Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday May 7.
An Alibaba IPO Has All The Hallmarks Of Disaster. Stocks mentioned: Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG), (NASDAQ:GOOGL), Yahoo (NASDAQ:YHOO), Yandex (NASDAQ:YNDX)
This market needs an IPO for Alibaba like it needs "a hole in its head." This IPO could cause so much to go wrong. "It may be the most fraught aspect of the current stock landscape...and you know what really slays me? It can't be stopped." The now broken bull market will not be further wounded with this deal, but will die. Alibaba's deal will suck the life out of Facebook (FB), Amazon (AMZN) and Google (GOOG), (GOOGL). Alibaba has huge customer growth and has 57% revenue growth, which will accelerate as more people in China go mobile. It has a gigantic operating margin of 48%. After all of these positives, however, investors of other ecommerce plays will likely sell shares to buy Alibaba. Another question, is Yahoo (YHOO) cheap or will the company be considered "undermanaged and worthless" away from Alibaba?
The "real elephant in the room" is the fact that Alibaba is dependent on China, which can be volatile. Poor economic numbers are coming out of China, the company might fall afoul of the Communist government and there is likely to be competition with Alibaba. "It has all the hallmarks of disaster," Cramer said of the IPO. There is confusion over pricing and ownership structure, but money managers will have to see Alibaba as "too big to ignore." The only hope, Cramer said, is that "everyone will revile this as much as I do," but he doubts this will happen.
"Wrong time, wrong business, wrong cohort," is the "Alibaba deal in a nutshell."
3 Kinds of Investors: FireEye (NASDAQ:FEYE), Twitter (NYSE:TWTR), King Digital (NYSE:KING), Alcoa (NYSE:AA), Pioneer (NYSE:PXD), Cimarex (NYSE:XEC), Procter & Gamble (NYSE:PG), General Mills (NYSE:GIS), Mondelez (NASDAQ:MDLZ), Pfizer (NYSE:PFE). Other stocks discussed: Level 3 Communications (NYSE:LVLT), Devon Energy (NYSE:DVN), AOL (NYSE:AOL)
There are 3 major kinds of investors and traders in the current environment. The first group are those that chased momentum and now are selling high-flyers like Twitter, (TWTR), FireEye (FEYE) and King Digital (KING). In addition to being sold off because of its sector, Twitter had lockup expiration to deal with; FireEye, which was trading on a plethora of contracts, has given up all of its gains, and KING's lackluster IPO signaled the cooling off of these deals.
The second kind of investor is taking their cue from strong economic indicators, such as the positive jobs number and construction, and is buying stocks like Alcoa (AA), Pioneer (PXD), EOG Resources (NYSE:EOG) and Cimarex (XEC). The third kind of investor is turning away from growth and running towards safety into stocks like Procter & Gamble (PG), General Mills (GIS), Mondelez (MDLZ) and Pfizer (PFE).
Cramer took some calls:
Level 3 (LVLT): "I like it. It is the right place to be."
Devon (DVN) is going higher. "It is in the right spot now after some real underperformance."
AOL (AOL): The cash flow number was bad, but Cramer said he "wants to do more work on it," before opining.
Half A Heart About Whole Foods (NASDAQ:WFM). Other stocks mentioned: Wal-Mart (NYSE:WMT), Kroger (NYSE:KR). Other stock mentioned: Perrigo (NYSE:PRGO)
"What the heck do we do with Whole Foods (WFM) here?" Cramer would recommend shopping there, but after disappointing earnings, a multiple quarter guide-down in earnings and the stock price down 33% so far this year, he would wait on buying the stock. WFM is a stock money managers will pay less and less for, given its many disappointments. WFM still has the advantages of brand loyalty, but competitors are popping up, not only specialty health food plays, but even among conventional stores like Wal-Mart (WMT) and Kroger (KR), which are beefing up their natural and organic aisles. WFM is still best of breed, but it might have to sacrifice some profitability, at least in the short run, to compete. WFM is likely to be a buy down the line, but not yet. "Whole Foods will ultimately win" this match, but it might get ugly until then for WFM.
Cramer took a call:
Perrigo (PRGO) tends to swoon after its quarter. Cramer would wait a few days and see if it settles down.
Cramer took a call:
Yandex (YNDX) "Let this one lift a bit before selling," said Cramer.
CEO Interview: Alan McKim, Clean Harbors (NYSE:CLH)
Clean Harbors (CLH) is the largest hazardous waste disposal company in North America, with exposure to incinerators, landfills and disaster relief services. The stock was a steady grower, but since 2012, it has traded sideways. The company missed earnings in February and declined 14% in a single session. The stock has rebounded on the news that an activist hedge fund has taken a substantial stake in the company. CLH recently beat earnings by one cent and revenues rose, thanks to its oil and gas cleanup business. Will this stock keep climbing, or will it stall out? CEO Alan McKim discussed integrating acquisitions and strategies to improve return on capital. "In the long run, (the acquisition) Safety Clean will be a home run for the company ... we did overpay ... but when you think of the network it has ... we are absolutely excited about it." Safety Clean was a battered company when it was acquired, and CLH is revamping the acquisition. Cramer thinks the company could be "starting its next leg up."
CEO Interview: Martin Richenhagen, Agco (NYSE:AGCO)
Agco (AGCO) is the third largest producer of agricultural equipment in the world. It gets the majority of its sales from tractors, but it provides a whole range of products. The agricultural environment is tough, with farmers spending less on new equipment, but Agco is cutting costs, taking market share and buying back shares. The company beat earnings estimates by 27 cents with higher than expected revenues. The stock got hit because of general worries about the sector. The stock has gained 6% since Cramer last spoke to the CEO 3 months ago.
CEO Martin Richenhagen thinks the long-term story for Agco is good, given the growing global population. Cramer asked about geopolitical tensions, since Agco has joint ventures in Russia and Ukraine. Richenhagen says unless there are severe sanctions, the Russian business won't be affected very much, and the unrest in Ukraine is mainly in the cities, not in areas where Agco does business. "In fact, our business in Ukraine is better than we expected," said the CEO. Cramer would keep Agco on the radar.
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