Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday December 2.
Abercrombie & Fitch (NYSE:ANF), Aeropostale (NYSE:ARO), American Eagle (NYSE:AEO), Hot Topic (NASDAQ:HOTT), Pacific Sunwear (NASDAQ:PSUN)
When it comes to retail, teen retail is the "heart and soul of danger;" the stocks are just as moody and capricious as the teens who buy the cool clothes. However, for those who are willing to take the risk of investing in teen retail, it is a good idea to stick with the cool kids represented by the three 'A's: Abercomrbie& Fitch (ANF), Aeropostale (ARO) and American Eagle (AEO), and avoid the strictly trendy, fringe stores like Hot Topic (HOTT) and Pacific Sunwear (PSUN).
Why are the three As the best in teen retail? They tend to stock staple products everyone needs, are constantly developing their brands, and are expanding overseas. Cramer would not buy Aeropostale right now because it had a disappointing quarter and lacks momentum. He would also stay away from American Eagle right now because of its pricing obstacles... So currently the best-of-breed in teen retail is ANF, which blew away its quarter with 22% same-store sales growth compared to analysts' modest estimates of 6.6%. ANF is closing unproductive stores and growing aggressively, especially overseas. It trades at a multiple of 21 with a 20% growth rate. Cramer would buy ANF on a decline.
When it comes to retail, "stick with the cool kids, the 3 'A's," said Cramer.
Avnet (NYSE:AVT), Semiconductor HLDRS (NYSEARCA:SMH), TechData (NASDAQ:TECD), Arrow Electronics (NYSE:ARW), Synnex (NYSE:SNX), Ingram Micro (NYSE:IM)
"You don't need inside information to get ahead," Cramer said. With the FBI currently investigating those who paid big money for bits and pieces of information, it seems risky and foolish to buy data any investor can find out by doing some homework. Cramer says it is possible to build a mosaic from various sources of public, legal information.
For instance, investors who want to find out about semiconductors should consult the Semiconductor Association's bullish information on upcoming growth in the sector, as well as what companies are saying in their quarterly conference calls (see Seeking Alpha's earnings call center!). The real tell on semis is information from tech distributors, which are the intermediaries, because they know what is selling, and when they do well, it is a good sign their products are doing well. Avnet (AVT) discussed pent up demand and the CEO said that "semis are very strong," because there are so many different kind of devices on the market that require advanced technology. TechData (TECD), Arrow Electronics (ARW), Synnex (SNX) and Ingram Micro (IM) made similar bullish statements about the industry, contrary to what the analysts were saying. The Semiconductor HLDRS (SMH) ETF has grown 27% last January compared to the S&P 500's increase of just 11%.
"You can get this information free," Cramer said and added, "it has the extra advantage of keeping you out of prison"
CEO Interview: CEO Manny Chirico, Phillips Van Heusen (NYSE:PVH)
The owner of Izod, Calvin Klein and now the Tommy Hilfiger brand reported a strong quarter, but the headlines emphasized that guidance was below expectations. Cramer noted that PVH, which is up 24% since Cramer recommended it in September, bounced back after disappointing guidance the previous quarter. Manny Chirico said the company is seeing double-digit growth in the Calvin Klein brand and Tommy Hilfiger, both of which are popular brands in Europe and Asia. PVH is continuing to take market share domestically through increased marketing, partnerships with distributors and strategic advertising, such as ads during football games. These ads give Phillips Van Heusen a "competitive advantage," and PVH has huge market share; 60% of Macy's (NYSE:M) neckwear is from PVH, and the majority of its men's dress shirts.
Phillips Van Heusen is also seeing double digit growth in China where the consumer "has a great appetite for world class brands," said Chirico. While he predicts apparel inflation for 2011 because of rising cotton prices, starting at around 4% and perhaps rising to as high as 12% by the end of the year, Chirico is confident his company's superior brands will enable PVH to withstand the pressure. He expects the holiday season to be "very strong."
Cramer said: "The biggest gift is if this sells off on guidance. Buy it on any weakness. Buy it even if it is up."
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