Cramer's Mad Money - How Do You Solve a Problem Like Nvidia? (6/16/10)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday June 16.

CEO Interview: Jen-Hsun Huang, Nvidia (NASDAQ:NVDA). IBM (NYSE:IBM), Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL)

Many people aren't sure what to do with Nvidia. For one thing, the stock has dropped from $15 in September to its current level of $11.40. The company gave disappointing guidance, and there are worries its new line of graphics chips will be too expensive. However, the company has some excellent contracts, and is the provider of chips for IBM's (IBM) new server line and Microsoft's (MSFT) smart phone. The stock trades at a multiple of 11 with a 14% growth rate and has $3 of cash per share.

CEO Jen-Hsun Huang says European woes are a main problem faced by the company, but notes this issue is affecting the entire tech sector. However, Huang sees many opportunities for growth and notes that while Apple (AAPL) makes its own chips, most companies don't have that luxury and need Nvidia. Cramer concluded the stock is too cheap at its current level.

What the President Didn't Say: BP (NYSE:BP), Schlumberger (NYSE:SLB)

Although President Obama addressed a variety of issues in his speech from the Oval Office, Cramer concentrated on a few key points the President missed in his address.

First of all, Cramer praised Obama on his general handling of the Gulf of Mexico crisis, from demanding BP issue a bond to pay for its liabilities to promising to reform the corrupt bureaucracy, but he thinks the President owed the American People an apology for trusting the oil company in the first place, and believing BP's (BP) initial claim that only 5,000 barrels a day were leaking. Would a major oil company like BP waste its money, including the $500,000 a day in rig rental, if the output were so small?

Of course, Cramer doesn't expect the President to be an expert on oil output and rig rental rates, and that is the reason Obama should have been on the phone to Schlumberger (SLB),) CEO Andrew Gould, or retired oil executives who could have assessed the situation.

Finally, the windmills are for Don Quixote. Cramer thinks the President should have discussed a more realistic energy alternative than wind power, and reiterated his recommendation that Washington get behind natural gas, which is a plentiful, clean and efficient alternative fuel. America is the "Saudi Arabia of natural gas," said Cramer, and there has not been a single fatality caused by a natural gas drilling accident. While there are worries about minor cases of water contamination, these accidents, unlike oil spills, can be easily contained.

No More Flash Crashes: Special Guest Senator Ted Kaufman (D-Del), Diebold (NYSE:DBD), Washington Post (WPO)

While there has not been a complete repeat performance of the "flash crash" that brought stocks down nearly 1,000 points on May 6, there are "bungee jumps" here and there where a stock is taken down or up dramatically before it recovers. On June 2, Diebold (DBD) lost 35% in six seconds, and Tuesday the Washington Post (WPO), caught a double before dropping to its normal level. "Nothing is fixed," declared Cramer who laments the fact that much of the market is being driven by high-frequency trading, and a few institutional traders control 80% of volume on any given day.

Senator Kaufman said high frequency trading has mushroomed from 30%-80% in the past four years, and given its lack of visibility and regulation, many investors are starting to mistrust the market. Investing in America could die a "death of a thousand cuts" if reforms are not adopted, and Senator Kaufman resolved to use his influence to create change in the status quo.

CEO Interview: Jason Rhode, Cirrus Logic (NASDAQ:CRUS)

Cramer called Apple (AAPL) an "island of sanity" in an insane global market, and declared Cirrus Logic (CRUS) is the best play on the maker of the iPhone. Cirrus derives a third of its revenue from Apple and produces the device in iPhones and iPods that converts sound into a transmittable data stream and vice versa. Cirrus' technology produces higher quality sound and requires less energy to operate. While its stock price is up 30% since May 10th, Cramer thinks its shares could still go higher.

Jason Rhode said "focus" was the main recipe for the company's success, and added while the company can sometimes be bombarded with brilliant ideas from tech engineers, Cirrus chooses to focus on developing a few at a time. He credited the "fabless" model for making it easier to choose the technology appropriate for each specific kind of chip. Rhode said the "smart grid" backed by Obama will drum up plenty of business for the company and its exposure to the car audio market is driving growth in the company. Cramer thinks Cirrus has more room to run.


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