Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday May 19.
AT&T (T) is buying DirecTV (DTV), but it is possible DTV could lose the NFL package to another network. Many customers will be less excited by DTV and the deal with AT&T if DTV no longer has the NFL. DTV has significant exposure to Latin America, but Cramer thinks the region is a difficult place for North American companies to do business. Cramer thinks DTV CEO Mike White is anxious to sell the company because of its problems; "You should sell DTV too," advised Cramer.
Momentum Stocks May Be Bottoming: Yelp (NYSE:YELP), Yahoo (NASDAQ:YHOO), Concur Technologies (NASDAQ:CNQR), Tableau Software (NYSE:DATA), Oracle (NASDAQ:ORCL), Facebook (NASDAQ:FB), Google (NASDAQ:GOOG), (NASDAQ:GOOGL), Twitter (NYSE:TWTR), Salesforce.com (NYSE:CRM). Other stocks mentioned: Insys Therapeutics (NASDAQ:INSY), Ensco (NYSE:ESV), Transocean (NYSE:RIG)
On Monday, the Dow rose 20 points and the Nasdaq climbed .86%. The momentum stocks seemed to have bottomed. Lower prices going into the session, takeover chatter, the charts, lack of new IPOs, little insider selling and investors' fear of being short the market led to an uptick for the averages. Yelp (YELP) is one stock that is on sale, after it has fallen from $101 to the mid 50s, and has decent fundamentals. Cramer thinks Yelp might be a great takeover for a company like Yahoo (YHOO) after it spins off Alibaba.
Tableau Software (DATA) is also the subject of takeover chatter. This didn't make sense when it was at $102, but at $52, it sounds more credible. Concur Technologies (CNQR) reported remarkable sales numbers and rules the enterprise travel software space. Cramer thinks Concur is a natural takeover target for Oracle (ORCL). Concur traded as high as $130 but is down in the 80s. It may still be overvalued, but Cramer doesn't think this matters to a potential acquirer. Salesforce.com (CRM) will report this week, and it is likely that it will blow away the numbers. CRM is still expensive and offers no dividend or buybacks, but it could provide a significant discount to potential buyers, since it has fallen so dramatically.
The lack of new IPOs is a good thing, because the plethora of deals created an oversupply. Established cloud plays are not being sold off the way they were earlier in the year. Facebook (FB) and Google (GOOG), (GOOGL) saw an uptick, and even Twitter (TWTR) stabilized after its lock-up expiration fiasco. Cramer would wait to see what happens when Salesforce reports on Tuesday; a good report could mean upside for momentum stocks. Cramer would not double down ahead of CRM's quarter, though.
Cramer took some calls:
Insys Therapeutics (INSY) is worth holding on to because of increased insider buying.
Transocean (RIG): "These stocks are so low already, and I'm tired of it," Cramer said. Cramer's charitable trust bought Ensco (ESV), which was recently downgraded. He prefers ESV to RIG because the latter has older drilling platforms than ESV.
J.C. Penney (JCP) and Rite-Aid (RAD) have been terrific turnarounds. Retail is the most difficult sector to effect a comeback, because the vicious cycle can be hard to break. This was true in the case of JCP. CEO Ron Johnson in 2011 was a man with a plan, but not a good one. He alienated JCP's core customer base by doing away with promotions, and people left the stores. JCP saw "hideous" declines in same store sales, and JCP lost two-thirds of its value. Johnson was fired by the Board of Directors, which brought back former CEO Mike Ullman. Recently, JCP reported a 6.5% increase in same store sales. JCP has risen, but it has more room to run. Ullman raised cash, restocked the stores with private label brands that are higher margin and offered the kind of deals that JCP customers crave. Ullman is reviving home furnishings, which were historically 20% of JCP sales, but under Johnson, dropped to 12%. Ullman brought back the commission-based compensation. Cramer thinks JCP has more upside.
Rite-Aid is not really a turnaround story, because it seems to have arrived already. Eighteen months ago, the company was trading around $1, but now is at $7.80. Same store sales increased recently by 5%, and this is significant, given competition. The stock has risen 132% since Cramer got behind it in August 2013. CEO John Standley has refurbished the stores and established Wellness Centers. RAD has more upside, since it has more stores to remodel. The stock has rallied significantly, while JCP has only just begun.
Cramer took some calls:
magicJack (CALL) is a controversial stock. Cramer wants to talk to the CEO before he opines on it.
AIG (AIG) is not a sell, but a buy.
Hillshire Brands (HSH) is poised to buy Pinnacle Foods (PF) at an 18% premium, and this is a huge win for those who hold PF. However, HSH's stock declined after the deal was announced. Wells Fargo upgraded HSH and JPMorgan downgraded it. HSH has risen 30% since it was spun off by Sara Lee in June of 2012. The company has rolled out popular new brands. Is it still worth owning after the PF deal?
PF has exposure to frozen food, syrups, pickles, cake mix- items that are in the center of the supermarket. HSH can now capture more space in the supermarket aisles in the highly competitive food industry. Wells Fargo thinks HSH could rise 15%.
JPMorgan thinks the PF takeover could put stress on HSH's balance sheet. The analyst once liked HSH because it could have been a takeover target, but after this deal, the analyst thinks it will be too large. In addition, the type of foods HSH is getting exposure to in the deal are not high-growth categories.
Cramer thinks the bearish analyst at JPMorgan "may be overstating the case." He thinks HSH could still be taken over, that HSH has abundant cash. While Cramer likes HSH's deal with PF, "there are better deals out there." Cramer would look for other possible takeover targets, like B&G Foods (BGS). The stock has declined, but has 16% revenue growth and yields 2.4%. WhiteWave (WWAV) might be bought by a larger company. The stock rose 79% since it was spun off by Dean Foods (DF) about 18 months ago, and might be a takeover idea for a company that wants more exposure to healthy products.
CEO Interview: Chip Johnson, Carrizo Oil & Gas (NASDAQ:CRZO)
Carrizo Oil & Gas (CRZO) is a small exploration and production company with assets in the major U.S. shales. CRZO sold off its non-core assets and beat earnings by 7 cents with a 27% yoy rise in revenues and 48% production growth. The stock has gained 54% since Cramer got behind it in September 2013. The stock trades at a multiple of only 14, which is cheap, given the huge production growth. CEO Chip Johnson says the company has drilled one of the best wells in the Utica shale. Currently, the company is testing areas in Niobrara shale for possible expansion, but Johnson says the Eagle Ford is still "the best field I've ever worked in." Cramer says Carrizo has "about the best growth I've seen" in the industry.
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