Jim Cramer's Mad Money In-Depth Stock Picks, Jan. 12

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Friday January 12. Click on a stock ticker for more analysis:

Metrics System: Nike (NKE), K-Swiss (KSWS)

"If you don't know key metrics, you don't know stocks," Cramer said, demonstrating to viewers that stocks are not the sum total of their price-to-earnings ratios. Metrics, he explained, are made of up of inventories and futures, or advanced orders placed by retailers. Cramer compared K-Swiss, which saw a 32% decline in futures and an inventory increase of 21% to Nike, which had a 7% increase in futures and is tranferring its excess merchandise to outlets. However, the two companies may seem equal because they were priced the same for earnings. Cramer faults K-Swiss for refusing to cut prices in spite of its inventory problem and comments that the company, which has two classes of stock, is not so concerned about its shareholders. Cramer concluded that Nike was best of breed and K-Swiss was a triple sell.

Related: James Hale makes the long case for Nike.

Spin-Off Doctor: MRV Communications (MRVC)

A good speculative play, according to Cramer, is MRVC which has three different businesses. The company's network integration business is responsible for 45% of MRVC's sales, has only 20% margins, is a slow grower, and is the business Cramer likes least. The network equipment division has the highest gross margins at 50%. Cramer's favorite business is Luminent which comprises 25% of MRVC's revenue and will turn the company into a moneymaker when it is spun off.

Intel (INTC), AMD (AMD), Captial One (COF), United Health Group (UNH), Continental (CAL), Merrill Lynch (MER)

Cramer commmented that although Intel had a good quarter it is hurting itself and bitter rival AMD by cutting prices. Concerning UNH, he says that it has been performing well but hasn't straightened out its management woes, and since COP reported an increase in loan delinquencies, Cramer would stay away. Continental "has more momentum than any stock I know," he said, and also recommended Merrill Lynch.

CEO Interview: Tom Folliard CarMax (KMX)

Cramer asked Tom Folliard why the used-car business is hot and the reason Wall Street doesn't seem to comprehend this fact. Folliard said that CarMax is dramatically different from other car dealers and added, "We have a huge selection of cars, no haggle price, guaranteed quality, a money-back guarantee and great employees." The company just opened in Hartford and will have a new showroom in New Haven. Folliard emphasized that the company does not sell cars on the Web, but uses the internet to attract customers to its showrooms.

Related: Jerry Marks comments on CarMax's blowout quarter.

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Comments

[Greg Calder...:]

I love this stock. One division that is worth at least the market cap of the entire company! I follow Cramer closely and he has spoken about mrvc. If they spin off luminent, this one could double overnight. Hope you are not short here.

2007 Jan 15 05:52 AM