Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday April 3.
CEO Interview: Bob Benmosche, AIG (NYSE:AIG)
AIG (AIG) has been transformed from a broken business into an insurance powerhouse. The stock has been stalled lately, but has returned 59% since Cramer spoke to CEO Bob Benmosche 17 months ago. The company should benefit from rising interest rates, because of investments it makes with clients' premiums. Bernstein Research thinks AIG's valuation could double over time, and the stock is selling at only 75% of its book value. Benmosche thinks worries over the stress test are keeping the stock down, but the company continues to buy back stock in the meantime. AIG is developing its technology and cutting expenses. Benmosche says that one advantage AIG has in terms of government regulation is that, given the fact that AIG has to be accountable to government, it inspires confidence in clients because it has to fulfill its promises. Cramer thinks AIG is the cheapest of the insurance companies he follows.
Looking For Bargains: Monsanto (NYSE:MON), PPG Industries (NYSE:PPG), Eaton (NYSE:ETN), Phillips-Van Heusen (NYSE:PVH), Nike (NYSE:NKE), Lorillard (NYSE:LO), PepsiCo (NYSE:PEP), Coca-Cola (NYSE:KO), WhiteWave (NYSE:WWAV)
On a day the Dow closed flat, Cramer discussed the value of finding bargains. Monsanto (MON) tends to decline following its earnings report. Those who bought on the decline saw an uptick in the stock, with the bonus that MON received an upgrade from JPMorgan. PPG Industries (PPG) and Eaton (ETN) dropped on disappointing numbers, but both stocks have rallied back. Stocks that have started to recover from declines, but may have more upside, are Phillips-Van Heusen (PVH), which is finally seeing its Warnaco acquisition pay off, and Nike (NKE), which is working its way up after it sold off excessively following a decent earnings report.
Cramer took some calls:
Lorillard (LO) is a buy when the price drops so that the stock yields 5%. Its dividend is currently at 4.70%.
PepsiCo (PEP), Coca-Cola (KO) are not buys now that there is a decline in soda sales. Even though PepsiCo also offers snacks, it is not as good a choice as WhiteWave (WWAV), which is cashing in on the healthy eating trend.
Even though it is already April, Mad Money has its own version of March Madness, and Thursday featured the Nasdaq playoffs. The two top performers in the index were Intercept Pharmaceuticals (ICPT), which has gained 382% so far in 2014 and Plug Power, which has risen 358% so far this year. These are both stratospheric jumps for hot stocks, and those who hold them should take gains, not just the recommended 50%, but 75% off the top. Of the two stocks, Cramer thinks the winner is ICPT, which has an orphan drug for a rare liver disease in Phase 2 tests. The fact it produces an orphan drug will give it pricing power, superior gross margins, international exposure and less vulnerability to competition than Plug Power. PLUG's advantages are its strong addressable market, its backlog and its exposure to the growing trend of fuel cells. Ultimately, the winner is ICPT, which may have more upside. Both stocks have inflated valuations, but Cramer trusts ICPT's management more, and PLUG has disappointed a few times along the way.
Veeva Systems (VEEV) has shorts crawling all over it; "Veeva is in a world of hurt." If it rallies, Cramer suggests selling some.
Urban Outfitters (URBN) has been creeping back up and is undervalued; "I want to own it," said Cramer.
On Thursday, the hot biotech and speculative cloud stocks were taken out and shot. FireEye (FEYE) dropped $6.63 in just one day, Splunk (SPLK) fell $4.56, and these weren't even Thursday's biggest losers. Both stocks have made round trips since the beginning of the year and have seen some insider selling. Both stocks, in a sense, are victims of their own success, as selling is inevitable after such outstanding gains, and selling breeds more selling. In addition, both stocks are victims of the general rotation from red hot biotech and cloud stocks into "old tech" and industrials.
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