Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday April 24.
Revenge of the Nerds: Apple (NASDAQ:AAPL), Lam Research (NASDAQ:LRCX), Texas Instruments (NYSE:TXN), AstraZeneca (NYSE:AZN), Zimmer Holdings (ZMH), Stanley Black & Decker (NYSE:SWK), McDonald's (NYSE:MCD), D.R. Horton (NYSE:DHI), Caterpillar (NYSE:CAT). Other stocks mentioned: Pfizer (NYSE:PFE), Under Armour (NYSE:UA), Hershey (NYSE:HSY), ServiceNow (NYSE:NOW), Thermo Fisher (NYSE:TMO), Yahoo (NASDAQ:YHOO), General Motors (NYSE:GM), Alibaba (ABABA)
Regardless of the sector, the "nerd" stocks, those of companies that have been greeted with low expectations, were rallying on Thursday. Cramer discussed the top 10 "nerds."
1. Apple (AAPL): Few thought Apple had growth coming into the quarter, and Apple has been losing out to competitors. Apple reported data that showed its ecosystem is back, sales are great in China and the company is brimming with cash. It is selling at a multiple of just 12 and is doing a 7 to 1 stock split. The stock rose 8.2%.
2. Lam Research (LRCX) has a multiple of just 10, has been taking market share and has made good acquisitions. LRCX is executing well and rallied 11.5%.
3. Texas Instruments (TXN) made a "winning" merger with National Semiconductor a few years ago, although there were many skeptics. It rose 4.3% in one session.
5. Zimmer Holdings (ZMH) is buying one of its competitors and rose 11% on the news.
6. McDonald's (MCD) is keeping costs under control and is performing well in spite of the fact that the general trend is toward healthy eating.
7. Stanley Black & Decker (SWK) has missed quarters in the past, but this time, every segment performed well in the U.S. and in Europe. The stock rallied $3.
8. D.R. Horton (DHI) reported a quarter so strong, "I had to read it twice," said Cramer.
9. Timken (NYSE:TKR) disappointed a few quarters ago, but steel is getting hot; the stock rose 6.5%
10. Caterpillar (CAT) reported terrific numbers in construction domestically, and it is restructuring. Its raw costs are declining. The stock rose $2.
Cramer discussed a few "cool kids" that disappointed. Under Armour (UA) got hammered because of excessive spending, even though the quarter was good. ServiceNow (NOW) reported great revenues, but fell dramatically because of lack of earnings. Hershey (HSY) has growth, but not enough for the street.
Cramer took some calls:
Yahoo (YHOO): Alibaba (ABABA) is probably going to be worth $250 billion, and Yahoo is a screaming buy.
General Motors (GM) reported a great quarter, but people are still worried about it. Cramer's charitable trust is buying the stock at this level.
Thermo Fisher (TMO) tends to report a good number, but then doesn't guide high enough. TMO is a Buy.
Expect the Unexpected: Facebook (NASDAQ:FB), American Airlines (NASDAQ:AAL), United Continental (NYSE:UAL), Xilinx (NASDAQ:XLNX), Celgene (NASDAQ:CELG). Other stocks discussed: Ariad Pharmaceuticals (NASDAQ:ARIA), Gilead (NASDAQ:GILD), Chipotle Mexican Grill (NYSE:CMG).
Facebook (FB) reported a great quarter with accelerated revenue growth, but didn't discuss a buyback or a dividend and "threw cold water on the future." Cramer thinks FB's management is underpromising to temper expectations with talk of tough comparisons and some delays in monetization, but it still has strong growth and earnings. FB sold off after the opening, and it is a cheap stock on earnings. FB is radically underpromising, but he expects it to radically overdeliver.
American Airlines (AAL) has a similar story. It is flush with cash and reported magnificent sales and earnings, but it had the misfortune to report on the same day as United Continental (UAL), which had dismal numbers. Cramer thinks AAL would have risen higher if it had reported the day before UAL.
Xilinx (XLNX) reported a strong number but gave "hideous" guidance. Cramer's charitable trust bought some in weakness. Cramer thinks management was too bearish. Celgene (CELG) reported that Revlimid failed to deliver and its numbers were just in-line. It reaffirmed its guidance and is likely to come back, but it doesn't have the dividend advantage. Until then, "It's cheap, but so what." The stock is down 17% year to date.
From these examples, Cramer thinks the kind of stocks that have been delivering for the past few years, high growth momentum stocks, are not impressing the street the way they used to.
Cramer took some calls:
Ariad Pharmaceuticals (ARIA) is on the lower end of the speculative quadrant in biotech. It isn't worthwhile to "go down the food chain" to ARIA.
Chipotle Mexican Grill (CMG) is facing a headwind with rising food prices. Until prices fall, it will likely continue to struggle.
CEO Interview: Martin Anstice, Lam Research
Lam Research makes equipment that is used to make semiconductor equipment. Currently, there is a move to smaller chips, so chipmakers need to upgrade, and demand for Lam's equipment is likely to rise. Lam bought Novellus in June 2012, and its recent quarter saw an 8 cent earnings beat with a 10% rise in revenues and an 11% increase in shipments. Management gave bullish guidance, and the stock rose 11.5%. Lam is taking market share and is growing 3 times faster than the industry, but trades at a modest 12 times earnings. The company spends a large amount on R&D, and CEO Martin Anstice says this is necessary to deliver results and size market share. Lam has a significant amount of cash which Anstice says will be invested into growing the company. "This is too cheap a stock for the opportunities you have," said Cramer.
CEO Interview: Frank Slootman, ServiceNow
ServiceNow (NOW) is a high-quality cloud stock in an environment when cloud stocks are getting pummeled. NOW has an easy-to-use cloud platform that allows IT departments to develop their own applications. NOW has a total addressable market of $12 billion. The cost of ownership for its software is 50% cheaper than the competition. NOW rallied from $51 in October to $70 in March; since then, the stock gave up all of its gain. The company reported an 8 cent earnings loss which was in-line with expectations. Revenue rose 62% yoy. Billings rose 64% yoy, and 9% since the previous quarter, and management gave bullish guidance, but the stock dropped.
CEO Frank Slootman said the company has benefited from the massive refresh cycle in IT departments. He admits he is "puzzled" by the sentiment in the marketplace, but he believes it will resolve itself as the company continues to grow. Cramer commented, "The street has just turned (its back) on revenue growth."
CEO Interview: Rick Hamada, Avnet (NYSE:AVT)
Avnet (AVT) is a stock Cramer has called, "the largest supermarket of tech." The stock missed earnings by 5 cents on lower than expected revenues, and the stock fell 6%. Business seemed to go well at first, and then, later in the quarter, it went soft. CEO Rick Hamada talked about the "week 13 anomaly;" a shortfall that occurred late in the quarter and mainly in North America. He doesn't believe that there is a secular trend behind the shortfall, but management will keep an eye on the pipeline. The CEO thinks that many companies are delaying, rather than eliminating, new purchases. Avent has strong cash flow and Hamada said the company will be prepared to buy back stock at the right level. Since Avnet has been consistent, this was indeed a "puzzling" quarter, said Cramer, who recommends doing homework in Avnet before buying.
Get Cramer's Picks by email - it's free and takes only a few seconds to sign up.