Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday December 1.
What do you do if you missed the 250 point rally in the Dow? Cramer suggested a solid stock that did not rise along with the rest of the market. Airgas (ARG) has not only been unfairly kept down, but it provides two ways to make money. First, it is likely to get a higher takeover bid from Air Products (APD) which initially offered it a "grand theft" amount of $65.50. This level is 20% lower than similar takeover bids, and Cramer thinks the final offer might cross the $70 line. Thanks to regulations related to the takeover, Airgas is down 7 points in addition to having been kept artificially low because of the lowball bid from Air Products.
The other way to win with Airgas is that even if it doesn't get taken over, it is still a great company with solid fundamentals and a generous dividend. Either way, Airgas is worth buying and is cheap.
It doesn't matter whether or not Cramer thinks Netflix (NFLX) will go higher or that its $10 billion market cap is too small, "discipline always trumps conviction," he explained, and when a stock catches a double, it is time to cut a position in half. Cramer recommended Netflix when it was at $59 more than a year ago, and since it was at $102 four months ago, the stock has increased 100%. Therefore, there is nothing to lose by taking half off the table and letting the rest run. "Bulls make money, bears make money, hogs get slaughtered, if you do not take anything off this one you are most definitely a hog, you will get slaughtered."
Cramer admits he can't blame J. Crew (JCG) CEO Mickey Drexler for taking his company private, since specialty retailers are among the first companies to get caught in the crossfire of shorts and hedge fund selling. Often these stocks make great trades and, if their fundamentals are strong, are worth buying when they get hammered. The trick is knowing when a specialty retailer has a good long-term story.
The key is to look for new store openings, especially overseas, new concepts and great management. Drexler is an example of a great manager who understands fashion trends and who can skillfully develop and create brands. Two specialty retailers in particular resemble J.Crew in their ability to create new fashion trends and command powerful growth.
Urban Outfitters (URBN) is a "brilliant incubator of new concepts" including Free People, Anthropologie, Leifsdottir, a house and garden store called Terrain and a wedding brand due for Valentine's day. The stock is up 1,000 percent in 11 years, and it still has room to grow, since URBN has only 355 stores compared to nearly three times that number owned by its nearest competitors like Abercrombie & Fitch (ANF). The company is opening 50-55 new locations in the next year with the goal of eventually doubling its total number of stores. URBN trades at 19.4 times earnings with a 20% long-term growth rate. While this is good, Cramer thinks it is a good idea to wait for a pullback to buy.
Another great specialty retailer is Limited (LTD) which owns the Victoria's Secret brand and Bath and Body Works stores. Limited was once limited in its new concepts but it is now making a comeback and is planning aggressive international expansion for 2012. The company has declared a $3 special dividend in addition to its 1.7% yield and has authorized a $200 million stock buyback. "These are two things you don't do if you expect your business to suffer." Even though Limited is close to its 52-week high it trades at a multiple of 15.8 with a 17.5% long-term growth rate.
"You need to remember this day the Dow skyrocketed 250 points...the next time someone tells you all is lost and you must sell," said Cramer, who has been accentuating the positives, including China, the European Central Bank, and U.S. policy. In spite of lackluster housing and jobs, in just 24 hours, several positive things happened in Washington that sparked the major rally on Wednesday. President Obama canceled his vacation plans to hammer out a compromise concerning tax break and the extension of unemployment benefits. Add to this good news about hiring and auto production.
For those who believed in good stocks, it is time to take a few gains with Apple (AAPL) up $5, Deckers (DECK) up $3, F5 Networks (FFIV) up $7 and a moderate rise in Amazon (AMZN). "Go ahead," Cramer said. "They are yours to take."
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