Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday October 22.
Cramer was disappointed last week when two stocks he got behind for their cutting edge diabetes treatment, Amylin (AMLN) and Alkermes (ALKS) were slaughtered, down 50% and 30% respectively after the FDA delayed approval of the drug pending a further, time-consuming study. Even the most bearish analysts were amazed by the decision, since the FDA approval seemed like a sure thing. As a result, there seems to be little hope for approval of other diabetes treatments, such as the one developed by Mannkind (MNKD).
From this error, which few would have predicted, Cramer formulated four rules for buying Biotech.
1. Beware small biotech companies that live or die by FDA approval.
2. Beware of the Obama FDA which is more risk averse than the FDA under Bush.
3. Always talk to the bears. And not just the bears, but the short-selling hedge fund bears.
4. Hedge with a competitor. A good choice in this case would have been Novo Nordisk (NVO) which produces the dominant diabetes drug on the market.
BE Aerospace (NASDAQ:BEAV), Hexcel (NYSE:HXL), Boeing (NYSE:BA), Dow (NYSE:DOW), Johnson Controls (NYSE:JCI), Cummin (NYSE:CMI), Dupont (NYSE:DD), Radware (NASDAQ:RDWR), Agnico Eagle Mines (NYSE:AEM), Wabco (NYSE:WBC), Rockwell Collins (NYSE:COL), F5 (NASDAQ:FFIV), Procter&Gamble (NYSE:PG), 3M (NYSE:MMM), Merck (NYSE:MRK),
The coming week's earnings should give plenty of information about the areas Cramer has identified as the 7 bull markets: gold, aerospace, climate control, trucks, agriculture, chemicals and security.
Based on positive numbers from Boeing (BA), Cramer expects strong quarters from BE Aerospace (BEAV) and Hexcel (HXL) on Monday. The metric to look out for is the number of orders. On Tuesday, Cramer wants to hear from Johnson Controls (JCI) about Europe and Cummins (CMI) about China. Dupont (DD) is a trade on both agriculture and chemicals. Speaking of chemicals, on Thursday, Cramer expects Dow Chemical (DOW) to report the "'biggest earnings per share' of any company next week."
Radware (RDWR), a small tech security firm, might give information about a possible takeover. Cramer wants to hear about finding costs from Agnico Eagle Mines (AEM). Wabco (WBC) and Rockwell Collins (COL) are two companies to buy on weakness, if there will be any weakness.
Certain earnings reports will be definitive and set the tone for their sectors. These include F5 (FFIV) on Tuesday, Procter & Gamble (PG) on Wednesday, 3M (MMM) on Thursday and Merck (MRK) on Friday. Cramer discussed these stocks and their impact in more detail on Friday's edition of Stop Trading!.
Cramer warned if the dollar gets strong and commodities are weak, there could be a selloff. Also the election could throw the market into chaos. Existing home and new home sales on Monday and Wednesday respectively will inspire the bears to spread negativity.
While he had overlooked the stock because of its lackluster performance after its June IPO, Cramer says Motricity (MOTR) is a "fantastic story" which has had a "well-deserved" run and has farther to go. The company is a pure play on the wireless internet and has 80% market share, a virtual monopoly, in its field. Motricity provides internet access to so-called "dumb phones" or phones that don't have their own web browsers. Nearly 77% of all mobile phones fit this category. The company also optimizes websites for phones and aggregates social networking platforms. It also facilitates communication and solves the problem of data hogging. Its multi-year subscription structure provides 80% earnings visibility prior to every quarter, and there are significant barriers to entry, which means there will be little competition in the space. Cramer sees Motricity's margins going "through the roof" and would buy this speculative mobile internet play.
CEO Interview: Robert Gross, Monro Muffler and Brake (NASDAQ:MNRO)
Monro Muffler and Brake (MNRO) beat earnings by 2 cents on Friday, yet the stock didn't move. Is there a reason to be worried about the company? Cramer noted the decrease in car dealerships and the fact that people are holding onto their cars for longer are two factors that help the company, which is up 133% since he recommended it in August 2008 and 37% since January with the S&P 500 up only 7% for the same period. Selling at 19 times next year's earnings with a 22% growth rate, Monro is a "steal." Its lack of movement after its quarterly earnings statement is something that happens "every time this stock reports" and is a buying opportunity.
Robert Gross discussed the company's acquisition of tire companies, and how Monro's size and experience is a great opportunity for smaller dealers who are looking for an exit strategy and an opportunity to sell. While the slow economy accounts for some of MNRO's success, as consumers want to hold onto their cars longer, Gross pointed out the company thrives even when the economy is strong. Cramer would buy the stock before it moves up.
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