Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday July 15.
CEO Interview: Strauss Zelnick, Take Two Interactive (NASDAQ:TTWO)
In January, Cramer said Take-Two Interactive (TTWO), in spite of the success of Grand Theft Auto 5, was not getting enough respect from Wall Street, but it has rallied 30% since then. Those negative on the stock think it is a "one trick pony" with the Grand Theft series, but the company has a diverse mix of games. It is a cash machine and blows away analyst estimates. The company has developed a new game, "Evolve", which was best in show at a major Gaming Expo. There are 10 unique titles in the pipeline, but many titles have not been announced yet. "We aren't 'teasing,'" said CEO Strauss Zelnick, "We are waiting for the marketing moment." He said TTWO is becoming "ecumenical," meaning, "We have to be where the consumer is. We have to be highly flexible." October should be a big month for the company with the release of new titles. With the large amount of cash, Zelnick says he plans to invest in organic growth and perhaps inorganic in a "highly disciplined way" as well as considering returning cash to shareholders.
Was Fed Chair Janet Yellen urging people to sell small-cap biotechs and hot internet stocks? She said valuations of these stocks are "stretched." If she believes there is too much speculation, the Fed can just raise margin requirements; this strategy is the "responsible" way to tame overheated stocks. However, the Fed seems to prefer raising rates and punishing stocks across the board rather than taming speculation in certain sectors. Some of these stocks are richly valued, but deserve to be. In December 1996, Fed Chief Alan Greenspan said the market was experiencing "irrational exuberance." Stocks sold off on this remark, only to rebound into a bull market that lasted for years. This turned out to be "one of the lamest comments Greenspan ever made." Cramer suggested that Yellen speak softly about stocks and use the higher margin stick, or not to speak about them at all."
Cramer took some calls:
Groupon (GRPN) has a lot of irons in the fire, and he liked it lower. It reported a disappointing quarter, and is in the penalty box. It is a pastiche of different companies, and "needs to get more organized."
Facebook (FB) should be bought at $63-$64 for those who want to get in ahead of the quarter.
The Gift Of Low Expectations: Gilead (NASDAQ:GILD), Apple (NASDAQ:AAPL), IBM (NYSE:IBM), Intel (NASDAQ:INTC), JPMorgan (NYSE:JPM), Goldman Sachs (NYSE:GS), Johnson & Johnson (NYSE:JNJ), Wells Fargo (NYSE:WFC). Cramer took some calls: Hilton Worldwide (NYSE:HLT), Starwood Hotel (NYSE:HOT), Fairway (NASDAQ:FWM), Cedar Fair (NYSE:FUN)
If expectations are high, investors could lose money even with good earnings. If expectations are low, this could provide a "margin of safety" that could push a stock up. Fed chief Janet Yellen said that some stocks, such as small biotechs and internet stocks, are higher than they deserve to be. Cramer thinks that these remarks are a "lame attempt" by Yellen to get tough on inflation risk. However, Cramer thinks the problem with these hot stocks are the high expectations they face. Some stocks experience "miracles" of justifying their sky-high valuations. Perhaps a small biotech has the next big blockbuster drug. Gilead (GILD) bought Pharmasset 3 years ago for $11 billion, and skeptics thought this was a risky move, but the Pharmasset segment now is worth 5 times more than Gilead paid for it.
Apple (AAPL) has run quite a bit, but Cramer thinks it isn't too expensive. The company announced a partnership with IBM (IBM) to bring Apple into more offices. The "watershed" deal will be good for both stocks. Even though AAPL has run 19% so far this year, it still has growth ahead. Intel (INTC) pre-announced better than expected earnings, which led people to think the positive data would be baked in, but INTC rose further after a successful earnings report. JPMorgan (JPM) and Goldman Sachs (GS) are both trading at a cheap 10 times earnings. JPMorgan showed how it is thriving even under regulatory pressure, and Goldman Sachs is benefiting from strong equity markets. JPM and GS used to sell at a premium to the regular stock, and if they reach historic levels, there could be significant upside for investors.
High expectations can be a curse for good companies. Wells Fargo (WFC) announced a fantastic quarter, but since it had been consistent and was expensive, the stock dropped following earnings. Johnson & Johnson (JNJ) ran up prior to earnings, and fell when it reported a decent quarter. Cramer thinks JNJ is a "serious buy." A good strategy is to own inexpensive stocks and wait for good things to happen.
Cramer took some calls:
Fairway (FWM): Cramer recommended people sell the Fairway after its rise, and he would stay out of the stock.
Cedar Fair (FUN) has terrific earnings; "I like it as a growth stock no matter what."
Cramer consulted the technical analysis of Tim Collins to see if Amazon (AMZN) and Netflix (NFLX) can go higher. Amazon's daily chart showed a rally in May and early June, but AMZN was stuck in a tight channel until a few days ago. It broke above a crucial resistance level of $340. Collins thinks this level will be a floor of support. The next ceiling of resistance for Amazon is at $380. The MACD just had a powerful bullish crossover, which indicates higher prices may be ahead.
Amazon's weekly chart is more complex. It looks bullish, but there is room for interpretation. The recent 6 month pullback has a flag pattern, and usually, when this pattern ends, stocks tend to head higher. The MACD and the RSI are bullish, but Collins doesn't find these signs convincing on the weekly chart. If the stock turns lower, it could fall dramatically to the mid-200s. However, Collins thinks the weekly chart is mainly bullish.
Netflix's daily chart looks risky. It has a head and shoulders pattern, which is a classic bearish sign. If it drops below $430, it could fall to $390. However, as long as it stays above $430, the stock could go higher, and above $460, the bearish pattern would be broken. Cramer doesn't think down 100 and up 100 is a good risk/reward proposition.
On the weekly chart, NFLX has a reverse head and shoulders, which is positive. The RSI, however, has made a lower high, and volume has also showed a lower high. The chart shows that Amazon is a better bet than NFLX. Cramer thinks either might be alright for a speculation, as long as investors are aware of the risks.
Cramer took some calls:
Barnes & Noble (BKS) is spinning off its Nook, but it is not likely to hold its own against the giant Amazon.
Dillard's (DDS): Retailers that have been strong remain strong, and Dillards has been breaking out. However, Cramer is generally negative on retail right now.
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