Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday June 29.
While the fnancials did not rally in the aftermath of financial reform legislation, as Cramer expected, mainly because the vague mess of detailed regulations provided no real clarity. What immediately followed the reforms was a 24 hour relief rally followed by a devastating selloff of the banks.
The one bank whose fundamentals and chart point to an upturn in the near future is Citigroup (C), that "helpless, pitiful giant" that sits at $3 and change after a botched selloff by Treasury and Morgan Stanley (MS). The selloff should reach its halfway point this summer and Citigroup should have some pressure, but it will prevail.
The Street.com technical analyst Tim Collins sees a rising wedge formation where the lows get higher and the highs stay constant. The 14 day moving average is crossing over Citi's 34 day moving average, which means the company's short-term trajectory is becoming stronger; the stock moved up 50% the last time this happened. Citi's Relative Strength number is moving up and is approaching breakout level, and its On Balance Volume is moving up to form a Bullish Divergence. According to the chart, Citi is oversold, and a bullish crossover will likely produce the same huge rallies in the future as it has in the past. Collins thinks $3.80 is a good entry point and predicts the stock will rise anywhere between $4.60 to $5.
Concerning the fundamentals, Cramer has faith in CEO Vikram Pandit, thinks the bank has the right balance between domestic and international exposure, and has little exposure to housing, which is an area of concern right now. His long term target for Citi is $12 and he would go ahead and buy the stock. Concerning the effect of financial reforms on Citi, Cramer insists "the worst of its problems are over."
Cramer described Tuesday as a "horrible, stinking bad day" reminiscent of "Stalingrad or Verdun." The Dow sank 268 points and the S&P dropped 3.1%. However, he doesn't think the real news is as gloomy as the headlines or the performance of the major indexes.
The market is saying there will never be another job created again, there will never be another loan, there will never be another house sold (in spite of the low 4.5% mortgage rate, the end of the homeowner tax credit was supposedly the end of everything housing.) The market is saying no one will ever make or buy a car again, there will be no trade with China, there will be no energy consumed and no one will ever buy another Starbucks (SBUX) latte for $4.92.
Cramer's translation: job losses have slowed, banks want to lend but they need small businesses to lend to, there is a pent-up demand for homes ("after all, people still get married, have babies, get divorced or get tired of living with their mother-in-laws"). Fewer homes are being built, so demand will increase. Car sales are strong, according to CarMax (KMX). Even if numbers out of China were not so hot, Cramer believes in the shrewd, capitalist strategies of the Communist country. Energy is still in demand, Darden Restaurants (DRI) reported that people are still going out to eat, and even though tech was bad on Tuesday, the general trend, particularly for Apple's (AAPL) products is still good.
Cramer suggested investors get out their shopping lists and start buying into weakness because while happy days are not yet here again, things are not as bad as they seem.
On Tuesday, Cramer featured another "gloom busting" stock, Accenture (ACN), which works with software companies to suit their clients' applications. Accenture is a play on businesses' willingness to spend money to save money. Analysts were expecting a poor quarter from Accenture, but instead, the company beat estimates and raised guidance. The company discussed accelerating growth in the management consulting business, which produces 58% of the company's revenues. Cramer noted the tone of enthusiasm in Accenture's call:
We are very pleased with our performance in 3Q. Which showed positive growth, strong overall results and building momentum in our business. Equally exciting, we see increasing demand for many of our new services and offerings across both management consulting and technology.
The key metric for Accenture is bookings, and the company is increasing its bookings to $19.5 billion (Cramer was expecting 15). Even though the macro situation looks gloomy, Accenture keeps hiring and is flush with cash. The stock is currently down 13% from its 52-week high and has a multiple of 13 down from 18. Given its continued growth, Cramer thinks Accenture is a buy.
Eureka Moment: The Next Big Export
Cramer hit on the ultimate irony: While America is the "Saudi Arabia of natural gas" it might become the largest exporter of the fuel rather than meeting its own energy needs. In spite of the good news about natural gas, that it is clean, plentiful, cheap and will create jobs, it seems likely that the U.S. will sell this commodity while importing foreign oil. Given foreign demand, "We no longer need the U.S. for natural gas to work."
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