Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday May 14.
Timothy Geithner's Stress Test
After reading former Treasury Secretary Tim Geithner's book Stress Test, "You might never buy a bank stock again," said Cramer. Geithner discusses all of the big players in the financial space, how the corruption and obfuscation of some banking CEOs brought the financial sector so low that the country could have actually fallen into a second Great Depression. While these CEOs were not jailed, the entire banking sector is now paying the penalty through necessary regulations that will keep bank stocks down for a long time. "This is the most cautionary tale I have ever read about a sub-set of an asset class," said Cramer.
The New Frugality. Stocks mentioned: Pier One Imports (NYSE:PIR), Rite Aid (NYSE:RAD), SandRidge Energy (NYSE:SD)
"Has our psyche changed since the Great Recession?" asked Cramer, calling the decline in interest rates "shocking." In the past, a decline in rates usually caused a rally, but now, people smell a recession when rates dip. Former Treasury secretary Tim Geithner's book, Stress Test, reveals how close the U.S. was to another Great Depression.
Years later, there are still signs of economic worry as producer prices are increasing, which is a red flag for inflation. This is usually accompanied by a rise in rates, but this didn't happen on Wednesday. The supply of high-quality bonds is scarce, so it makes sense that rates could come down as bond prices rise. The Federal Reserve is tapering bond buying, yet bonds are acting like the Fed is buying them hand over fist.
Borrowing and home buying are down in the U.S. Cramer sees a new frugality developing. The increase in auto production is not a sign of discretionary spending increases, since most Americans need cars to get to work, and cars are necessities, not luxuries. Cramer thinks fears of a recession are overblown, but Americans are going frugal, are borrowing and spending less. Cramer would buy stocks that have fallen as the result of recession fears.
Cramer took some calls:
Pier One Imports (PIR) has been dinged unfairly. It is at the right level to buy.
SandRidge Energy (SD) is a heavily speculative stock. SD is restructuring and reported a decent quarter. It is going up incrementally.
Rite Aid (RAD) is a stock Cramer has been recommending since it was at $3. It has strong earnings. RAD has a strong run, and it is digesting the move.
CEO Interview: Steve Hughes, Boulder Brands (NASDAQ:BDBD). Other stock mentioned: Wal-Mart (NYSE:WMT)
Many people are jumping on the gluten-free bandwagon, and a good play on this is Boulder Brands (BDBD). The stock rallied from $5 to $18, but the last quarter was not as strong as expected, and the stock has fallen back down to $13. The stock has popular main brands, such as Earth Balance, Smart Balance and Evol. Smart Balance has been a great legacy brand. It was the first major spread to eliminate trans-fat, and it is now becoming GMO-Free. Smart Balance is a slower growing brand than the other segments, but it still adds significant value in the company. Many people are trying gluten-free diets and are making the switch. Mainstream consumers are now concerned about what is in their food. Wal-Mart's (WMT) expansion into the space with its own brand demonstrates an opportunity for all players, since WMT's introduction of natural food to its demographic will create demand from new sources for healthy products.
CEO Interview: Doug Tough, International Flavors and Fragrances (NYSE:IFF)
International Flavors and Fragrances (IFF) creates new tastes and smells and licenses them to personal care and household products companies. The stock has returned 15% since Cramer last spoke to CEO Doug Tough 6 months ago. The stock reported a 7 cent beat with revenues up 5.8% yoy. The company has laboratories and factories overseas where IFF does significant research to determine what flavors and fragrances will be popular in various regions of the world. IFF has been successful with organic growth as well as new contracts. IFF takes into account the trend towards health and wellness, and is developing natural fragrances and flavors. "Your stock has been terrific for as long as I have known your company."
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