Stocks discussed on the in-depth session of Jim Cramer's Mad Money, Tuesday August 24.
CEO Interview: John Koelmel, First Niagara Financial Group (NASDAQ:FNFG), Newalliance Bancshares (NYSE:NAL)
Cramer predicted that with the fall in financials, stronger regional banks would buy up weaker peers, like Fleet Bank did in the late 80s and early 90s. This trend might continue with the news First Niagara Financial (FNFG) will buy Newalliance Bancshares (NAL). The new First Niagara, a bank many have never heard of, will have 340 branches, $20 billion in deposits, $15 billion in loans. John Koelmel is satisfied with the acquisition and says the banks can accomplish far more together than they could separately. He said the banks FNFG is taking over have strong credit stories. He discussed intentions to raise the dividends and buy back shares.
The Market Wants to Rally
With the Dow down 134 points and the S&P 500 with a 1.45% decline, Cramer predicts more pain. "The market wants to rally, but it doesn't know how to rally. There is no leadership." Big money is having to give back money to clients as they divest from stocks, and no sector seems safe from the carnage.
The perception of doom and gloom could change if the President would simply make encouraging remarks about the economy, put some of his business unfriendly reforms on hold, according to Cramer.
I think when it comes to this economy, Obama lacks imagination... to say nothing of vision, when it comes to growing the economy and that's critical... and it's sad.
Cramer is also concerned that if the Republicans gain a significant number of seats, they might also encourage austerity measures and the kind of belt-tightening that might keep the economy from growing.
The bottom line is that jobs have to be created. Once the employment situation improves, the rest of the economic problems will take care of themselves.
The Scary Head and Shoulders of the S&P 500: Clorox (NYSE:CLX), MedcoHealth Solutions (NYSE:MHS), Pepsi (NYSE:PEP), Kinder Morgan Energy Partners (NYSE:KMP), 3M (NYSE:MMM), Kimberly Clark (NYSE:KMB).
The fundamentals of the market are not good, with a weak euro, decline in oil and stagnant housing numbers. The charts are also telling a scary tale; Cramer is concerned about a head and shoulders pattern developing for the S&P 500. A head and shoulders pattern is usually sign of an impending decline. While Cramer isn't usually a technician, he explained that charts right now are having even more of an impact on stocks than fundamentals.
While the market could rally off the neckline of the head and shoulders pattern, Cramer thinks the charts say the market is headed down and would buy defensive and dividend-rich stocks like Clorox (CLX), MedcoHealth Solutions (MHS), Pepsi (PEP), Kinder Morgan Energy Partners (KMP), 3M (MMM), Kimberly Clark (KMB).
Cramer would buy Las Vegas Sands (LVS) "one of the greatest turnaround stories." Just 18 months ago the stock was "roadkill" at $1.50, and now it is at $27.49, close to its 52-week high. LVS had a blowout quarter beating earnings estimates of 8 cents per share when it reported 17 cents per share. Revenues increased 50.7% since last year. While Cramer admits Wynn Resorts (WYNN) has been the better stock, Las Vegas is gaining on its competitor by taking full advantage of opportunities in Macau, which is fast becoming the Vegas of China and play on the Middle Kingdom's rising middle class. Despite its name, 75% of Las Vegas Sands revenues come from overseas. In addition to building new casinos in Asia, Las Vegas Sands has cleaned up its balance sheet and trades at a significant discount to Wynn; 26 times earnings compared to Wynn's multiple of 38.
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