, but he predicts bailouts are in order for the troubled countries of Spain, Greece and Portugal and the situation will be stabilized.

A weak dollar is actually a reason to be bullish, said Cramer, because it means American products are cheaper abroad and companies with heavy global exposure like Coca-Cola (KO) can make more sales. Even though high gas prices hurt consumer spending power, expensive oil inspires confidence in the economy. It is no coincidence, according to Cramer, that oil was $1.91 higher on Tuesday and stocks were up as well. Higher copper prices might have led many to believe that demand in China is still strong, another bullish sign. While Cramer liked Tuesday's action, it is further proof that external circumstances are driving the market, fundamentals don't weigh in so much and stocks are "just along for the ride."

Oil Service HLDRS ETF (NYSEARCA:OIH), Schlumberger (NYSE:SLB)

It looks like short sellers are going to drive down Oil Service HLDRS ETF (OIH), at least that's the story the chart tells. The fact that oil itself doesn't look so bad doesn't matter so much, since fundamentals aren't driving the market. According to technical analysis, OIH is probably going, to be driven down another $15 to $103, and from there, eventually to $83. For this reason, Cramer would stay away from OIH right now but might consider buying the best stock in the ETF, Schlumberger (SLB), which reported a good quarter, gave a strong long-term forecast and is a healthy company. Cramer would buy Schlumberger on weakness, but would use caution when trying to find the stock's bottom.

Core Labs (NYSE:CLB)

Cramer continued his series on dividend stocks with Core Labs (CLB), an oil service company which pays a dividend of 0.3%; this may seem small until one considers that the company increased this yield by 20%. The dramatic increase is basically a neon sign that says, "I'm Core Labs, there is none better."

The company deals with oil futures and its main service is reservoir description, or analyzing potential reserves. Core Labs generates 70% of its revenue overseas and 80% from work with crude oil reserves. The company also analyzes domestic shale reserves for natural gas drilling and is involved in production enhancement services. Core Labs pays out special dividends as well. Core Labs is expected to earn $5.34 per share in 2010 and $6.34 in 2011, with strong cash flows of $6.62 for this year and $7.92 for 2011. The company also has a large amount of cash and can pay out its dividend many times over. While Core Labs doesn't look like a dividend play, “a company that can raise its dividend by 20 percent like Core Labs,” Cramer said, “is a company that’s telling you things are getting better.”


Seeking Alpha publishes a summary of Jim Cramer's stock picks every day including: Mad Money Recap, Lightning Round and his Stop Trading! Picks.

Get Cramer's Picks by email-- it's free and takes only a few seconds to sign up.

Seeking Alpha is not affiliated with Jim Cramer, CNBC or