Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday May 3.
Earnings season most often produces a "cacophony of information," said Cramer, but amid the sound and fury of reports, there are some meaningful patterns that emerge. Cramer devoted a segment to discussing a sector that is winning this earnings season; travel and leisure. Although this sector was "on life support" not too long ago, Royal Carribbean (RCL), Starwood Hotels (HOT) and Travelzoo (TZOO) delivered "huge beats." Revenue per available room, a "hugely important" metric for the industry, exceeded management's expectation for nearly every major hotel company. Royal Caribbean beat estimates by one penny, but The Street was forecasting a 5 cent loss. In addition, RCL's bookings grew 20% and revenues rose 12%. In addition, the company has kept its costs down and is adding new ships to its fleet.
Cramer thinks Travelzoo's 8 cents earnings beat is "staggering" and would buy Hyatt (H) ahead of its report on Thursday. Starwood Hotels (HOT) has an apt ticker symbol, since it "blew the lights out" of its earnings with an 11 cent beat. Starwood is up 45% and has given strong guidance for the year. Cramer thinks Starwood hasn't finished going up because it has "years and years" of growth ahead from pent-up demand that is being unleashed as the economy improves. High-end occupancy is up and Starwood plans to build an additional 80 hotels in China.
WellPoint (WLP), JP Morgan (NYSE:JPM)
There is no investment without some risk, but it seems Cramer attracted criticism for his allegedly "reckless" call to buy financials during their "ugliest moment," when the government is discussing radical reform of the banks.
Cramer said the pattern going on now is similar to that of the healthcare debate, when Cramer received flak for recommending WellPoint (WLP). However, fears of healthcare's demise were overblown, Cramer caught the bottom and WellPoint rose 17 points. When it comes to the banks, "I am detecting a WellPoint moment," because "the posturing has gotten out of control" and the anger is too deep."
Cramer thinks the legislation will be benign for the industry and with more clarity, it might even "boost" banks. So if a good bank like JP Morgan (JPM) gets savaged on worries about reforms, investors should buy on declines.
"The essence of good investing is anticipating when the worst is not going to happen," Cramer says, adding he has seen unfounded fears disappear time and time again, with tobacco stocks in the 90s, credit card reform, and healthcare. "The banks will not be broken up," declared Cramer, and they will still be competitive worldwide. Cramer paraphrased one of Buffett's core maxims; "You have got to take some risks… and invest when everyone is most fearful… that is when you get the biggest gain."
The shoe revolution is running forward, with most major shoe companies seeing stock prices rise generously; Skechers (SKX) is up 18%, Steve Madden (SHOO), 35% and DSW (DSW) 20%. Yet "the best footwear company on Earth," according to Cramer, Nike (NKE) has seen a measly 5% gain.
However, Cramer thinks Nike is going to dip for a day, and he would buy the stock ahead of Wednesday, when NIke will have its first analyst meeting in three years. Historically, Nike has risen 1% on the day of the meeting and 3% in the two weeks that follow, but Cramer expects even more upside; "I think that this analyst day is going to be even more positive than the last ones that have produced really fabulous profits."
Why is he so optimistic? Nike beat earnings in March by 12 cents a share, its gross margins were up 300 basis points, direct consumer sales in the U.S. grew 20%, online purchases increased 25% and future orders, a key metric for the industry, were up 9% and 36% in emerging market countries. A full 65% of Nike's sales are overseas where it should benefit from the burgeoning middle class in Asia. Nike is already seeing an increase in soccer shoe sales ahead of the World Cup. Cramer thinks Nike will give some information on what it plans to do with its $7 per share in cash and thinks there is room for upside, since the stock has 11 buys and 10 holds.
If the stock is up on Tuesday, Cramer doesn't recommend chasing it. However, if Nike dips on Tuesday, he would buy.
Cramer made the bullish case for B&G Foods (BGS): the company beat estimates by 2 cents, has seen revenue growth across the board, gave solid guidance and has hedged commodity costs for 2010. In addition, the company offers a huge 6.5% dividend. Cramer thinks the stock is a buy.
Responding to a question about natural gas, Cramer said he and Boone Pickens are "both severely disappointed and amazed" about the fact the White House seems reluctant to adopt natural gas as a bridge fuel. Cramer told another viewer to buy Anadarko Petroleum (APC) even though it isn't as low as it was last Friday. Cramer thinks ARM Holdings (ARMH), Cypress Semiconductor (CY) and Skyworks Solutions (SWKS) are "terrific" plays on the mobile internet tsunami.
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