Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday November 4.
Cramer has been backing Teva Pharmaceuticals (TEVA) for some time, but he acknowledges it is "one of the most misunderstood stocks out there." Teva is known for its generics, but has a significant branded division, including Copaxone, a $3 billion drug and the leading treatment for MS.
While Teva reported a good quarter, the stock was taken down and the multiple has shrunk. Bill Marth says he is not worried about the decline because the company is strong with a solid pipeline for 2011.
Analysts on the conference call kept asking Teva about competition, even though the drug is very difficult to replicate and certainly impossible without additional clinical trials. While Novartis (NVS) is developing an oral treatment for MS, Marth says Teva also has an oral equivalent of Copaxone and its safety has been tested more thoroughly than any equivalent treatment.
Teva's respiratory and women's division of drugs are also growing. Marth said TheStreet also was worried about a recent acquisition the company made; it was expected that the deal would be immediately accretive when there were significant financing costs. Marth is confident that the deal will be profitable in the near future. Cramer says he believes the interview with Marth laid certain fears over Teva to rest.
Is Gold a Bubble?
Cramer reiterated his bullishness on gold and said the yellow metal could continue to rally because it is a currency and not a commodity. He has been behind gold since it was at $500 a few years ago, and thinks it will continue to rise to $2,000. Currently, gold represents less than 1% of all portfolios. "We will be all done with gold," he explained, "when it represents 5% of all portfolios worldwide." It will be a "long, long time" before that happens, so in the meantime, Cramer says, "keep buying."
CEO Interview: Irwin Simon, Hain Celestial (NASDAQ:HAIN)
There is a bull market in healthy eating, as Whole Foods (WFMI) reported a "blowout quarter," which is good news for its client, Hain Celestial (HAIN), producer of Terra chips, Celestial Seasonings, and many other healthy brands. Irwin Shaw said tackling obesity is a profitable aim because there is such growing concern over the issue. Currently 60% of adults and 30% of children in the U.S. are obese, and it is becoming abundantly clear that the issue is not just the amount eaten, but what goes into food. Hain Celestial produces low sodium, low or no sugar and mainly organic products. Many of Hain's products can be seen on Whole Foods' shelves, but other major retailers, like Wal-Mart (NYSE:WMT) and Costco (NASDAQ:COST) are jumping on the healthy brands bandwagon.
Irwin Shaw says schools need to adopt the same kind of healthy brands found in airports and on planes. The company is also seeing double digit growth in its personal care division. Although raw costs are going up, the company bought up most of its commodities when prices were low, and Hain has some protection from rising costs. Cramer says health food is in a multi-year bull market and would buy Hain.
Never Hold Onto a Takeover Stock: Airgas (ARG), Air Products (NYSE:APD), Potash (NYSE:POT), BHP Billiton (NYSE:BHP), Oracle (NYSE:ORCL), Art Technology Group (ARTG), Fortinet (NASDAQ:FTNT), IBM (NYSE:IBM), Commscope (CTV)
While there are some exceptions to investing rules, one hard and fast principle is never hold onto all of a stock that has had a takeover bid. The reasoning is the upside is capped and there may be a downside if the deal does not go through. The sole exception recently has been Airgas (ARG) which was given an excessively low offer from Air Products (APD). After many negotiations, the deal was raised from $60 a share to $78 and ARG's stock price went to $69 from $43.53. That was a rare case when selling on a takeover bid would have lost investors money.
However, in virtually all cases, the rule was correct. Cramer said he was mistaken thinking that Potash (POT) was the next exception when it got a bid from BHP Billiton (BHP). The Canadian government nixed the deal, and those who didn't sell Potash on the initial bid lost a significant amount.
Cramer urged viewers to sell Art Technology Group (ARTG) after its bid from Oracle (ORCL). The stock is up 33% since he recommended it on January 29. Commscope (CTV) is being taken private by Carlyle Group at $31 a share, a 37% gain since Cramer recommended it on June 22, 2009.
Not only is news of a takeover bid reason to sell, but even a takeover rumor may mean taking profits. When news that IBM (IBM) would buy Fortinet (FTNT) came out, the latter stock jumped from $30 to $36. Once Fortinet denied the rumor, the stock snapped back down to $30. Cramer likes FTNT, up from its IPO price of $12.50, he would simply wait for a pullback to buy more.
"These stocks should be taken off the table first thing on Friday," Cramer said.
Jim Cramer was up 31% in 2009. Click here now to sign up for Jim's Action Alerts PLUS and trade alongside him. Special discount for Seeking Alpha users.
Get Cramer's Picks by email - it's free and takes only a few seconds to sign up.