Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday July 27.
CEO Interview: Alan Mulally, Ford (F)
Ford (F) CEO Alan Mulally dropped by "Mad Money" for a surprise visit. Cramer has said that Ford is "the greatest turnaround story in American history." Mulally was pleased at the strongest quarter he's seen in ten years, the removal of $7 billion of debt, and Ford's strong position worldwide, rating first or second in 19 to 21 markets.
Mulally said the company is "on the way to where we want to be, and that's investment grade." Although dividends weren't mentioned on the conference call, Mulally said there could be a chance for a dividend for the common stock in about 18 months. When asked about unions, Mulally sounded confident that his company could provide "profitable growth for all" including Ford's workers. While China hasn't been discussed often, Mulally says "the Ford brand is fantastic in China," and he intends to "expand as fast and as prudently as possible."
While stocks seem to be certifiably crazy sometimes, there must be a method in the madness of Amazon's (AMZN) recovering 13 points after falling 15 points on a disappointing quarter. There was no additional news that caused this U-turn.
Cramer says it was purely due to the technicians who noticed Amazon reached "support" level and then started buying like mad. In true fashion of a self-fulfilling prophecy, the stock rose. The momentum kept building and the stock never broke out of its "continuation pattern." Technician Tim Collins noted something similar happened to Amazon in February and it flatlined for a month after the rally. Cramer thinks the same thing will happen now, but for the time being, it is a tug of war between bulls and bears over Amazon. Collins would consider starting a position at $114 and putting in a full position at $105.
While the charts have influence, Cramer emphasized that he is a fundamentalist and not a technician. He likes Amazon long-term and is neutral short-term until he sees a strong quarter.
The Irresistible Power of Rotation
Cramer demonstrated the power of rotation. It is like a blind taste test when someone cannot distinguish between brands. The market was saying pretty much the same thing about stocks, and sent up every kind of stock in certain categories without regard to performance of individual companies. Consumer goods were all useful and tasty, but industrials and steels were crushed. However, the market is showing some signs of reason.
First industrials have been rallying lately, so there was every reason to expect a sell-off. Commodities have "fallen off a cliff" which is a signal that the economy isn't so sturdy after all. There are also concerns about Thursday's jobs number and next week's labor report.
Utilities are strong, partly because cap and trade legislation seems not to be moving, but another reason is investors are looking for safety because they feel the economy is not on solid ground. Cramer advises taking gains if there are too many "hot" stocks in a portfolio, but for a diversified portfolio, he recommended holding steady.
One viewer asked if it was better to buy more shares of El Paso (EP) at $12 than to buy fewer shares of Kinder Morgan Partners (KMP) at $60. Cramer says it is worth paying up for Kinder Morgan, because the company is best of breed and El Paso is not. Cramer told another viewer to hold on to DuPont (DD) which reported a "remarkable quarter."
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