Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday December 14.
November was a fabulous month for retail with the sector growing 8%. Cramer would look for what he calls junior growth stocks in the sector. Regular growth stocks, like Nike (NYSE:NKE) are too big to grow much bigger in a short time. "I'm looking for the next Nike," Cramer said. He discussed four junior growth retail stocks, all of which have a market cap of between $2-5 billion and which have the potential for outsized growth; Deckers (DECK), Lululemon (LULU), Under Armour (UA), Columbia Sportswear (COLM). "All four of these can be winners. There are no losers here," but Cramer was looking for the best of the bunch.
Cramer thinks the main metric for these stocks is distribution. In this category, Deckers is the winner, with its ever popular UGG brand found online, in major stores and in wholesale outfits. Thanks to UGG boots, Deckers has a stellar 29% growth rate, and is expanding the brand by creating UGG boots for men. While Lululemon also has a 29% growth and is aggressively putting up stores, the strength of the UGG brand makes Deckers the winner. While Under Armour and Columbia Sportswear are good stocks, they aren't yet following in Nike's or Deckers' footsteps.
On The Street, growth is as addictive a "substance" as crack, especially as the year winds down. Money managers are looking for big growers to show investors that they haven't been slacking off. Cramer created an index of 7 growth stocks with the acronym F.A.D.S. C.A.N : F5 Networks (FFIV), Salesforce.com (CRM), Apple (AAPL), Amazon (AMZN), Deckers (DECK), Netflix (NFLX), Chipotle Mexican Grill (CMG). This group is up 18% since November 2nd while the S&P 500 is up 4% for the same period. Since these stocks have caught such big gains, it is easy to jump to the conclusion that the move has been made already and it is too late to buy.
Ken Shreve, technical analyst at theStreet.com thinks there is more opportunity in at least a few of these stocks, most notably Apple and Amazon. Apple saw a major breakout on September 20, when it broke though resistance. Since then, the stock has been trading sideways. Shreve thinks that since Apple has been up for the year, it is now consolidating and its price swings are less volatile. Cramer thinks the action in Apple resembles the situation before its previous breakout; "People say Apple is acting doggy. It isn't." Amazon is in a similar situation, is trading sideways and seems to be consolidating, and both Shreve and Cramer think Amazon is also a buy.
Concerning these growth stocks in general, Cramer reiterated his warning to viewers to take profits and not to be greedy. For instance, when Neflix doubled, he urged cutting positions in half. "I think you can't go wrong on Apple or Amazon, though," he said and admitted he considered raising his price target for Apple from $325 after Goldman Sachs raised its own target to $430.
On Tuesday, the Dow returned to the level it reached 11 years ago: 11,497. "Is the market just running in place. Have stocks done nothing?...we are finally treading water rather than sinking...we've been on a meandering road to nowhere," mused Cramer. However, there is no point crying over the past, but rather, it is time to look forward to a bullish future. Putting a positive light on the move, Cramer declared the Dow has reached resistance.
Cramer analyzed several sectors and decided the future generally looks brighter than the past. Concerning financials, he said, "This group cannot do worse in the next decade" than they have done in the past decade. "The financials have bottomed. They are building a base."
Pharma has gotten brutalized almost as much as the financials. However, with Obamacare off the table and Republicans in Congress, the clouds seem to be parting and the sun may yet shine on pharma. Cramer declared that packaged goods are "the lowest I've seen them in 31 years," and tech, which has never fully recovered from the dot.com bloodbath, is "incredible." The paradox of tech is the stocks have never been cheaper precisely at a time when opportunity has never been greater, thanks to the mobile internet tsunami. Tech offers opportunity for telcos Verizon (VZ) and AT&T (T), both of which are also down from where they were 11 years ago.
Retail is hard to gauge, but if job numbers increase, this sector should see a good decade. The diversified manufacturers have the "brightest future" of any other sector, given aggressive growth abroad and the aerospace cycle.
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