Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday April 13.
Intel (INTC), Sherwin Williams (SHW), Whirlpool (WHR), Fortune Brands (FO), Plum Creek Timber (PCL), Weyerhaeuser (WY), Standard Pacific (SPF)
Cramer once again wondered why the average American has yet to feel confident in spite of the many bullish signs in the economy. The Dow lingering at 11,000 "mocks your fears" says Cramer, which will seem very real until there is a significant improvement in the nation's employment numbers. However, investors shouldn't wait for employment to come back before buying stocks, because there will be many significant moves in the market before then.
Cramer says the stock market is the best predictor of where the economy is headed and is "the closest thing to a crystal ball." Bolstering the bullish thesis is the strong import number that came out from China, along with improving same-store sales numbers; "there is so much demand out there for new goods," that a growth in jobs is inevitable. Intel's (INTC) "beautiful" number and the 63% growth of its gross margins indicate it is not going to keep its employment low for much longer.
The dramatic moves in housing-related stocks, from Sherwin Williams (SHW) to Fortune Brands (FO) to Whirlpool (WHR) indicate a recovery for the sector and with housing starts at very low rates, Cramer thinks a housing shortage rather than a surplus, is on the cards. JP Morgan "not a bunch of jokers," predicted a housing shortage by 2011; Cramer would buy timber and land companies, especially Plum Creek (PCL) and Weyerhaeuser (WY) as well as Standard Pacific, "that little housing spec that I gave you last week."
In addition, Cramer declared TARP a success and added "We are 6 months away from seeing genuine prosperity."
"Teenagers are once again doing what they do best… spending their parents' money like there is no tomorrow." Teen retail numbers are "incredible" with Aeropostale reporting a 19% increase and American Eagle a 15% increase in same-store sales. Cramer says teenagers are the most "coveted" consumers because they have no bills to pay and can spend all day "being mall rats."
One teen retailer has lagged behind the others, but "its time has come": Hot Topic (HOTT). After HOTT announced a $1 special dividend along with the news that same-store sales were less bad than The Street expected, down 7% rather than the predicted 11%, the stock gapped up 18% then sold off. This ordinarily would be a bearish sign, but the successive higher lows in following trading sessions were a strong indication that investors were buying the stock. The chart paired with the dividend increase, which Cramer thinks is a sign of confidence, represents a "genuine turn" for Hot Topic.
Its CD business got "hammered" but Hot Topic now sells MP3 online with Shock Hound and formed a promising partnership with Amazon (AMZN). Same-store sales were up 9% for Torrid, the company's plus-sized line of apparel for women. Hot Topic is trying to wean itself off of reliance on movie openings and is aiming to make its products less hit-related than "Twilight." The company is focusing on more accessories and product differentiation. Inventories are down 4%, the balance sheet is clean and Hot Topic is flush with cash. Cramer would buy Hot Topic, preferably by Wednesday, which is the deadline to get the special dividend.
With Saks (SKS), Nordstrom (JWN) and Tiffany (TIF) reaching their 52-week highs, bargain stores should be "stinking up the joint." However, Family Dollar (FDO) beat estimates roundly and raised guidance for the entire year. The stock is up 36% since November thanks to its revamped stores, improved selection, longer hours of operation and a larger diversity of payment methods, including credit cards and food stamps. Family Dollar is expanding its selection of private-label goods to grow from 18% to 25%, because consumers are still cost-conscious and private labels generate strong margins.
Cramer asked CEO Howard Levine if the key to Family Dollar's success is the frugal consumer and if the company can survive an economic recovery and a more confident consumer. Howard Levine explained Family Dollar does well coming out of recessions; "I think that a lot of that has to do with our consistent investment back into our business." That is the reason, according to Levine, the company is still buying back stock even after a significant climb. When Cramer commented on how cheap Family Dollar's merchandise is, Levine responded, "Well, I do not like to use the word cheap, Jim. I like to use the word value and really that is what we are all about."
Howard Levine discussed FDO's latest earnings conference call; "We are going to be driving comps, we talked about that. Adding consumables, brand name consumables. Growing our private label. We are also talking about growing our discretionary categories. We think that we have great opportunities as the economy improves."
After the interview, Cramer said, "I am sticking with my recommendation… even though we are up 10 straight points… Why?... Because I want to buy, buy, buy!"
CEO Interview: Bruce Vincent, Swift Energy (SFY)
At one time, Cramer felt confident the government would get behind natural gas as a clean, cheap bridge fuel, but now it seems that Washington is not interested. He now suggests investors veer away from pure plays in natural gas and look to hybrid energy plays with exposure to the unconventional American shale foreign investors are clamoring for as well as oil.
Cramer's new energy pick is Swift Energy (SFY), with 113 million barrels of oil reserves. The company reported an "amazing" quarter with cash per share at $2.10 when The Street expected just $1.60. Swift has significant exposure to the highly profitable Eagle Ford Shale in Southern Texas; these assets are worth $15 a share when the stock is currently trading at $35. Bruce Vincent called Eagle Ford Shale an "American Treasure" especially with the latest technology that enhances drilling. Vincent described two "roadblocks": the government and end users who need to be persuaded that natural gas supply is reliable and predictable. Utilities especially need to be reassured that there will not be volatile price swings. However, Vincent said he is confident that natural gas is still "the fuel of the future."
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