Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday April 28.
Routing The Amazon (NASDAQ:AMZN) Army: Wal-Mart (NYSE:WMT), The Rubicon Project (NYSE:RUBI), AstraZeneca (NYSE:AZN), Merck (NYSE:MRK), Allergan (NYSE:AGN), McDonald's (NYSE:MCD), Procter & Gamble (NYSE:PG). Other stocks mentioned: Darden Restaurants (NYSE:DRI), Groupon (NASDAQ:GRPN)
Cramer said that some stocks can do no right and some stocks can do no wrong in this market. The "Amazon (AMZN) Army" is committed to growing revenues at the expense of profits. Amazon, for a while, was showing loss after loss, but it wasn't penalized, because it was investing in its business. However, the market has changed sentiment about high-flyers like Amazon, and companies like Wal-Mart (WMT), with more moderate growth but with profits, seem to be in favor. Amazon did nothing "wrong" when it reported on Friday; it reported growth as usual. It was the hedge funds that punished Amazon; stocks that follow the Amazon model are getting punished too.
In addition, companies in a space where there have been a plethora of IPOs are suffering. The Rubicon Project (RUBI) fell 16% after it was shown that two potential IPOs with similar products are waiting in the wings. Sellers are getting out of RUBI ahead of these competitive IPOs. Biotechs are also hurting, while some are trying to find their footing. Traditional pharmas like AstraZeneca (AZN), which has received a bid, Merck (MRK) which might be splitting up and Allergan (AGN), the target of a potential takeover, are heading higher.
The decline in interest rates create an ideal environment for high-yielders. Utilities are running, and Procter & Gamble (PG) and McDonald's (MCD), which did not report good quarters, are seeing upticks in their stock prices. Consumer goods, oils, industrials and pharma are the sectors to get into.
Cramer took some calls:
Darden Restaurants (DRI): Management needs to fix Red Lobster (and the whole company, for that matter) rather than just spin it off.
Groupon (GRPN) did not make the quarter. It is not likely to bounce back until it reports again.
Bank of America (BAC) discovered an error in the calculations of capital it submitted to the federal government. It may now have to suspend its buyback and plans to raise its dividend. "How could they be such a bunch of boneheads," said Cramer. The overstatement of capital is "preposterous." Many investors bought more stock on the possibility of BAC's returning capital to shareholders. "Not only are these banks too big to fail, they are too big to manage." JPMorgan's (JPM) whale scandal was the result of CEO Jamie Dimon being led astray by the London office. Citigroup (C) was denied approval because of regulatory issues related to an exposed fraud. "Maybe Citi needs to research its clients before spending the money," remarked Cramer. No matter how cheap the bank stocks look, they are not going to get a decent valuation with these "travesties."
Cramer took some calls:
Synovus (SNV) is not a great bank. Cramer recommended it as a spec at the $2 level, but he prefers a better-quality bank than Synovus.
Workday (WDAY) is a better stock than Marketo (MKTO). Workday is better able to compete, but is more expensive. These companies are going to keep correcting. Workday will rebound, but it is probably not done going down yet.
How much longer will momentum stocks be punished until they rebound? This momentum meltdown has a few things in common with the dotcom collapse, but the pain is likely to be contained to the high-flying tech sector, and probably will not spread to the entire market. Cramer consulted the technical analysis of Tim Collins of RealMoney.com to compare the dotcom names in 1999-2000 to the present tech IPOs. The dotcoms had explosive moves in 1999-2000, and by the end of 2001, the gains evaporated. There was no oversold lift or dead cat bounce, and they flatlined for years. Once these red hot stocks give up the ghost, they either expired or took many years to show signs of life. The "better" momentum names tended to rise dramatically after their IPOs and recently have fallen. Some are showing similar patterns to the dotcoms of the beginning of the century.
Collins compared Ciena (CIEN) in 2000 and Yelp (YELP) more recently. Ciena, in 2001, fell below its 40 week moving average and experienced a bearish crossover, in which the 40 week moving average crossed over its 20 week moving average. Yelp has fallen below both of these lines, but has yet to form a bearish crossover. Ciena fell from $500 to $17 in one year after it made this pattern. Amazon showed the same pattern in 2001, and then it fell off the cliff. It started to recover in 2002, but the recovery was slow. LinkedIn (LNKD) is 40% below its high, but it has more pain ahead, since it is showing a bearish crossover.
Facebook (FB) is one of the rare momentum stocks that is holding above its 40 week moving average. It is in a much less dire position than many other high-flyers. FB's fundamentals are also strong. While not all of the high flyers are the same in terms of fundamentals, Cramer would take the charts to heart.
CEO Interview: Brian Sharples, HomeAway (NASDAQ:AWAY)
Not all momentum stocks are responsible for their dramatic moves lower. HomeAway is the largest online marketplace for vacation rentals, and is profitable. The company beat earnings by 2 cents, with a 33% rise in revenues yoy. Paid listings were up by 28% and management gave upside guidance for the next quarter and the whole year. However, the stock was punished along with other tech high flyers. CEO Brian Sharples pointed out the increase in the number of people buying vacation homes and renting them out, which will benefit AWAY. Professional managers as well as private owners use AWAY's services. AWAY made an acquisition that will enable it to give recommendations for local restaurants, shopping and entertainment with properties it advertises. In the early days of the business, AWAY was concentrating on getting as many listings as possible, and Sharples says the focus now is to make the user experience easier and more pleasant for the customer. Cramer thinks momentum stocks like AWAY with actual profits are likely to bottom first.
CEO Interview: David Wenner, B&G Foods (NYSE:BGS)
This market is thirsting for yield and has a "house of brands." It is a slow and steady grower with a 4.5% dividend. It has a track record of buying neglected brands and breathing new life into them. The stock has been flat over the last year and missed a few quarters. It missed earnings by 4 cents and reported lower than expected revenues. However, management noted that volumes have improved since April. "We try to be forthright on the conference call," said CEO David Wenner, who admitted he was unhappy with the results. Sales have been rebounding since early April, but the winter storms hit the stock hard, since BGS supplies directly to restaurants, which were closed because of inclement weather. Wenner says he might consider selling off some of the smaller brands rather than major brands like Ortega and Cream of Wheat; "There is nothing wrong with these brands." BGS bought some snack brands, because this segment has higher growth in the industry. "Our company is a cash flow machine," said Wenner, with 60% of the cash flow going to dividends. "The consistency of this company is remarkable, and it belongs in your portfolio," said Cramer.
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