Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday July 21.
Ten Tailwinds for Stocks: Apple (NASDAQ:AAPL), 3M (NYSE:MMM), Qualcomm (NASDAQ:QCOM), Eaton (NYSE:ETN)
The 109 point drop in the Dow was not because of recent earnings, which were strong, but because of negative comments by Fed Chairman Ben Bernanke. Recently Washington has been "correction central" and when things are smoking on Wall Street, the government pours cold water on potential rallies.
Ben Bernanke made dire statements about the state of the economy and with the employment number expected to be low and with lackluster forecasts of August's labor report, his remarks are not unfounded. However, the worst is over, said Cramer, who identified 10 tailwinds driving stocks forward.
1. China is back. The Baltic Freight Index has been up for three straight days because of increasing demand from the Middle Kingdom.
2. Brazil is hot. Many companies are mentioning demand in Brazil in the same breath as China and the United States, and are benefiting from Brazilian strength.
3. Europe is stabilizing. The euro is showing signs of strength and Europe's banks appear to be on the road to recovery.
4. Financial regulation has been passed, so anxiety over proposed reforms has abated.
5. Gridlock in Washington. If the government is prevented from functioning, it is therefore prevented from messing with Wall Street.
6. Bernanke is doing a great job. Interest rates are where they should be and there is no inflation.
8. Valuations are "very, very cheap."
9. Investor sentiment is so bearish it can only get more bullish.
10. Long term stock charts are looking better.
Weatherford International (NYSE:WFT)
With the Chinese economy revving up once again, Cramer sees a bull market in oil, and the black gold has just reached a 3 week high. Weatherford reported a "terrific upside surprise" Wednesday morning, and Cramer would buy the stock on the strength of its solid quarter. Weatherford is the fourth largest oil service company, and Cramer called it an "anti-Gulf of Mexico" play. It trades at a 25-30% discount to its competitors. Currently the stock is down because of a series of earnings disappointments which were the result of Weatherford not downsizing during the recession. As a result, the company is in full operation and is "in the sweet spot" for an international oil recovery. Weatherford has significant exposure to Irag and should soar once the political situation in Iraq stabilizes.
Weatherford's recent quarter is a sign that its losses are behind it; the company beat estimates by 11 cents, increased revenues by 2.3%, and its margins expanded by 175 to 400 basis points. Domestic revenues were up 6% since last year and overseas, they rose 7%. Weatherford is one of the few oil companies that has been able to raise prices. Cramer thinks Weatherford is ready to accelerate in the second half of the year.
CEO Interview: David Demshur, Core Labs (NYSE:CLB)
Raising dividends is one of the clearest signals a company can send that it has confidence in its business. Case in point. Core Labs (CLB) raised its dividend by 20% early in the year. Cramer suggested buying if February at $59.72, and since then it has caught a 37% gain and is at $82. Core Labs beat estimates by 3 cents, saw increased revenues and raised guidance. Its production management business was up 53% and the reservoir management segment rose 8%. With Core Labs up 88% this year compared with 11% for the S&P, Cramer thinks it is likely the company will issue a special dividend, as it hinted a few months ago.
David Demshur discussed the fact that Core Labs has only a tiny exposure to the Gulf of Mexico, about 2%, compared to the 70% of it revenues which come from overseas. The company currently has 6 projects in Southern Iraq, and its goal is to help boost production there to its peak 1978 levels. Core Labs is also focusing on projects in oil and gas shales in the U.S. and Canada. Demshur indicated the company would likely return more to shareholders as Core Labs continues to grow.
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