Cramer's Mad Money - 'One Of The Most Volatile Companies I've Had On Air' (8/7/14)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday August 7.

CEO Interview: Alan Trefler, Pegasystems (NASDAQ:PEGA)

Pegasystems (PEGA) produces business software and has high-profile clients. The stock rose 10%. It is #2 player in the space, with 10% market share. Its multiple is only 24 with a 28% growth rate. It missed earnings because of hiring, but its revenues grew dramatically. Bookings, a key metric, were up 74%. CEO Alan Trefler says he isn't worried about competition, because of the focus on the client and the options provided by PEGA. Cramer said PEGA is "one of the most volatile companies I've had on air." The CEO noted the volatility has lessened so far this year. One reason for the volatility is its dual offerings, monthly or perpetual licenses. "We are very transparent with our numbers." Its renewal rate is high, and 70-80% of orders are from repeat customers.

Don't Go Near The Dip: Caterpillar (NYSE:CAT), Vitamin Shoppe (NYSE:VSI), GNC Holdings (NYSE:GNC), Procter & Gamble (NYSE:PG)

The Dow fell 75 points on Thursday. Cramer discussed sectors that have punished, and asked is buying on weakness too risky? Industrials is one example. Caterpillar (CAT) went down in a straight line after a poor quarter until Thursday, when an analyst got positive on industrials. However, Cramer thinks the market will continue to punish the industrials, because global uncertainty is rising. Before the Olympics, there was tremendous confidence in industrials. Since then, Russia's relationship with almost every other major country has been challenged. In addition, the Italian economy is poor, Germany is slowing, and France might be the next bearish economy. The sanctions standoff will hurt businesses, and people are scared out of industrials.

Airline stocks have also been poor performers. People don't feel as safe flying as they used to, airline insurance will increase and the sanctions will also hurt airlines. Even if things aren't so bad, these stocks were due to take a breather anyway. Oil is the real puzzle; it should be going higher rather than lower given the several crises. However, the strength of the dollar means lower oil prices, and this time around, lower oil prices are a negative indicator for stocks. Cramer has cut oil exposure in his charitable trust.

Cramer thinks stocks tend to go lower ahead of a military crisis, and then when there is either war or a resolution, stocks go higher when the uncertainty is over. Cramer recommends investors avoid being contrarian right now, because there is more pain ahead for stocks as long as there is so much uncertainty.

Cramer took some calls:

Vitamin Shoppe (VSI) is better than GNC (GNC), but neither has been performing well. However, he would be a buyer of VSI.

Procter & Gamble (PG) talked about spin-offs, the stock popped, but may be going down again. Cramer thinks under $80, PG is a really good investment.

3 Companies That Stick By Their Guns: Walgreen (WAG), Allergan (NYSE:AGN), Time Warner (NYSE:TWX). Other stocks mentioned: Twenty-First Century Fox (NASDAQ:FOX), General Electric (NYSE:GE), Express Scripts (NASDAQ:ESRX), AmerisourceBergen (NYSE:ABC), McKesson (NYSE:MCK), Valeant (NYSE:VRX)

Did Walgreen (WAG) do the right thing by walking away from tax inversion? Did Time Warner (TWX) do the right thing rejecting Twenty-First Century Fox's (FOX) bid? Is Allergan (AGN) doing the right thing by trying to ward off the Valeant (VRX) takeover? Cramer thinks these 3 CEOs are creating value without takeovers or special tax havens. In terms of investing, those who lost money because these CEOs made the decisions they made should take full responsibility for their losses. In such risky situations, they should have taken profits in the run-up created by the chatter.

Cramer took some calls:

General Electric (GE) had 5% organic growth, but if it can get this to the bottom line, it will go back up. However, GE is also likely to "just wallow here."

Express Scripts (ESRX) has been a remarkable performer, but Cramer prefers AmerisourceBergen (ABC) and McKesson (MCK). Express Scripts is too expensive above $70.

Off The Charts With Dan Fitzpatrick: J.C. Penney (NYSE:JCP), Deckers (NASDAQ:DECK), Michael Kors (NYSE:KORS)

Cramer invited technical analyst Dan Fitzpatrick on the show to discuss the charts of 3 retailers: J.C. Penney (JCP), Deckers (DECK) and Michael Kors (KORS).

J.C. Penney has an "interesting chart" said Fitzpatrick. The stock has traded in a range for a few months and sold off. He is seeing lower lows on lower volume, which is a less bearish sign than what preceded. On the weekly chart, Fitzpatrick sees a reverse head and shoulders. Fitzpatrick thinks it is such a strong pattern, he would buy the stock at the current level.

Deckers is showing a cup and handle pattern and it is close to the 200 and 50 day moving averages. This is a sign that it is not overbought or oversold. After earnings, Deckers gapped up and is drifting higher. The weekly chart shows a series of short squeezes that sent it into volatility compression; the stock traded in a wide range. Fitzpatrick thinks this is a bullish chart.

Kors (KORS) looks less rosy. The volume peaked, but then Kors reported, and the volume didn't rise. This shows investors have become less interested in Kors. If it breaks resistance, Fitzpatrick would be a seller of Kors

CEO Interview: Tim Taft, Fiesta Restaurant Group (NASDAQ:FRGI)

Fiesta (FRGI) is a fast-casual restaurant chain with several concepts: Pollo Tropical which serves Caribbean food mainly in the Southwest, Taco Cabana and Cabana Grill. Fiesta beat earnings by 1 cent with same store sales up more than 6%. Management raised its guidance and has gained 5% since Cramer recommended it in July. "We are a well-kept secret," said the CEO Tim Taft. Cramer is amazed at the numbers; there are 500 cars that pass the drive-thru every day in one Miami location. "We are removing some items that are cumbersome," said Taft, and throughput is efficient.

He thinks Taco Cabana is going to be popular in Texas, so it is worth keeping both concepts under one roof. Mexican food is growing in popularity with very strong regional players. "We have every confidence that we can have a national footprint," said the CEO, but for the time being, the company is expanding first in the South. Food costs are in control, said Taft. "When times are tough, people will trade down to us, and when times are good, they will trade up." Cramer thinks the multiple is high, but the company has a good story.


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