Cramer's Mad Money - These 2 Sectors Have A Huge Void (8/12/14)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday August 12.

These Two Sectors Have a Huge Void. Stocks mentioned: Lockheed Martin (NYSE:LMT), BE Aerospace (NASDAQ:BEAV)

Financials and industrials seem to be in no-man's land. The banks have seen gut-wrenching declines even with decent earnings. Before the great recession, there was merger talk in the financial sector. The group has very little yield and few takeover prospects, and is not a winning sector. Industrials are also facing a lack of consolidation and have little growth. Even good industrials have seen their stocks retreat, especially with weakness in Europe. Cramer sees a "huge void" in these groups.

Cramer took some calls:

Lockheed Martin (LMT) is very well-managed. It has a great yield and keeps going higher.

BE Aerospace (BEAV) seemed like it was going to be acquired. It is cheap, and aerospace is going down every day. "One day I'm going to be right about (the eventual recovery of) this sector, but don't join me in the house of pain."

Brand Action: Kraft (KRFT), Hillshire Brands (NYSE:HSH), Pinnacle Foods (NYSE:PF), Campbell Soup (NYSE:CPB), General Mills (NYSE:GIS), Hain Celestial (NASDAQ:HAIN), Coach (NYSE:COH), Michael Kors (NYSE:KORS), Kate Spade (NYSE:KATE), Tesla (NASDAQ:TSLA), Netflix (NASDAQ:NFLX), Apple (NASDAQ:AAPL), Starbucks (NASDAQ:SBUX), Disney (NYSE:DIS), Costco (NASDAQ:COST), Priceline (NASDAQ:PCLN), HomeAway (NASDAQ:AWAY), Yelp (NYSE:YELP). Other stocks mentioned: Mannkind (NASDAQ:MNKD), Sanofi-Aventis (NYSE:SNY), Oneok (NYSE:OKE)

Brand awareness was the underlying theme of Tuesday's action. The food industry has created lasting brands; Kraft (KRFT) reported a miserable quarter, but its brands are not going away. Pinnacle Foods (PF) got a bid from Hillshire Brands (HSH) and Hillshire Brands received 2 bids of its own. Campbell's Soup (CPB) should be taken over. Cramer thinks General Mills (GIS) should buy Hain Celestial (HAIN). These brands have moats around them because they are household names.

Not all brands are created equal. Coach (COH) is not as iconic as people thought. Michael Kors (KORS) seems like it has peaked. Kate Spade (KATE) has been a big brand, but the stock retreated after a good quarters when management discussed gross margin pressure and refused to give details. Tesla (TSLA) was a killer brand overnight, and it might become even more popular. It seems to be immune to price, which is the virtue of a strong brand. Netflix (NFLX) is a great brand and it might be bought by another fantastic brand creator, Apple (AAPL). Starbucks (SBUX), Costco (COST), Disney (DIS) and other great brands have the luxury of being able to raise prices. HomeAway (AWAY) could be acquired by Priceline (PCLN), or PCLN could buy Yelp (YELP).

Cramer took some calls:

Mannkind (MNKD) is getting too hard; it looked like it was going to be saved from the Sanofi-Aventis (NYSE:SFY) partnership, but things have gotten too complicated due to questions over its drug.

Oneok's (OKE) earnings were not fantastic. It is aggressive, growing and has a good yield.

Packaged Food Companies Are A No Growth Zone: ConAgra (NYSE:CAG), Kellogg (NYSE:K)

The packaged food companies used to be a flight to safety, but now they are a "no growth zone." Many have strong yields, but few can generate organic growth. That is why Hillshire Brands is receiving a high bid, because companies are willing to pay up for growth. Food companies aren't even benefiting from cost cuts. Competition is fierce for shelf-space. Cramer thinks ConAgra (CAG) should be bought, if there are takers. Kellogg (K) cut earnings and sales guidance and Kraft is also losing out to competition. As long as interest rates stay low, the dividends may prop up these stocks, but Kraft is a "lousy operator."

CEO Interview: Burton Goldfeld, TriNet Group (NYSE:TNET)

TriNet Group (TNET) is an employee benefit manager whose shares have risen 30% since Cramer last recommended it in May. With employee data becoming ever-more complicated, and as laws vary from state to state, TNET takes the guesswork out of organizing employee information. TriNet manages information for myriad clients, and Cramer reiterated his recommendation of the stock.

CEO Interview: James Foster, Charles River Labs (NYSE:CRL)

Cramer spoke to CEO James Foster, who said that demand is heating up and the over-capacity issues have now been resolved. When asked how the company would deal with the Ebola crisis, Foster explained that the disease is complex to treat and involves getting the right balance of destroying the infection without harming the patient. The lab animal business is strong, and Foster noted that half of the world's lab animals are provided by CRL. Cramer thinks CRL's stock is ready to move higher.


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