Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday December 17.
"Is the decline in consumer products a mere selling squall or is it the real deal?" asked Cramer. These stocks are slow growers with relatively high yields, and Cramer thinks that in the near term, they are headed lower. They tend to perform well in a sluggish economy, but as long as interest rates were low, they also did well in boom times because their yields were higher than bonds. With fears of Fed tapering, these stocks have been going down, not in a dramatic way that might signal a buying opportunity, but like Chinese water torture, drip by drip. Cramer thinks these stocks are tortuous as trades, but may be alright as long-term investments. Those who can't take the pain should sell these stocks, because they are not going up any time soon.
It is time to stop worrying about the Fed and start buying stocks of well-managed companies. Boeing (BA), 3M (MMM), Whole Foods (WFM) and Honeywell (HON) have been huge winners in 2013, and the secret sauce is their stellar management. BA is up 80% for the year and announced a 50% dividend increase in addition to a generous buyback. 3M (MMM), up 41% for 2013, is raising its yield by 35% and is also adding to its buyback. Honeywell (HON) is on track to meet its targets in spite of government cutbacks and has risen 41% for the year. Whole Foods (WFM), matching the S&P 500's 25% gain for 2013, is building more stores as the healthy eating megatrend gains in popularity. What is driving these stocks higher is their great CEOs, who like master coaches, can have even more of an impact on a team's performance than individual players. Cramer would buy these stocks on any decline; he has recommended them often, and those who bought and held onto them have profited nicely.
Cramer took some calls:
LinnCo (LNCO) is a stock that many on the street want to see drop. Cramer would hold onto it.
Cramer recommended two "stock"ing stuffers to buy for the long term. Google (GOOG) is up 50% for the year, but it is still cheap compared to its peers, and trades at a multiple of 20 with a 16% growth rate. Internet advertising is growing at double digit rates, and Google is still the leader in the industry, with 40% of all online ad revenue going to Google. A full 60% of all online searches are done on Google, and its search business is growing 23%, international sales are up 32%, paid clicks increased 26% and gross profits are up 18%. Google has a fortress balance sheet and has earnings growth in the high teens.
Bank of America (BAC) is a better bank than it was 3 years ago, when it traded at $19. Cramer thinks the stock could move from $15 to $20. BAC benefits from rising interest rates and has diversified segments, including lending to individuals and small businesses, enterprise wealth management and investment banking. BAC has seen a 19% increase in commercial lending, and it is putting its legal problems behind it.
Cramer took some calls:
Yahoo (YHOO) is worth much more than it is trading for, thanks to Alibaba.
CEO Interview: Co-CEOs John Mackey, Walter Robb, Whole Foods
Whole Foods is up 1,000% in 5 years and it is the leader in the healthy eating trend. In November, Whole Foods beat earnings by a penny with same store sales up 5.9%, which was higher than its peers, but was lower than Wall Street's estimates. However, Cramer thinks the company will transcend this temporary weakness and will remain ahead of the competition.
Co-CEOs, John Mackey and Walter Robb discussed their strategy to increase Whole Foods' store count by 1,200 locations. With 69% of Americans overweight and seeking healthy alternatives, the trend towards natural foods is going to continue to grow. The CEOs said they are not worried about competition, because the fact that other stores imitate what Whole Foods does validates the market opportunity. John Mackey said that the company will continue to evolve, already has higher quality standards than its peers and gives customers a unique experience. One strategy is to lower prices while creating more differentiation. Whole Foods is instituting a generous buyback and increased its dividend by 20%.
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