Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday December 9.
"The Chinese government has done more favors for worldwide capitalism than any other government," says Cramer. Not since the dot.com revolution have IPOs been so hot, and the really hot IPOs are coming straight from China. However, Cramer admitted it was time to play the role of "traffic cop slash hall monitor" and repeat his familiar mantra, "Bulls make money. Bears make money. Hogs get slaughtered." If you want to buy a hot Chinese IPO, make sure you take gains the same day, preferably the amount you invested, and let the rest run, since these IPOs tend to get shot out of the sky relatively quickly and with devastating impact.
Youku.com (YOKU) and DangDang (DANG), termed the You Tube and Amazon of China respectively had incredible gains on their IPOs this week. Youku was priced at $12.80, opened at $27 and saw a quick 110% profit. The stock closed $33.44, reaching a 161% upside and gained another 9 points on Thursday. The total rise of Youku was an incredible 234%. DangDang doubled from its initial offering. SemiLeds (LEDS) initially was priced at $17, opened up 41% at $24 then closed at $25.756 for a 52% gain.
However, these stocks often fall just almost as spectacularly as they rise. Mecox Lane (MCOX) opened with a 59% jump from its offering of $17.50. Following a class-action lawsuit, the stock is at a mere $7. Even a stock with strong fundamentals like China Cache (CCIH) opened at $27 and is now lagging at $25.
Therefore, Cramer would play Chinese IPOs with caution, taking back the amount of the investment at least, so there are no losses.
The most addictive substance on Wall Street is growth, said Cramer, but not all growth is created equal. People feel secure with growth companies whose names they recognize and have a reassuringly large market cap. Other growth plays are smaller companies that aspire to be one of the big guys. Cramer thinks Diamond Foods, with under $2 billion market cap is an example of the latter type of growth company and posed the question "Can Diamond Foods become the next General Mills (GIS)?"
The company that owns Kettle chips, Popsecret popcorn and a huge variety of nut brands is one of the highest quality snack plays around. The company beat earnings by 4 cents a share, with strong revenues and raised guidance, and saw a $4.77 uptick in its stock price following its conference call. However, this small company has a very large percentage of shares sold short, a full 38%, and is vulnerable to any whiff of negative news that might bring down the stock; witness its otherwise bullish quarter last time around, but a confusion over the company's guidance led to a hammering of the stock.
CEO Michael Mendes is confident that Diamond will continue to grow, since the company is continually in touch with consumers and clients and innovates with new products and creative merchandizing. Diamond's "meaningful differentiated offerings" compared to its competitors, brings consumers back time and time again. Diamond was one of the first snack companies to advertise during the Superbowl and marketed its PopSecret popcorn as a staple football food for viewers.
Diamond Foods is growing at four times the rate of the average packaged consumer goods company. Cramer says the company has an advantage its competitors don't have; it is a high growth company in a low growth sector. While Diamond has a large short interest, Cramer says the shorts are wrong and are soon going to realize it when they get "crushed." He would stick with Diamond Foods.
Cramer says the greatest opportunities lie with companies that are on their way to becoming major players. Intel (NASDAQ:INTC), for example, is a semi company that has already arrived, while Novellus (NVLS-OLD), which makes the thin film of insulation and conductive materials for the silicon wafer chips, is a $3 billion company with plenty of room to run. This is especially true since semiconductors are in a bull market. CEO Rick Hill says semis "are the key ingredient to improving life no matter where you are in the world," since the technology increases productivity and communication.
Novellus is up 55% since Cramer recommended the stock last February and is still "unbelievably cheap," trading at a multiple of 10.6 with a 13% growth rate. The company has $643 million left in its share repurchase program, an equivalent of 22% of its market cap.
Rick Hill says the company has not seen this kind of growth since the mid-90s, and has two main goals. First, the enterprise PC refresh which will take place as Microsoft (MSFT) releases Windows 7 and PCs will have to be updated and the "gentrification of the internet cycle," which will require brand new technology to deal with the new demands on the internet with video and diversified media.
"We are believers," said Rick Hill. Cramer is bullish on Novellus.
12 Gifts of Thursday: Diamond Foods (DMND), Lulemon (NASDAQ:LULU) , SemiLeds (LEDS), Freeport McMoRan (NYSE:FCX), Helen of Troy (NASDAQ:HELE), Ciena (NYSE:CIEN), Dean Foods (NYSE:DF), Arbitron (NYSE:ARB), Legg Mason (NYSE:LM), Charles River Labs (NYSE:CRL), AIG (NYSE:AIG)
While the Dow didn't seem to do much on Thursday, more happened than indicated by the headlines. Cramer counted 12 gifts of Thursday:
3. SemiLEDS (LEDS) had its IPO and saw a 52% pop.
4. Freeport McMoRan (FCX) issued a special dividend.
5. Helen of Troy (HELE) acquired Kaz and the former's stock rose $4.
6. Ciena (CIEN) was up 15% on raised sales guidance.
7. Dean Foods (DF) announced it was refinancing debt and the stock jumped 12%.
8. Clear Channel made a deal with rating agency Aribtron (ARB) whose stock price rose 19%.
11. Shareholders recommended Charles River Labs (CRL) put itself up for sale and the company rose 2.6% on that news alone.
12. AIG (AIG) announced it was going to pay back the government some of the money it owed, and the stock rose 13%.
Jim Cramer was up 31% in 2009. Click here now to sign up for Jim's Action Alerts PLUS and trade alongside him. Special discount for Seeking Alpha users.
Get Cramer's Picks by email - it's free and takes only a few seconds to sign up.