Cramer's Mad Money - 2 Overlooked Cyber Security Stocks (12/16/10)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday December 16.


With the rise of WikiLeaks, which can grab significant amounts of top secret data from the government offices, the military and banks, Cramer thinks online security is going to be in bull market mode. Fortinet (FTNT) has risen 154% since its IPO in 2009, and many pure plays in online security have seen their stock prices rise dramatically. Instead of chasing these stocks higher, Cramer discussed two household names that are "the best overlooked cyber security stocks": eBay (EBAY) and Intel (INTC). While only a small portion of these companies are devoted to online security, the space should generate increasing revenues for both companies.

While the media was critical of Intel's acquisition of McAfee, the merger might revolutionize the way the semiconductor makes chips. Using McAfee's technology, Intel can embed security features on chips and hardware and can raise the average price per chip. In addition, Intel is cheap and trades at just 9.4 times earnings with a dividend of 3.4%.

eBay (EBAY) owns Paypal, which is one of the most popular ways to make secure payments online. Paypal currently generates only 5% of eBay's revenues, but Cramer predicts that will grow, along with the percentage of online transactions through Paypal; the current level is 13.5%, but Cramer thinks the number will grow to 20% in a few years. Cramer thinks eBay is a buy for Paypal alone.

CEO Wall of Shame: William Weldon, Johnson & Johnson (NYSE:JNJ)

A company that was once one of the most well-respected names in healthcare worldwide, which once had a pristine reputation and products that were loved and trusted has been wrecked by the mismanagement of its once legendary CEO, William Weldon. The list of medicines that have been recalled in the past year is seemingly endless, many of them children's medicines. In addition, production has been suspended at JNJ's plant in Pennsylvania and its Puerto Rico factory might close. One of the most shocking stories was a recall of hip implants when 93,000 had already been implanted worldwide.

Cramer doesn't usually put a CEO on his Wall of Shame unless the chief executive has destroyed value for shareholders. Weldon is an exception to the rule; miraculously, JNJ's stock has not dropped on all these scandalous screw-ups. Cramer thinks, though, Wall Street's indifference about JNJ's problems will not last and the stock is destined to fall unless Weldon is replaced.

CEO Jeffrey Schwartz, Timberland (NYSE:TBL)

Cramer can't stop talking about shoes, but for good reason; the bull market in shoes has been big. Cramer devoted a segment to the cheapest in the shoe space, Timberland (TBL). The company reported a "thing of beauty" quarter but only 1 out of 5 analysts rate the stock a "buy." The stock is up 131% since 2009, is expanding its brand in Europe, and had developed a shoe made from recycled materials. While the green aspect has captured the imaginations of environmentalists, particularly in Europe, Jeffrey Schwartz stresses the green aspect is a fringe benefit; the main focus is on creating durable, attractive quality footwear. The stock trades at a multiple of 14 with a 14% growth rate. Cramer says it's a buy.

General Mills (NYSE:GIS), Fed Ex (NYSE:FDX), Nucor (NYSE:NUE)

Cramer discussed "three companies that succumbed to the media's misdirected butchery": General Mills (GIS), Fed Ex (FDX), Nucor (NUE). All three were considered "incredible disappointments" but the press should have focused on the positives, and looked where the companies were going rather than where they had been.

Federal Express (FDX) saw a 15 cent miss that sent the bears on a raid, but no one seemed to notice the company's comments about lowered expenses, raised guidance and strong volume growth. General Mills missed by 2 cents, it seems that its issues with commodity costs might be improving. Cramer thinks there was a change in tone to GIS that the headlines didn't catch. Nucor, which pre-announced to the downside, gave the most bullish information Cramer has heard about the company in years. CEO Dan DiMicco tends to be a bear on the industry and the macro situation, but he actually sounded upbeat, said utilization rates were improving and looked forward to raising prices. Cramer urged viewers once again to look beyond the headlines and listen to the CEOs.


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