Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday May 6.
Procter & Gamble (NYSE:PG)
The market action was erratic on Thursday, to say the least, as the Dow dropped 988 at one point in the day, jumped back up and finished 388 points down with the S&P declining 3%. Cramer contrasted yesterday's action with sought-after market declines he saw as a hedge manager, the "fabled whoosh" when sellers would finally finish selling and the result was a real bottom where "fortunes were made." However, Thursday's action was not a "fabled whoosh"...the moment was not real." Cramer added, "The market short-term is too nutty, even for this madman."
He described what led up to yesterday's decisive call on Procter & Gamble (PG). When he left his office, the Dow was down 285 points, and by the time he walked 35 yards to the CNBC studio to meet Erin Burnett, the Dow was already down 398 points. While Erin Burnett and Cramer were discussing the market, the Dow was down 648 points and then, "like a beacon, I saw PG had dropped below 50, and I said, 'I want to go $49 bid for 50,000 of PG.'" The stock rose from $49 to $60 while he was talking.
Procter & Gamble had gone from a "pretty attractive stock" to a "steal of a lifetime." The stock became an accidental high yielder and the dividend rose from 3% to 5% in a few sentences. For those who are looking for the next "PG moment," it is a good idea to find solid companies with decent dividends, companies that will become accidentally high yielders if they decline. Beyond that, Cramer says the market right now is "too crazy to play."
Governments of the world are uniting in hurting their economies… and you have nothing to lose but your stock market profits...Every day it feels like more countries around the world are being run by the Marx brothers… and that is, Groucho and Karl Marx… like some sort of absurd mix of the Communists manifesto and duck soup…
While world governments are quick to come up with reforms and austerity measures, they don't seem to care about the stock market, observed Cramer, and are not doing enough to create jobs. Although the U.S. is probably one of the most secure places to invest, the U.S. government's behavior is puzzling; "I cannot even fathom what our government wants anymore… they want to break up the banks… they want to make it tougher to get a loan."
There are "no safe nations left to go to." The market will not be secure until there is a "definitive solution for Europe." This may involve drastic action, like the breakup of the euro or the European Union or the German government saying it will stop doling out band-aids to ailing economies. Perhaps some members of the EU should be suspended until they fix their situations. The bottom line is, according to Cramer, "You cannot buy until you have already stuck a sharp stick in the eye."
Unfortunately, the average investor right now needs to become a "seasoned pain taker," and to rely on dividend stocks and a diversified porfolio to weather the crisis. Cramer thanked Lynn from Illinois who had a great porfolio on the "Am I Diversified" segment on Wednesday's Mad Money. Cramer would buy any of the stocks Lynn mentioned: Abbott Labs (ABT), McDonald's (MCD), Lowes (LOW), Plum Creek Timber (PCL). He would add to the list: Coke (KO), General Mills (GIS), ConEd (ED), Apple (AAPL) and Eldorado (EGO)
CEO Interview Jim Hagedorn, Scotts Miracle-Gro (NYSE:SMG)
In spite of the crazy action on Thursday, Scotts Miracle-Gro had a huge upside surprise in the morning. Scotts is the largest lawn care company in the country with 60% market share. Since 75% of its revenues generated between April and September, this is prime time for the company. Cramer congratulated Jim Hagedorn on the 50% rise in stock price since he last appeared on the show and asked him about the company's growth prospects. When asked how much weather affects sales, Hagedorn responded; Everybody always asks, how do I know about your business? And all I tell people is look outside.
Hagedorn said that since "one-third of people don't do anything for their lawns and two-thirds don't do enough" there is plenty of potential demand to be tapped. The new trend of home-grown vegetables is "Just crazed. Last year, more vegetables sold, more home growing stuff sold than flowers. Which is, I mean, that is huge."
The company is grabbing still more market share with the improvement of its exposure in the southeast United States. Scotts has very little exposure to Europe, and Hagedorn dismissed an analyst's comment that Scotts' raw costs might be too high. The CEO said most of the raw costs are actually declining and lower oil prices are helping the company. Hagedorn says he plans to use Scotts surplus cash to buy back stock and raise the dividend.
I am all for having quick executions of your trades. I am all for the internet. I am all for electronic trading, but I am all against farce. When it comes to your money, your hard earned dollars, and farce is what I saw today… and I am furious.
Cramer added that the action yesterday demonstrated the high cost of having, "quick institutions and quick trading companies… that are too fast and too sophisticated for our own good."
One important thing to remember is, "these things we own called stocks are not cash." Cramer recalled 2008, when he suggested investors have sufficient cash available for the next 5 years... He urged investors to review their portfolios and weed out stocks that aren't working for them to generate more cash. He would take profits on any lift and buy good stocks on declines.
"Do you have enough cash? That should be your question," Cramer said.
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