Cramer's Mad Money - Is Intuitive Surgical Losing Its Mojo? (8/26/10)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday August 26.

Intuitive Surgical (NASDAQ:ISRG), Medtronic (NYSE:MDT)

"How do you know when a super-powered, turbocharged, rocket-fueled, steroidal growth stock has lost its mojo?" asked Cramer.

It didn't seem possible that Intuitive Surgical, creator of the revolutionary da Vinci surgical robot would be performing so badly, down 21% since Cramer recommended it on June 3rd. A poor quarter from Medtronic (MDT) and a New England Journal of Medicine article that said medical equipment like the da Vinci machine might be too expensive are factors hurting Intuitive's stock.

Cramer thinks the main culprit is the chart, as technicals seem to rule once again. Technician Ken Shreve noted a topping pattern in Intuitive's chart that is followed by heavy institutional selling. The reversal for Intuitive began on April 16th and has been relentless ever since. The only thing that could reverse the downward pattern is heavy institutional buying. While the stock could be a buy if it declines to $240, it has a long way to go.

While there seems to be more pain in the stock, Camer thinks Intuitive is a broken stock and not a broken company, because its long-term growth story is still intact. An upgrade from Wells Fargo is a good sign. The company doesn't just sell da Vinci machines, but disposable parts and the last quarter the company said it sold 43% more machines than last year. Intuitive trades at a multiple of 22 with a 24% growth rate. Cramer would wait for the stock to fall more before buying.

CEO Interview: Todd Becker, Green Plains Renewable Energy (NASDAQ:GPRE)

Cramer has not been a fan of ethanol stocks, even with regulations to increase the amount of ethanol in gasoline. His concern was that ethanol companies are hostages to commodity prices which are increasingly volatile. However, he invited Todd Becker of Green Plains Renewable Energy (GPRE) onto the show to make the bullish case for ethanol:

Well, ethanol plays this time around are very different. The professionals have taken over. What we had early on was entrepreneurs, developers and promoters that really didn't understand that this was a commodity risk business, and an operational excellence business. And that's really the difference this time around. We manage a margin. We don't speculate on corn. We don't speculate on ethanol. We manage a margin.

Becker thinks the amount of ethanol required in gasoline will increase, and said the higher the level of ethanol, the higher the quality of the fuel. Concerning the company itself, Becker said, "We've actually seen an expansion in margins since we've issued our earnings and hopefully we see that continue on through the end of the year."

The Data Melodrama

Welcome to the moment of total earnings vacuum that is the dog days of August where each session we take the temperature of the market a new for no reason... some days the market is 99.6... others it's 97.6 which shockingly averages to 98.6... kind of normal. Economy is not great... economy is not horrible.

Cramer thinks the reaction to data in general has been melodramatic, and expects more drama to come. While most people knew that the housing number would not be good, it was not as bad as expected, and yet, doomsday scenarios followed on the baked-in information.

He added:

There is not enough information out there to warrant the big swings or big moves like we've had this week. We don't know enough to have those... yet we're trading on every little data point be it macro or micro...unimportant quarters and bits of information or tics of futures of oil or copper are being seized upon right now as life threateningly important.

The bottom line: Don't panic or become euphoric over every passing piece of data.

CEO Interview: Irwin Simon, Hain Celestial (NASDAQ:HAIN)

Cramer is a believer in the long-term story for Hain Celestial (HAIN), given the trend toward healthy food and the national war against obesity, a problem that affects 67% of the population. However, not everyone is a fan of the stock, which has a 12% short position. Irwin Simon, however, notes the company's stock is up 22% since April, and its brands are increasing in popularity:

You know we want to be what P&G is to a Walmart and that's exactly what we want to be to the natural organic food industry. You come back and look at where Hain's growth... I mean if you walk into Whole Foods today... and Whole Foods is just rocking Jim... and you walk in and see those lines and see what's going on... we have over 1800 products in Whole Foods

Meanwhile, the company is expanding into China and is benefiting from its deal with the Martha Stewart brand. Simon thinks with the increase in health-conscious buying, the consumer is going to become increasingly willing to pay up for healthy food. In this situation, "health trumps wealth."


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