Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday November 10.
There is every reason to fear missing a move in the banks. The obsession over FDIC fees is misplaced, because this news is baked in and banks can easily pay these fees as they are performing better. What about the so-called "mortgage morass?" As the unemployment situation improves customers will be able to pay mortgages.
Concerning worries over the 30 year bond weakness, Cramer says loans actually need to start making money for banks, and the 30 year trajectory is a plus. Also, appraisers are quoting low numbers, which lead to lower numbers in the future, but Bernanke's reforms should end this cycle.
In short, bank stocks are working. "It's been a long time, but it matters."
Selective Negativity: BJ's Wholesale (BJ)
The media is suffering from "selective negativity," said Cramer, and is downplaying truly good news while blowing every bit of bad news out of proportion. For instance, the "spectacular" unemployment number on Wednesday, which saw a decrease of 24,000 jobless claims hardly got any airtime. Ironic that, when the unemployment numbers are bad, the bears consider it all-important, but when the news is good, the improvement seems insignificant, even though stocks were up on the news.
The bears preferred to obsess over the G-20 conference and the fact that the Chinese and Germans are "mad at us," than on the bullish news that BJ's Wholesale (BJ) is being taken over. How bad can the economy be when a major retailer is being bought? Apparel makers are being downgraded because of concern over the price of cotton? That news is fast becoming baked in.
Even as The Street might be obsessed by the new negatives, stocks are fooled, since they were up on Wednesday.
CEO Interview: Jay Shah, Hersha Hospitality (HT)
Cramer is generous with his praise of Ben Bernanke, but what demonstrates, better than anything else, what the Fed Chairman has done for the economy? Cramer illustrated this with the story of one of the few REITs to survive the recession, Hersha Hospitality (HT), which has 76 hotels throughout the Northeast, many of which are familiar branded names. Thanks to low interest rates, the company raised $167 million through an equity offering in October and nearly doubled the size of its credit facility from $135 million to $250 million.
Hesha is seeing growth rise, with its average daily rate up 8.9% and a 13.9% increase in its revenue per available room. Jay Shah says this growth comes on the heels of the worst two years for the hospitality industry since records have been kept. The company continues to make profitable acquisitions, and has seen growth in revenue per room in all of its major locations, particularly in New York, with a 14.5% rise.
When asked about the dividend, Shah commented that the dividend has always been "a signature of the company" with Hesha as one of the highest dividend payers. While it was a challenge to pay the yield when times were hard, the company expects to increase it as cash flow increases.
Cramer thinks the stock is cheap and is a strong buy.
MEMC Electronics (WFR)
One hard and fast rule of finding a winner is if a stock refuses to decline on bad news, or at least, recovers quickly. When Cramer recommended MEMC Electronics (WFR) in October, he warned viewers that its 3Q would not be so strong, but to look forward to a strong 4Q. Not surprisingly, the producer of polysilicon components for solar panels and semis missed its earnings estimates by 3 cents and pulled guidance. The stock immediately took a 6% haircut, but quickly recovered, and closed just 33 cents down.
TheStreet got spooked because the MEMC pulled its full year earning guidance, but they failed to do the research into the very bullish reason. The company was not ready to give an apples to apples explanation of earnings since its acquisition of SunEdison, which will be very profitable for the company. Analysts ignored the good news; that MEMC expects strong demand, higher prices and record production for its semiconductor wafer business, and is opening a new factory in Malaysia. SunEdision has a huge pipeline of 1,000 megawatts worth of projects. Rovigo, MEMC's $380 million Italian project which comprises 65% of MEMC's yearly solar wafers, is 75% completed.
In spite of all of this good news, MEMC is trading at a multiple of just 12.9 with an 18% growth rate. With 13 holds, 9 buys and 4 sells on the stock, MEMC is "really unloved" by TheStreet, although one analyst had the courage to upgrade the stock. Cramer predicts this $12.90 stock will reach $19, and thinks this laggard will soon become a sector leader.
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