Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday January 16.
The Most Upside Of Any Bank I Follow: Bank of America (NYSE:BAC). Other stocks mentioned: PNC Financial Services (NYSE:PNC), JPMorgan (NYSE:JPM), Citigroup (NYSE:C)
"There is nothing like a hated story," said Cramer. Many of those who follow Cramer on Twitter have been resistant to his enthusiastic backing of Bank of America (BAC). Cramer thinks many of BAC's problems are behind it, even though litigation continues. Its net interest margins are strong, and while mortgages are a weak area, they are weak for BAC's peers as well. The government might give BAC permission to issue a dividend in the near future. "BAC has the most upside of any bank I follow." Next in the pecking order is PNC Financial Services (PNC), JPMorgan (JPM), followed by Citigroup (C).
Retail Woes: Best Buy (NYSE:BBY), WellPoint (WLP), GameStop (NYSE:GME), Amazon (NASDAQ:AMZN), Wal-Mart (NYSE:WMT), VFCorp (NYSE:VFC), Scotts Miracle-Gro (NYSE:SMG), Macy's (NYSE:M), Costco (NASDAQ:COST), TJX (NYSE:TJX)
Few sectors shape opinions about the health of the market more than retail. When retail is weak, people assume the market in general is in trouble. The Dow dropped 65 points on Thursday because of lackluster news out of retail, including not-so-great data from Best Buy (BBY). Same store sales were barely down, gross margins were a bit soft, but the selloff in BBY was staggering; the stock shed 29% in one session. The reason was that BBY was perceived as a turnaround play, and so many analysts had upgraded it. When it disappointed, it got punished severely because of inflated expectations. Cramer observed the same thing happen to HMO WellPoint (WLP), which got hit on worries about Obamacare. When the street realized WLP could benefit from The Affordable Care Act, there were massive upgrades, so much so that the upgrades were bringing up the stock price, but the fundamentals were lukewarm. WLP, a holding in Cramer's charitable trust, rose from $57 to $86, but snapped all the way back to $57 when it reported tepid guidance.
GameStop (GME) had a similar story. Analysts upgraded it like crazy, but when GME's performance was just okay, it dropped 20% in a single session. Now that BBY faltered, the thesis that the consumer is buying hard goods has been called into question. However, not all retail is weak. While there is an undeniable decline in traffic at stores, ecommerce is going strong, and Macy's (M), with a strong internet presence and cheap branded products, had a strong holiday season. Other solid retailers are Costco (COST) and TJX (TJX), which are plays on the frugality theme.
Amazon (AMZN) hasn't reported yet, but Cramer suspects it had a strong holiday season, and it is undervalued compared to retailer giant Wal-Mart (WMT). However, the poor employment number in December might be casting a cloud over the retail sector in general.
Cramer took some calls:
VFCorp (VFC): Management is good. Cramer wishes it were down so he could push it more aggressively.
Scotts Miracle-Gro (SMG) is too dependent on the weather for Cramer to get behind it with enthusiasm.
CEO Interview: Todd Davis, LifeLock (NYSE:LOCK)
Personal information is becoming increasingly vulnerable, and security violations have been the number one consumer complaint for 13 years in a row. LifeLock (LOCK) has 2.9 million subscribers and provides a service to alert customers to potential identity theft before it happens. The company reported a significant increase in billings, 32% higher revenue, a 12% increase in revenue per user and a 21% jump in subscriber growth. More users are buying the premium service, and although it trades at a rich multiple of 46 compared to its 26% growth rate, estimates may still be too low given the strength of the theme. CEO Todd Davis discusses the company's proactive approach to preventing theft by alerting users before new transactions are completed and asking for authentication before the damage is done. Cramer thinks LifeLock is a great long-term story.
CEO Interview: Dr. Mark Ahn, Galena Biopharma (NASDAQ:GALE)
Galena Biopharma (GALE) is a small controversial biotech that has cutting edge technology in the creation of a vaccine that prevents the recurrence of breast cancer in those who have survived the disease. Around 25% of women who have had successful treatment for breast cancer see a re-emergence within 3 years, and the vaccine is thought to prevent this from happening. The stock has gained 18% in a single week and has risen 233% since last year. However, some medical professionals have expressed skepticism about the science behind the drug. Dr. Mark Ahn says that studies show the vaccine works in 50-60% of patients, and this provides better odds of survival than anything else currently on the market. He added that the drug should be tailor fit for patients who are most likely to respond to this kind of treatment. Although he acknowledged there is an "appropriate period of skepticism" prior to final approval, he is confident the drug will be revolutionary. Cramer noted there are pro and con arguments surrounding the drug and recommended viewers to do homework on it before buying.
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