Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday August 23.
6 Ways to Reform the stock market
The New York Times featured an article that explains what is going on in the market; "In Striking Shift, Small Investors Flee Stock Market." Cramer is disturbed by the flight from stocks as $33 billion have been pulled out of stock mutual funds and $185 billion have been flowing into bonds, even though returns from treasuries are near historic lows and "are nowhere near what you can get with dividends."
What is startling is the brokers and the exchanges aren't doing something about the indifference about stocks. To attract investors back into stocks, Cramer suggested six ways to reform the system.
1. Investigate the Flash Crash: Cramer would examine the factors that caused the disastrous flash crash on May 6th to prevent it from happening again. "I know what happened May 6th. People decided to leave... we dropped 600 points in a few minutes... those people are never coming back unless you fix the darn thing."
2. Cut capital gains taxes. Cramer suggests a 10% cut on dividend on capital gains.
3. 401(k)s should be self-directed so clients can choose their own dividend-rich stocks.
4. Beef up the SEC. There should be 50,000 people in the SEC policing white collar crime so retail investors can feel it is safe to buy stocks.
5. Exchanges need to take charge and to stop trading when things start to go haywire.
6. Open Up the GM (NYSE:GM) IPO. Make sure that ordinary investors, who helped bail out GM, can get a piece of the GM deal.
Cramer discussed Salesforce.com's (CRM) "blowout quarter" which brought the stock up 16 points. Like a great artist who changes the way people look at the world, Salesforce is "breaking through the four walls of information technology... redefining software." The company's performance is stunning considering its market cap of $15 billion compared to Oracle's (ORCL) $115 billion market cap. While Cisco (CSCO) is complaining about a slowdown in enterprise spending, Salesforce.com is accelerating and is defining the tech environment rather than merely responding to it.
Cloud computing, which delivers applications from centralized servers rather than from storage places on individual computers, could become a $100 billion market opportunity. Chatter, a social networking product, is improving productivity for businesses. The multiple is high, 73 times next years' earnings, but Cramer thinks Salesforce's growth may make up for the high price tag.
Marc Benioff discussed Salesforce's mission;
We're all about the end of software. We've been that way for about 12 years now. We believe that companies don't have to buy hardware or software or hire anyone to automate themselves, and that cloud computing makes that possible. That's what were doing here, and we're getting a great reception from companies who can't afford the traditional capital expenditures, and they're looking for these alternative solutions like cloud computing.
Benioff went on to describe the ways in which Chatter, inspired by Facebook, facilitates business networking. Concerning the recent quarter, revenue was up 25% year over year and the company raised guidance. Of all the companies Cramer follows, he says Salesforce.com is the only one with significant accelerating revenue growth, and he asked Benioff how this is possible for a company of Salesforce's relatively small size. Benioff says the company has $683 million in deferred revenue which gives the company "tremendous visibility." After the interview, Cramer declared, "That stock is not done going up."
Cramer said that while Itron (ITRI) looks like a buy, it might be plagued with competition soon. Clean Energy Fuels (CLNE) will rise or fall depending on natural gas legislation. Baker Hughes' (BHI) quarter was a "ball of confusion;" he would buy Weatherford International instead (WFT).
Jim Cramer was up 31% in 2009. Click here now to sign up for Jim's Action Alerts PLUS and trade alongside him. Special discount for Seeking Alpha users.
Get Cramer's Picks by email - it's free and takes only a few seconds to sign up.