Cramer's Mad Money - The Great Bank Breakout (12/22/10)

Includes: BAC, CAT, COLM, JPM, NAV
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday December 22.

The Great Bank Breakout: Bank of America (NYSE:BAC), JPMorgan (NYSE:JPM)

The banks are breaking out for practically no reason at all. "No one is championing this," noted Cramer, since The Street is obsessed with bad news about financials, while the stocks go onward and upward. No one can really blame people for their bearish attitudes, given the fiasco in financials in the past, but Cramer says the fact that when a sector moves based on nothing at all, it is time to sit up and take notice. He noted strong performances in Bank of America (BAC), JPMorgan (JPM), and told viewers to stay tuned for consolidation of small banks. "Jump on the bank bandwagon," he said. The bears eventually will want to jump on too, but probably after the move has been made.

CEO Tim Boyle, Columbia Sportswear (NASDAQ:COLM), Nike (NYSE:NKE)

Price matters. Cramer said while that statement might make him sound like "Captain Obvious," price makes all the difference between liking and not liking a stock. Take Columbia Sportswear (COLM), an outdoor athletic apparel play Cramer got behind on October 26. In just two months, the stock has climbed 20%, and is now as hot as its Omni-Heat sportswear with the reflective lining. Has the stock gotten too hot? Cramer confesses he feels "a bit skittish" about it, given the fact that Nike (NKE) was hammered on Wednesday after it reported, and the stock's high multiple of 24 compared to its 13% growth rate.

Tim Boyle says the proof is in the company's products which are "demonstrably different, visibly different and demonstrate value" to customers. Columbia Sportswear adapts technology used to warm car seats for use in apparel. This accounts for Columbia's highly unique products, including plug-in shoes. While Boyle acknowledges the products are expensive, they yield high margins, and as is the case with electronics, growing demand and production will drive down the prices. While Boyle sees a temporary inflation in production costs in Asia, Columbia has broad enough sources to offset the problem.

Cramer said that while he is worried about the cost structure, Columbia has a great long-term story, and he might consider buying it on a pullback. "I can't be as bullish on it as I want to after what happened to Nike, although the products are unbelievably great."

CEO Interview: Dan Utisan, Navistar (NYSE:NAV), Caterpillar (NYSE:CAT)

Because The Street can often be a "feeding frenzy of negativity," it is easy to find bargains when good stocks get knocked down. The largest American producer of trucks and school buses had an apparent earnings miss by 6 cents. Navistar's (NAV) stock was run over by an eighteen wheeler on Wednesday, but Cramer noted that Navistar's deal with United Autoworkers was not priced in; what looked like a 6 cent miss was actually an 8 point gain. The company reported higher than expected revenues and management was positive about all of the company's businesses. The stock is up 6% from Cramer's June recommendation, and he thinks the bull market in trucks will take the stock higher.

CEO Dan Utisan says that especially after a bearish time for trucks, with the industry off 60% from historic levels, recovery is happening quickly. He expects to see a 30% gain in the industry for 2011. When Cramer asked about Navistar's gross margins, which were off two percentage points from the expected 18%, Utisan said the company is in a launch period, and the introduction of new products distorts the margins slightly. The company is developing engines that are unique, and Navistar's new engine is the only one to meet current emissions standards. Utisan sees an improvement in market share, especially in late 2011 and doesn't think defense spending cuts will affect the military's demand for new vehicles. While most of Navistar's sales are in the U.S., it is expanding internationally, thanks in part to its contract with Caterpillar (CAT). Cramer likes Navistar's long-term story.


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