Cramer's Mad Money - If Botox Is Coke, Dysport Is Pepsi (3/15/10)

|
 |  Includes: AGN, BZH, CAA, CNX, D, DHI, DVN, HOV, K, KBH, KHC, MO, PHM, VRX, XOM
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday March 15.

Healthcare Proposals Unhealthy for Stocks: Kellogg (NYSE:K), Heinz (HNZ), Altria (NYSE:MO)

While healthcare reform seemed moribund only a few short weeks ago, Cramer says it is back from the dead and might even get passed, so investors had better prepare. Not only may healthcare reform be detrimental to the stock market, but passage of these proposals will further embolden Washington to make other changes that will adversely affect stocks. These reforms may be paid for by raising capital gains taxes.

He expects a selloff if the bill passes, but wouldn't give up hope in stocks entirely; Kellogg (K), Heinz (HNZ) and Altria (MO) would still be worth buying in such an environment, as well as foreign stocks and gold.

CEO Jonah Shacknai, Medicis Pharmaceutical (MRX), Allergan (NYSE:AGN)

Allergan's (AGN) Botox has been the leading name in anti-wrinkle treatment, but Medicis' (MRX) Dysport is the Pepsi to Botox's Coke, and is giving Botox a run for its money, literally, since Dysport is a full $200 cheaper. Medicis is so confident about its product that it offers a $75 rebate for unsatisfied customers, and sales of the product have nearly doubled.

Medicis' main product, an anti-acne treatment, Solodyn, comprised 57% of sales in 2009. However generics could develop similar treatments as early as 2011 - a main reason for the bearish sentiment surrounding Medicis. However, the company beat its earnings by 8 cents a share and revenues are up 32% year over year. The company is just $2 from its 52-week high, but Allergan is also high, and has a multiple of 17 while Medicis' multiple is 12.

Jonah Shacknai admitted that while invasive cosmetic surgery procedures were down as much as 20% in many cases, non-invasive procedures, such as those developed by Medicis, were flat or had improved. He added he is not worried about the future of Solodyn because the company has a diversified menu of various treatments. Finally, he discussed the treatment for obesity, Liposonix, which is effective, takes only an hour to complete and is waiting for FDA approval. Cramer says Medicis is a "money maker."

CEO Interview: Larry Nichols, Devon Energy (NYSE:DVN), Consol Energy (NYSE:CNX), Dominion (NYSE:D), Exxon (NYSE:XOM)

Cramer declared a once in a lifetime, "natural gas rush" on the historic news that Consol Energy (CNX), a coal company, is buying Dominion's (D) Marcellus shale for natural gas drilling amid falling oil prices. However, strangely enough, natural gas prices are still low, but Cramer would use the opportunity to buy Devon (DVN), a company that has shed its offshore and overseas divisions to become a domestic pure play in natural gas. Devon is not selling these assets on the cheap, and is getting a full $7 billion. The company is up 220% in ten years while the S&P 500 rose just 7.5% in the same period.

Larry Nichols said he is 100% confident in the future of natural gas, even though the White House has yet to get behind the fuel. However, the media and the American people are waking up, according to Nichols. The fact that coal company CNX and oil giant, Exxon are diversifying into natural gas indicates the bright future for the fuel, which has less carbon than fossil fuels and doesn't pose the problem of nuclear waste.

While Nichols admitted the milder weather might spell a short-term decline in natural gas, there is every reason to be bullish for the long-term, especially since natural gas is undervalued and seems poised for a rise in price. When Cramer asked Nichols about buying back shares, Nichols says he is using extra cash to build up natural gas reserves. Cramer says he's sticking with Devon and with natural gas.

Stop Helping Homebuilders: Hovnanian (NYSE:HOV), KB Homes (NYSE:KBH), Pulte (NYSE:PHM), DR Horton (NYSE:DHI), Beazer Homes (NYSE:BZH), Standard Pacific (SPF)

On news the government gave assistance to homebuilders, Cramer expressed outrage; "This is the dumbest and one of the more counterproductive bailouts... and it is a bailout! It's never talked about... We grill every banking executive... but this one's never talked about. It's the worst one done so far." Once the homebuilders get money, they will start building more homes and continue the cycle of oversupply which will bring housing down further. Hovnanian (HOV), KB Homes (KBH), Pulte (PHM), DR Horton (DHI), Beazer Homes (BZH) and Standard Pacific (SPF) were all able to reap hundreds of millions of dollars in tax credit, even though none have been profitable in the past year.

Cramer made a plea to the government to let the capitalism do its work for homebuilders and to allow the worst to go bankrupt. However, he concluded; "You either help the homeowners, or you help the homebuilders! One or the other! And now we know which side Congress and Washington are on."

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

Jim Cramer was up 31% in 2009. Click here now to trade alongside him.

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