Cramer's Mad Money - High End in China (11/15/10)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday November 15.

High End in China: Coach (NYSE:COH), Tiffany (NYSE:TIF), Nike (NYSE:NKE)

The papers are already starting in with their doom and gloom predictions for the holiday season, but Cramer thinks the negativity is exaggerated, particularly since rising cotton costs are already priced into stock declines in the sector. With the minimum wage in the Middle Kingdom rising 15-25% many apparel companies are getting hit hard, but Cramer sees a key to retail success in China: higher wages for Chinese workers also means the average Chinese consumer can buy more.

Interestingly, higher end companies like Coach (COH) and Tiffany (TIF) are performing well in China, thanks to the "aspirational" buyer who wants a taste of the good life. With 49 stores in China, doubling of sales in the region and goal of 15% market share, Coach is a great China play. A full 35% of Tiffany's sales already come from Asia Pacific. Nike (NKE) derives 10% of its sales from China, and should keep running in Asia with future orders in the country up 23%.

BitAuto Holdings (NYSE:BITA), Caesar's Entertainment (NASDAQ:CZR), GM (NYSE:GM), LPL Investment (NASDAQ:LPLA), Booze, Allen and Hamilton (NYSE:BAH)

This week is a major week for IPOs, especially with much ado about GM's (GM) IPO. For those who can't get shares of GM, Cramer would consider BitAuto Holdings (BITA), a Chinese company, the largest holder of web content for the Chinese automotive industry. The company will sell 10.6 billion shares between $10 and $12. With auto sales increasing by 24% in China and the company's subscriptions to auto dealers rising at "a torrid pace," Cramer would buy the IPO. Chinese IPOs also tend to pop high very fast.

Cramer would avoid Caesar's Entertainment's (CZR) IPO, since it owns "the wrong properties" mainly in Atlantic City and nothing in Asia. If John Paulson sells his stake, it would definitely be a sell, especially since CZR is priced at too high a range between $15-17. LPL Investment (LPLA) is another IPO Cramer would avoid, since it is riddled with debt, proceeds from the IPO are not going to the company itself but to executives and LPL sells at an extremely rich $27-30. Finally, Cramer would stay away from Booze, Allen and Hamilton (BAH), a management technology consulting firm whose main client is the government. There are expected cutbacks in this area, and the company has a bad balance sheet.

Baldor Electric (BEZ)

Cramer got behind Baldor Electric (BEZ), producer of energy efficient industrial motors and power-transmission products. The stock has seen a substantial gain of 107% since Cramer recommended it in July 2008, but it has higher to go, since Congress is passing new legislation to improve energy efficiency.

Baldor beat earnings by 7 cents on a 19% increase in sales of its motor, the Super-E. Since these motors account for half of sales, the growth will continue, and revenues will increase since the Super-E sells at as much as a 30% premium to regular motors. In spite of its great story, Baldor sells at just 17 times earnings through a long-term growth rate of 34%.


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