Cramer's Mad Money - Cisco Screwed Up Royally (11/11/10)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday November 11.

CEO Interview: Jeff Bradley, Global Specialty Metals (NASDAQ:GSM)

Even in volatile times, it is necessary to have some speculative stocks in a portfolio; "Some of my biggest wins are from speculative stocks," Cramer said, "They make you money and keep you in the game."

Is it possible to make money from a stock that is up 95% since Cramer recommended it in December 2009? Global Specialty Metals (GSM) has promising fundamentals and is set to go higher. The company produces silicon and silicon alloys which go into myriad products from plastics to shampoo. The company reported a "phenomenal" quarter, and Cramer would take some gains for those who were holding the stock.

Global Specialty Metals has the advantage of being in an industry with high barriers to entry; it would take 3-4 years for a company to get permission to build factories and locate them close to raw materials. Bradley discussed the significant growth in emerging markets, from the auto industry, which is revving up again, and the solar sector. GSM has several contracts which provide earnings visibility for 2011. Its Niagara Falls plant is one of GSM's most successful, and helps stimulate the economy in a region with high unemployment.

Cramer thinks GSM is going higher on rising spot prices, lack of competition and earnings visibility.

Oracle (NASDAQ:ORCL), F5 Networks (NASDAQ:FFIV), Citrix (NASDAQ:CTXS), Juniper Networks (NYSE:JNPR), EMC (EMC), Cisco (NASDAQ:CSCO), Netgear (NASDAQ:NTGR)

"Cisco (CSCO) screwed up royally," declared Cramer, falling 17 percent on a disappointing quarter, making stronger tech names guilty by association and causing their stock prices to plummet. Cisco is not a buy on weakness; Cramer thinks it cannot be bought until it gets its act together, especially since institutional investors are going to do a mass dumping of the stock.

There is no need to extrapolate from Cisco's problems to the rest of tech, since the problems seem to be Cisco-specific and not industry-wide. The company claimed that Europe is a weak market, but not according to Netgear (NTGR), which has seen 23% growth on the continent. Cisco complained about cable, but other companies are holding up well in the space. Cisco projected just 3-5% growth, but look at the growth predictions for other tech companies: Juniper (JNPR), 16-18%, Oracle (ORCL), 39-43%, Citrix (CTXS), 10-13% and F5 (FFIV), 40-41%.

Not all of Cisco's businesses are bad, but the parts that were performing well comprise too-small pieces of its pie. Enterprise orders were up 16%, but it didn't move the needle for Cisco, while enterprise orders make up 90% of Oracle's business. Cramer likes Oracle, especially since it has pulled back unfairly. Cisco's data center business was up 59%, and EMC (EMC) has more exposure to this space than Cisco (Cramer thinks Cisco should buy EMC). F5 (FFIV) is another example of a company that is taking significant market share from the former tech bellwether.

Cramer told viewers not to let the "high profile meltdown" spook them, but instead to buy steady growers who were unfairly brought down by Cisco's bad quarter.

CFO Interview: Niq Lai, City Telecom HK (CTEL)

City Telecom HK (CTEL) is delivering subscriber growth with 135,00 new broadband customers with a new total of 526,000. The company has 28% market share. CTEL is a pure wire-line provider of internet, TV and corporate data services, and is planning to raise revenues by upping prices. Niq Lai said the company is charging $26 for its triple play from $13 a year ago. He is hopeful about the future of WiFi in Hong Kong, and the company has over half the total market share in fiber for home services.

Lai said the company's next "inflection point" was the completion of its fiber network, which could double cash flow and lead the company to double its 3.9% dividend.

Cramer is bullish on CTEL.

Buy the Miners: SPDR Gold Trust ETF (NYSEARCA:GLD), Agnico Eagle Mines (NYSE:AEM), Eldorado Gold (NYSE:EGO), NovaGold Resources (NYSEMKT:NG)

Cramer enjoys talking about gold, and he reiterated the bullish case for the yellow metal, with one change; now it is safe to buy the miners.

While Ben Bernanke is keeping our products affordable abroad by printing more money, there needs to be a better reflection of value than the dollar. Cramer emphasizes that gold is a currency and not a commodity, and it is worthwhile having 20% of a portfolio in gold, since gold has risen consistently, and with worldwide shortages and growing demand, is going higher.

There are several ways to get exposure to gold: coins, bullion, Gold Trust ETF (GLD) and the miners: Agnico Eagle Mines (AEM), Eldorado (EGO) and NovaGold (NG). While Cramer had been hesitant to push the miners before, he thinks money managers are underexposed to miners and will be buying more. In addition, these miners tend to keep production prices low and will benefit the most from price increases in gold. Novagold, while highly speculative, has exposure to North America, a more politically stable region than the places other companies mine.

When is it time to stop buying gold? Cramer might reconsider his bullish thesis once gold comprises 5% of portfolios worldwide. Currently, gold is just 0.3%. That's a long way for the gold bears to go before quitting.


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