Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday April 22.
CEO Interview: David Lesar, Halliburton (NYSE:HAL)
Halliburton (HAL) reported an "amazing" quarter, with a one cent earnings beat, revenues that rose 5.4% yoy and positive guidance. What was unique about this quarter is that management reported stronger activity and higher utilization. Management predicted it would grow EPS at a 25% clip. The company is benefiting from the domestic oil boom; 55% of its revenues come from the U.S, but CEO David Lesar said that business in the Middle East, particularly Saudi Arabia, is also strong. Lesar said he is "starting to feel the turn" in North America and believes the oil boom will create many more jobs. The company bought back 11% of its shares last year and raised the dividend. Halliburton provides its clients with proprietary technology, including chemicals that enable drillers to get more oil out of the ground and artificial intelligence-driven software that helps determine where and how to drill on certain sites. Cramer has been behind HAL for a long time; "It has been a remarkable performer," he said.
New Market Leaders: Netflix (NASDAQ:NFLX), Zillow (NASDAQ:Z), Google (NASDAQ:GOOG), (NASDAQ:GOOGL), Facebook (NASDAQ:FB), Allergan (NYSE:AGN), Gilead (NASDAQ:GILD), Home Depot (NYSE:HD), United Technologies (NYSE:UTX), Halliburton, Harley Davidson (NYSE:HOG). Other stocks mentioned: Eagle Rock (NASDAQ:EROC), Akebia Therapeutics (NASDAQ:AKBA), Yelp (NYSE:YELP).
The Dow rose 65 points on Tuesday, as sectors that had been "left for dead" rebounded. Hedge funds that had been shorting biotech and momentum stocks received an unpleasant surprise. Netflix (NFLX) has been punished since March, when the momentum tech stocks fell out of favor, but delivered an amazing quarter with great news about international expansion. Zillow (Z), Facebook (FB) and Google (GOOG), (GOOGL) rose on NFLX's strength.
News about a hostile takeover bid for Allergan (AGN) and robust earnings for Gilead (GILD) caused healthcare stocks to bounce back. As long as biotech IPOs slow down, this sector should rebound. Retail also perked up with an upgrade for Home Depot (HD) and a good quarter from the ultimate discretionary spending play, Harley Davidson (HOG). Oil had a down day, which helped retail and aerospace. In the industrials sector, Halliburton (HAL) and United Technologies (UTX) are seeing strong sales growth. Cramer noted that when sectors rebound so dramatically, they rarely do so for just one day, and there may be more upside ahead.
Cramer took some calls:
Yelp (YELP) is a high-flyer. People are panicking over a promotion. It is making a comeback and is an "important new tool."
Eagle Rock (EROC) has an unsustainable yield of 12%. Cramer thinks there has to be a catch, and it is "too dicey."
Akebia (AKBA) like many biotechs, is likely to recover. Not all stocks in the sector will remain strong after a rebound, but this one is a "keeper."
GameStop (GME) is the world's largest video game retailer. The stock roared higher on the launch of new game consoles, but soon after, the stock fell dramatically, and is down 15% year-to-date. Management gave weak guidance, and many are concerned about the future of its business model, since it is possible to download games from the internet. The stock rose 3% on its analyst day and it yields 3.2%, but 31% of GME's stock is sold short. CEO Paul Raines is bullish on the business for 2014 and said the market has a "misunderstanding about where we are." Raines doesn't believe the average customer is at the point where he or she would rather download games at home, and that people still love the in-store experience; "We are the leading seller of digital game content in stores." Raines says GME is taking market share and is not concerned about competition from Wal-Mart (WMT). Cramer suggests viewers do homework on GME and make their own decisions about the stock.
Usually mergers are a bullish sign, but Cramer doesn't want Valeant Pharmaceuticals (VRX) along with Bill Ackman to buy Allergan in a $4.5 billion hostile takeover. Allergan rallied 28% for the year and rose another 15% on this hostile takeover bid. CEO David Pyott has put together a collection of amazing franchises beyond just Botox for cosmetic uses. It has spent 16% of its revenues on research to find multiple uses and new treatments for eye diseases, incontinence and migraines. Allergan is a "research machine." When the stock was down dramatically in August because of rumors of a generic challenge to its eyecare drug, David Pyott made a strong case for the stock, and the stock has doubled since. The reasons for the takeover are synergistic and not necessarily to create the most sustainable growth. Cramer is concerned that radical cost-cutting will destroy the company culture that has been working well so far. "Pyott deserves better," said Cramer.
Cramer took some calls:
Pain Therapeutics (PTIE) is a stock Cramer wants to do more research on. He usually prefers Alkermes (ALKS) for pain medication. Alkermes is up 15% for the year and has a tax advantage from its location in Ireland.
Halozyme (HALO): Cramer likes biotechs that have a strong product profile. HALO was an "FDA roulette" play, and it "is no Gilead."
Kinder Morgan Partners (KMP) is a major pipeline play with a $16 billion backlog of projects for the coming years. The stock has been treated like a "punching bag" because MLPs are considered "bond equivalents," and when interest rates were rising, this sector suffered. Even with the easing of rates, KMP hasn't bounced back as much as other MLPs, although Cramer thinks the stock deserves to be higher. The company beat earnings by 6 cents and has a distribution of 7%.
CEO Rich Kinder thinks that the street is under the impression that Kinder Morgan is too large to grow substantially. Kinder countered, "We have a lot of room for growth left," and mentioned the company's backlog and its natural gas assets. He expects 5% growth for KMP and 8% growth for Kinder Morgan (KMI). In all of his years in the oil and gas business, he declares, "Those are damn good numbers." Cramer thinks Kinder Morgan is the cheapest MLP and is bullish on the stock.
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