Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday July 28.
Special Guest: Representative John Larson (D-CT)
The Energy Bill Is Dead! Long Live the Energy Bill!
With the first version of the radical anti-climate change energy bill dead in the Senate, a new, less controversial version is on the table now. Business need no longer worry about extreme cap and trade proposals and costly reforms.
A Natural Gas Bill is expected to pass the Senate, and will have $4 billion in provisions for the adoption of natural gas. While Congressman Larson said he was disappointed some of the original provisions were dropped, he thinks the revised bill will be good for natural gas. "It's not often that you get to embrace an issue that incorporates both the environment, energy, the economy and foreign policy."
Congressman Larson summed up the bill in simple terms; "Congress will come together and pass a bill that certainly will incorporate natural gas as a cornerstone to making us energy independent." He reiterated Cramer's comment that the U.S. is "the Saudi Arabia of natural gas" with a 200 year supply of the fuel.
With energy legislation passing, Cramer discussed natural gas plays that might benefit from the reforms. He mentioned Westport Innovations (WPRT), which, along with its partner Cummins (CMI), makes engines that run on cleaner fuels, the producer of parts for cleaner vehicles, Fuel Systems Solutions (FSYS), and Clean Energy Fuels (CLNE) which designs, builds and operates natural gas fueling stations.
With the number of cleaner heavy-duty trucks expected to increase by 100,000 in three years, additional demand for natural gas might rise to 1.5 billion gallons compared to the 101 million gallons produced in 2009.
Clean Energy Fuels CEO Andrew LIttlefair said he felt confident new legislation was an essential first step to adopting natural gas as an alternative fuel. He said the key to reform is the trucking industry, since trucks are huge consumers of fuel. He thinks the low price per gallon for natural gas is going to be a huge incentive for owners of large vehicle fleets to make the switch to natural gas. Littlefair added that the bill should create 500,000 jobs, which is good news with employment so sluggish.
The Panic Strategy
On a day the Dow declined 40 points on "nothing we didn't already know" (i.e. the weak economy), Cramer wondered whether panic is becoming the new strategy. In June it seemed that Europe was going to disappear off the face of the Earth, given the dour headlines. Instead, according to earnings reports, sales have been as strong as ever in Europe. "We now presume everything is Lehman or Bear Stearns...we shoot first...we don't even question...we reload ..we shoot again...we shoot like machine guns."
While the idea that one has to get out of a rally quickly before stock prices begin to decline is understandable, Cramer thinks it is time to stop panicking and to start making money;
I think it's time, now that we've seen all these fabulous earnings... I think it's time that we un-learn the lesson of 2008, and recognize that the Great Recession and its vicious aftermath is over. I think it's time we repudiate the notion that we must sell every stock the minute something goes wrong.
Cramer blames the government for some of this bearish sentiment:
At a time when every other nation has decided how best it can work with private industry to rebuild the economy, our nation has decided that every industry is kind of run by a bunch of fat cat bankers who want to rob the working man
Other countries are recovering faster than the U.S., and Cramer thinks the government should follow their examples of working with private enterprise rather than regulating business into oblivion. And with all the strong earnings reports recently, "There is too much good going on," to get into a panic over every negative headline.
While Cramer has been a critic of ethanol in the past, at least the corn variety that drives up food prices, he said the alternative fuel has the advantage of being loved by the EPA. The amount of ethanol required to be in gasoline is expected to increase from 10% to 12% and eventually 15%, and a final decision is expected by the EPA as early as next month. Cramer, however, doesn't trust volatile ethanol stocks and would choose Deere (DE) as a play on ethanol.
Farmers are seeing substantial profits from their fields, and variable margins per acre of corn are up 53% compared to 38% last year. Deere recently raised its outlook on 2010 North American sales, and while it is only one point off its 52-week high, Cramer sees a huge upside for the company. Sales are expected to rise 11-13% this year, higher than the company's guidance of 6-8%.
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