Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday June 16.
Creating Employee Loyalty: Starbucks (NASDAQ:SBUX)
Starbucks (SBUX) will "do well by doing good," said Cramer. CEO Howard Schultz announced a revolutionary plan to provide a free online college education to its employees. Cynics think this is a PR stunt to improve Starbucks' image, and that the plan is unsustainable; the question arises how much it will cost. However, there is no doubt the move is excellent for SBUX's image in the eyes of employees and customers. There is a relationship between employee retention and earnings per share, Cramer noted, and it is sometimes as important to foster employee loyalty as customer loyalty. Cramer said steps taken to retain employees goes right to the bottom line, because training costs are reduced. This announcement might not lead to upgrades or a rally in the stock, but it might create long-term value for Starbucks.
Fresh Fears Mean Missed Opportunities: Salesforce.com (NYSE:CRM), Priceline (NASDAQ:PCLN), Merck (NYSE:MRK), Tesla (NASDAQ:TSLA), Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX), SolarCity (NASDAQ:SCTY). Other stock: Fortinet (NASDAQ:FTNT), Palo Alto (NYSE:PANW)
Headlines describe "fresh fears" for investors in stocks, but Cramer thinks these fear mongering headlines are costing people money, as they unfairly cause potential investors to sit on the sidelines and lose out. With talk of systemic risk, high frequency trading and some insider trading scandals, some might find the stock market unreliable. Conflict in Iraq could send oil prices rising and lead to a bear market. There were fears during the spring that the hyperbolic rise in cloud stocks was reminiscent of the dotcom era, and that there would be a general market selloff when hot tech stocks fell; however, this prophecy of doom was not fulfilled. When Salesforce.com (CRM) reported a decent quarter and did not fall, that was a sign that the cloud stocks were going to stabilize. Instead of a flood of IPOs, there are now takeover bids for smaller companies, with Priceline (PCLN) and Merck (MRK) willing to pay up for acquisitions. Stocks like Tesla (TSLA), Amazon (AMZN), Netflix (NFLX) and SolarCity (SCTY) have rebounded. Cramer thinks there is enough going right in this market that fears can be digested.
Cramer took some calls:
To commemorate Holland's victory over Spain in the World Cup, Cramer featured Dutch company Unilever (UL). Unilever is one of the largest consumer goods companies in the world with diversified products and significant exposure to emerging markets. The stock has doubled in less than ten years and it has tripled its dividend. While sales in the U.S. were tepid, they rose 6.6% in emerging markets. One headwind is currency issues, but Cramer thinks Unilever can transcend this problem. Unilever's management has indicated it wants to concentrate on packaged personal care goods and to spin off some food assets. Cramer thinks this would be a good move for Unilever.
iShares MSCI Japan ETF (EWJ): "I don't want to go there." Cramer said about EWJ. He admits he has been "chastised" concerning certain overseas markets. "I'd rather select United States and European companies I think are doing well."
Tax evasion is a crime, but "tax inversion" or companies that move overseas to tax havens, is a good strategy. Medtronic (MDT) employed this strategy by buying Covidien (COV), which is based in Massachusetts but, as far as the taxman is concerned, is headquartered in Ireland. Eaton, the diversified industrial which has been the pride of Cleveland, Ohio, is "officially" located in Dublin, Ireland, and could be a good takeover for Honeywell (HON) or Emerson Electric (EMR). Other possible takeover target plays that practice tax inversion include Chicago Bridge & Iron (CBI) and Pentair (PNR).
Breaking up a business can unlock value. Covidien was spun off by Tyco International (TYC) in 2006 into a medical business, which became Covidien, an electronic business, TE Connectivity (TEL) and a fire and security products play, which kept the name Tyco. In 2011, Tyco spun off its flow control business with Pentair, then its residential security business, the ADT Corporation (ADT), leaving Tyco as a fire and security business worth $21 billion. Covidien spun off its pharmaceutical business, and now Covidien is going to be bought by Medtronics. Tyco's spin-offs, when added together, amount to $112.4 billion for a 63% premium. When companies make themselves leaner and meaner, they are more likely to be bought, like Covidien.
What could be the next Covidien? Cramer thinks Smith & Nephew (SNN) could be a big medical device takeover play.
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