Cramer's Mad Money - David Tepper's Nervous Moment (5/15/14)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday May 15.

David Tepper's "Nervous Moment." Stocks discussed: Keurig Green Mountain (NASDAQ:GMCR), Coca-Cola (NYSE:KO)

"Guru following has never been one of my favorite ways of making money," because "we never know when the guru changes their mind."

Influential hedge fund manager David Tepper has been bullish at many moments when others were bearish, so his admonition not to "be too fricking long" was sobering to many. Cramer noted Tepper had the prescience to shore up on banking stocks at just the right time during the credit crisis. While Tepper might be correct, does this mean not to buy if the market drops? This is a "nervous time," but we won't know where this ends if Tepper doesn't issue another statement.

While many of these master hedge fund managers are correct a lot of the time, they aren't infallible. David Einhorn infamously declared Keurig Green Mountain (GMCR) a "house of cards" before Coca-Cola (KO) bought a stake and GMCR stock doubled. Cramer cautioned against blindly following gurus. Tepper's view might be trumped by events, even though he accurately identified a "nervous moment" for the market.

Don't Panic: Wal-Mart (NYSE:WMT), J.C. Penney (NYSE:JCP), Nordstrom (NYSE:JWN). Other stocks mentioned: Dean Foods (NYSE:DF), WhiteWave (NYSE:WWAV), Zoe's Kitchen (NYSE:ZOES), Potbelly (NASDAQ:PBPB)

The Dow tumbled 167 points, as high-profile hedge fund manager David Tepper advised caution in investing. While he said he wouldn't short the market, he warned investors not to be too long.

Cramer would not take this as a cue to sit on the sidelines. He would not avoid all stocks, but would sell the overvalued momentum names. The employment number was strong, which usually leads to higher interest rates, but rates went lower, and this has caused selling of stocks. Cramer thinks rates are going lower because of the shortage of high-quality bonds. Wal-Mart (WMT) reported disappointing earnings, but J.C. Penney (JCP) and Nordstrom (JWN) had strong earnings. Housing sales have been shockingly weak, even though mortgage rates are low. Housing is only 10% of the economy, but because of the crisis that led to the Great Recession, the average American may be spooked by the housing sector. Despite Tepper's apparently gloomy forecast, Cramer thinks that there are some things that are working, but the picture is mixed.

Cramer took some calls:

Dean Foods (DF) is not a stock to own. Cramer prefers its spin-off, White Wave (WWAV).

Zoe's Kitchen (ZOES) is a phenomenon, but it might have the same unfavorable fate as Potbelly (PBPB).

Is Sexy Out of Style? Estee Lauder (NYSE:EL) Vs. Clorox (NYSE:CLX). Other stocks mentioned: Constellation Brands (NYSE:STZ), Diageo (NYSE:DEO), Brown-Forman (NYSE:BF.A)

Cramer discussed soft goods companies, Estee Lauder (EL) and Clorox (CLX). Estee Lauder beat the numbers and raised its guidance, while Clorox missed its quarter. EL rose and then dropped after earnings, while CLX dipped a bit following its quarter and has held steady. Cramer thinks there is a case to be made for both stocks, but the market seems to prefer safe, boring stocks with good dividends like Clorox, which yields 3.3%. EL has a lot going for it, but it only has a 1.1% dividend yield. It is forecasting long-term organic growth of 6-8%, which is one of the highest rates in the soft-goods sector. Its brands are huge profit-drivers for department stores, and it is benefiting from the aspirational consumers in emerging markets. EL is performing well in China, even as the Chinese economy seems to be slowing. EL is a terrific international growth story, and at $72, it might be a buy.

CLX's earnings growth is decelerating, and it reported the weakest number on this metric in 3 years. It is facing competition from private label brands. While many of its brands are winning, those brands are relatively slow growers. It gets 80% of its sales from the U.S., and most of its products sold overseas are in Argentina and Venezuela, whose economies have been problematic. It is clear that investors are buying CLX for its 3.3% dividend yield. The company is small enough to catch a takeover bid, as well.

Cramer would buy EL at a bargain, but for those who focus on yield, Clorox is the right name.

Cramer took some calls:

Constellation Brands (STZ) is "on fire," and is his favorite in the sector, although he also likes Brown-Forman (BF.A) and Diageo (DEO).

Why Is Cenovus Energy (NYSE:CVE) So Low? Other stock discussed: Halcon Resources (NYSE:HK), Phillips 66 (NYSE:PSX)

On a day the market got slammed, it may be a time to look for bargains. While the oil and gas sector has been hot, Cenovus has not yet moved up. This Canadian integrated oil company has some of the best assets in the Canadian oil sands. It yields 3.4%, but the stock is down 5% year-over-year, while other Canadian oil plays are up 25% for the same period. It produces huge amounts of oil at low cost. Why isn't CVE higher?

2013 was a tough year; it made a move into the light shale oil in Western Canada, and this proved to be a disappointment. It faced some problems in the Foster Creek asset, but these issues should be resolved in the near future. If the stock falls down to close to its 52-week low of $25 with a 3.8% yield, this would be a "magic trampoline" for the stock, and if it fixes its problems soon, there could be amazing upside.

The delay in the Keystone Pipeline won't affect CVE that much, because it has significant pipeline capacity and uses trains to transport oil. Management predicts it can grow its production in oil sands by 14% and is awaiting approval for expansion into more oil sands. It is hedged against weakness in heavy oil prices with its 50% ownership of Phillips 66 (PSX) refineries in Illinois and Texas. Cramer doesn't think CVE is getting enough credit. He sees this $28 stock trading in the mid $30s by the end of the year.

Cramer took some calls:

Halcon Resources (HK) looked bad, but now the stock is coming "back from the dead."

CEO Interview: Terry Gregg, DexCom (NASDAQ:DXCM)

DexCom (DXCM) produces glucose monitoring systems for people with diabetes. It has turbo-charged revenue growth, with product revenue up 16% last quarter. While these kinds of speculative stocks are out of style, it has risen 131% since Cramer recommended it in March, 2011. It has been pummeled lately, but Cramer thinks this is because of sector rotation and not fundamentals.

The technology allows patients to access their glucose information on their phones with alarm systems to alert them. While there is competition in this area, CEO Terry Gregg says DXCM's products are 50% more accurate than the other leading product. The long-term goal is to eliminate the old-fashioned "finger pricking" method of monitoring glucose levels. The CEO predicts 35%-40% growth annually. Cramer reminded viewers that there will be a time when growth plays are once again in favor, and DexCom is one to keep on the radar.


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