Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday June 23.
Advice for GM's (OTC:MTLQQ) IPO, Citigroup (NYSE:C), Primerica (NYSE:PRI), Mitel Networks (NASDAQ:MITL)
Cramer doesn't think the government is handling the sale of its stake in Citigroup very wisely and is guilty of "sloppy selling" which is unfairly bringing down the bank's share price. However, he would use this as an opportunity to buy.
The GM IPO will be "the biggest IPO of the year, perhaps all time," and has to be handled with skill. Cramer hopes the government will take an intelligent approach to spinning off GM, and will learn from the best IPO of 2010 so far, Primerica (PRI) and the worst, Mitel Networks (MITL).
Primerica went public on March 31 at a price of $15, and popped 7% to close at $19.15. The stock is currently at $22. What did Primerica do right? It wasn't too greedy with its pricing. "The valuation was too compelling." This best of breed insurance company was priced below its competitors. Cramer also praised the insurance company for having a clean balance sheet and excellent management.
Mitel Networks, however was priced at levels comparable to successful competitors when the company was not at the top of its class. On April 21st, the stock's IPO was $14, but it quickly dropped to $12.75, and is now stuck at $8.79. If Mitel had not been so greedy with its pricing, the IPO might have performed better, although the company is saddled with significant debt.
Cramer's advice to GM? First, they should follow Primerica's lead about modest pricing, get rid of its significant debt and ensure there is not too much overhang from the large share held by the Government and United Auto Workers Union.
While money managers might be driving up positions for end of the quarter markups, Cramer urged investors not to be fooled; "There is not much growth in this country," he declared and suggested looking north for growth to Canada, a country with a strong currency and a paucity of doom and gloom.
Telus Corporation (TU) is a Canadian telecom with a strong 5% dividend yield and a 28% share in the Canadian market, which is one of the least saturated in the Western world; only 68% of Canadians have cell phones. Wireless is a full 50% of Telus' business, and the company is expanding further. While AT&T (T) and Verizon (VZ) are struggling with huge infrastructure costs and the need to build more towers, Telus doesn't have such worries, since the industry has yet to develop to its full potential in Canada. Telus has time and the ample opportunity to concentrate on growth.
What's with the Handwringing About Housing? Lowe's (NYSE:LOW), Fortune Brands (FO), Toll Brothers (NYSE:TOL), Ford (NYSE:F)
The bulls and bears slugged it out on Wednesday; while the Dow closed only 5 points up, it was recovering from a 73 point drop at one point in the day. One thing Cramer said he could not believe was the handwringing over the housing number. Sure it was the lowest drop since the 1960s, and only 300,000 homes were bought in May. However, he insists these results were anticipated by the punishing housing and housing related stocks have suffered for months, and any decline was to be expected after the expiration of the tax credit for first-time homebuyers.
"Don't get me wrong," said Cramer. "The numbers were awful." But May was awful, the month that "trashed the national psyche" with the neverending oil spill, the flash crash, despair in Europe and unemployment at home. Right now, housing is so hated that he would buy, since he is a long term bull on housing and even predicts a housing shortage by 2012.
Although he has "hated" Lowe's (LOW) he thinks its drop from $28 to $21 is attractive, as well as Fortune Brands' (FO) decline from $54 to $42. Toll Brothers (TOL) reported business is light, but the last time it was at $17, business was "hideous" and Toll Brothers is a much stronger company now than it was then.
Things weren't completely dismal in the housing sector; stocks perked up by the end of the day, as investors sensed the hammering was too severe. Cramer would buy some housing stocks before more investors wake up to the bullish long-term housing story. He compared the current decline to the disappointment in the auto industry after the expiration of the Cash for Clunkers program. That is when he recommended Ford (F) and then caught a double.
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