Cramer's Mad Money - If You Can't Beat Them, Buy Them (7/28/14)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday July 28.

If You Can't Beat Them, Buy Them: Dollar Tree (NASDAQ:DLTR), Family Dollar (NYSE:FDO), Dollar General (NYSE:DG), Trulia (TRLA), Zillow (NASDAQ:Z), Cummins (NYSE:CMI), Medidata Solutions (NASDAQ:MDSO), First Solar (NASDAQ:FSLR), SolarCity (NASDAQ:SCTY), Armstrong World Industries (NYSE:AWI), Owens Corning (NYSE:OC)

Many companies are creating value for shareholders in spite of global conflict. The mergers of Dollar Tree (DLTR) and Family Dollar (FDO) and Trulia (TRLA) and Zillow (Z) are not affected by headlines about tensions across the globe. Dollar Tree announced an $8.5 billion purchase of competitor FDO. Both stocks surged on the news. DLTR is a well-run suburban operation that sells everything for a dollar or less. FDO has many urban locations and more flexible price tags. Cramer thinks DLTR should "inject its DNA" into Family Dollar, since DLTR is an effective operator. Many FDO locations are not well-organized and have not been renovated. Cramer thought that DLTR and Dollar General (DG) would eventually "kill" FDO, but nowadays, many companies take over inferior competitors and so they can fix them up.

Zillow seemed challenged, but now it is buying Trulia. Cramer has been bullish on Zillow and is confident about the deal. His biggest worry was the ad spend war with Trulia. Perhaps Zillow could have won, but it is a better idea for the two companies to join forces. Zillow is up 96% for the year and is an expensive stock right now.

Cummins (CMI) beat expectations, but the stock got clobbered, because the street thought its beat was "low quality." Industrials have been punished lately, and Cramer thinks CMI is going lower. Armstrong World Industries (AWI) reported a very weak number on top of the miserable Owens Corning (OC) number, and these misses show weakness in housing. Interest rates are still low, and banks can't go higher until rates rise. However, bad news from banks, housing and industrials can't keep investors away from the market with great mergers going on.

Cramer took some calls:

Medidata Solutions (MDSO) is expensive and the results were not impressive. Cramer is neutral on the stock.

First Solar (FSLR) is cheap. Solar City (SCTY) works as a speculative stock.

Cramer Agrees with Larry Robbins about Hertz Global (NYSE:HTZ). Other stock mentioned: Avis Budget (NASDAQ:CAR)

Cramer took a look at a stock recommended by Larry Robbins of Glenview; Hertz may be a "special situation for this moment." Cramer is a big fan of the rental car space, and his favorite had been Avis (CAR) which is well-run. The stock has run up 6% since Cramer recommended it two months ago and is up 45% for the year. Hertz is down 2% for 2014, and Cramer thinks Robbins is on to something. Hertz seems to have put its accounting issues behind it; Cramer takes accounting problems as an automatic sell, but after checking them out in the case of Hertz, he is convinced they are not severe. He thinks the issues will be resolved by the fall.

Hertz is the largest publicly traded company in the industry, and the other competitors are Avis and privately held Enterprise. The consolidation of the industry gives each company pricing power, although Hertz has been slower than the other two in raising prices, but management indicates it may raise prices rather than expand volume, and this will be good for the share price. The company once had too many cars and had to sell them off; the excess inventory will soon be resolved. The company has improved fleet technology with automated kiosks. Hertz could also be a breakup story, because it has the car and an equipment rental segment. It could spin-off the latter business, which is more cyclical. The value of the two segments could be worth 28% more than the current valuation. If Hertz misses numbers, it is likely an activist investor will step in and revamp the company. Cramer likes the risk/reward proposition of Hertz for the long term.

Twitter (NYSE:TWTR). Other stocks mentioned: Facebook (NASDAQ:FB), Marvell Technology (NASDAQ:MRVL), Lam Research (NASDAQ:LRCX)

Twitter (TWTR) reports earnings, and it is hard to know where the stock will go. Twitter has lost money and has a decelerating growth rate, and the market has zero patience for that, even as many people love the product. Twitter needs more growth if it wants to attract an increase in advertising. Many companies would rather put their advertising dollars to work on Facebook (FB) than on Twitter. If TWTR doesn't increase in advertising sales, the stock could rise to $45, but if there is no re-accelerating, the stock could fall to $30. Cramer thinks this is an unattractive risk/reward proposition.

Cramer thinks that if Twitter can't turn itself around, someone else will. The company could be an acquisition for about $32 billion. In the meantime, Cramer would stay away from this "battleground" stock.

Cramer took some calls

Lam Research (LRCX) is highly volatile. Cramer thinks Lam has had a huge run, and he would buy it on a pullback.

Marvell Technology (MRVL) is not a stock Cramer likes.

CEO Interview: David Brain, EPR Properties (NYSE:EPR)

EPR Properties (EPR) rose significantly before earnings and dropped after the quarter. CEO David Brain can't account for the dramatic up and down move in the stock, and he doesn't think it was related to earnings. Cramer thinks that since the stock trades at relatively low volume, it could have been an error that accounted for the volatility, and is a short-term issue. Brain mentioned an upgrade and thinks the business is strong.

EPR is a REIT that rents to movie theaters and shopping centers. Lower attendance at movies is not affecting EPR. Cramer likes the long-term story of this 6.2% yielder.


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