Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday June 10.
You're in Good Hands With Allstate's (NYSE:ALL) Stock
Allstate (ALL) has been quietly moving higher, and "nobody talks about it." Cramer consulted the technical analyst Bob Lang, founder of explosiveoptions.net and TheStreet.com's Trifecta Newsletter. The stock has given a 10% gain year-to-date. The chart shows it has staying power, and since the lows of February, it has been steadily rising. It has been making higher highs and higher lows, and it still has much more upside in front of it with "textbook bullish moves," from a technical perspective. High volume shows possible buying by money managers. The Williams %R Oscillator shows that it has been in overbought territory since early May, which might ordinarily be a yellow flag, but it is likely to stay overbought. Lang calls this an "imbedded" overbought situation, which is a positive sign. ALL is showing relative strength to the higher group.
The weekly chart shows it has been making a long march higher for nearly 2 years. The Relative Strength Index is an important momentum indicator, and the RSI has climbed up to levels last seen in May of 2013. The last time the RSI was at this level, the stock ran up 10 points. The MACD line made a bullish crossover, which is a "buy" signal. Lang thinks ALL has one of the best charts out there with all of the bullish signals. Cramer says its fundamentals are strong and the company is well-run. "Allstate is a thing of beauty and absolutely worth owning." While Cramer would ordinarily wait for a pullback, "I don't think we are going to get one," he said.
Carpe Diem: B/E Aerospace (NASDAQ:BEAV), HD Supply (NASDAQ:HDS), United Technologies (NYSE:UTX), Rite Aid (NYSE:RAD), General Motors (NYSE:GM), Facebook (NASDAQ:FB), Athenahealth (NASDAQ:ATHN). Other stocks mentioned: New York Times (NYSE:NYT), Wendy's (NYSE:WEN)
Aerospace declined on Tuesday, but there didn't seem to be a reason for the weakness, except for the failure of the sale of B/E Aerospace (BEAV), which was down 5% on news it was breaking itself up rather than selling itself. Cramer decided to buy United Technology (UTX) on BEAV's decline. HD Supply (HDS) reported that business was strong, which made another case for buying UTX. However, this kind of move isn't "typical." The common scenario nowadays is investors tend to buy stocks when they are hot and believe any selloff is just the beginning of a terrible decline. The thesis since 2009 seems to be any decline is a selling opportunity and a huge dropoff is a reason to panic. "If you believe the thesis is intact for a stock, you should be a buyer, not a seller," said Cramer. In general, any weakness that has nothing to do with the health of an individual company is a buying opportunity.
Cramer confessed he bought General Motors (GM) for the charitable trust too early, and this does happen at times, but it is better than avoiding buying declines out of fear. Rite-Aid (RAD) was a buy even as it pre-announced negatively, but since it has a good long-term story, it is alright to buy it down even if it isn't possible to call the bottom. Facebook (FB) is not that pricey based on earnings per share, unlike Athenahealth (ATHN). When analyzing growth stocks, it pays to analyze them further out than the current year. ATHN sells at 70 times 2016 earnings estimates, but FB sells at 25 times 2016 numbers, in addition to having better fundamentals than ATHN. The market often overreacts and gives investors a chance to buy good stocks at low prices.
Cramer took some calls:
Wendy's (WEN) was downgraded. People feel it has lost the momentum. It doubled quickly, and might need some time "churning" before it sees an uptick. Cramer is positive on the stock long-term, because of its aggressive remodeling strategy.
New York Times (NYT) is an intact company, and the stock could go to $18. Cramer recommended it when it was at $9, but he thinks it could double and be a takeover.
There is a rising tide of consolidation in a whole range of industries. Cramer thinks there is a reason to pay a bit more for stocks that might be taken over. The failed merger between Omnicom Group (OMC) and Publicis would have created an advertising monolith. This is good news for Interpublic (IPG), which now is "takeover target number one," given increasing competition in the advertising space. IPG is a cash cow with a market cap that is "easily digestible." It isn't merely a takeover target, but it also has solid fundamentals. The company has experienced a major turnaround, has sold off non-performing assets and is an "ATM machine" of an advertising company. The company saw 6.6% organic revenue growth. It has been winning major accounts in healthcare and the auto industry and has implemented cost savings initiatives. It boosted its dividend by 27%. IPG sells for a multiple of 16 and could fetch a 20% premium in a takeover deal. Investors will either see a takeover or their stock will move higher.
Cramer took some calls:
Yahoo (YHOO): Yahoo has the cash to make major acquisitions, and Cramer believes in Yahoo's management. It may be worth holding on to, even after the Alibaba deal.
Yelp (YELP) is a wild trader, but long term, it is great. It will one day be "immensely profitable."
CEO Interview: Robert Carrigan, D&B Corporation (NYSE:DNB)
D&B Corporation (DNB) provides commercial credit data and analysis, and has been around for a century. The company is on a long-term growth plan with new management, and the street is impatient, because the turnaround won't happen overnight; the stock fell following earnings. DNB has since bounced back and is executing a remarkable buyback. "We have indispensable data," said CEO Robert Carrigan. "We have the largest commercial database in the world," which is updated millions of times a day. A third of the business is in sales and marketing solutions, which is a change from its classic business model. Cramer is bullish on DNB.
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