Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday January 18.
"This was the most amazing thing I've seen in 31 years," said Cramer, discussing the rebound in Apple (AAPL) which declined 23 points in Europe on news of CEO Steve Jobs' medical leave of absence. However, the stock rebounded to close down only $7.80 and then rallied to new highs after its "amazing stunning quarter" during which it "smashed" estimates and raised guidance.
Apple's performance proves one thing. While Steve Jobs is a genius, "Apple is bigger than one man." In fact, Cramer thinks the company is taking over the world. Its secret? Apple creates its own ecosystem of products and Apple customers are not likely to abandon its products for those of the competition. In spite of Jobs' departure, Cramer is not lowering his target for Apple, but is raising it from $325 to $400. Tim Cook, the interim CEO, who also served as the interim CEO during Jobs' first medical leave, saw a 60% rise in the company stock the first time around, and Cramer thinks it is likely to happen again, especially with Apple selling at a cheap multiple of 14. "Nothing can stand in Apple's way," said Cramer.
With oil ramping, it pays not only to look at oil plays, but companies that clean up oily messes, like BP's (BP) fiasco in the Gulf of Mexico last year. Clean Harbors (CLH) was responsible for the clean up, but with the conclusion of the disaster, why does it make sense to buy CLH? While it is true that there is only a matter of time before the next big oil spill, won't Clean Harbors have a challenge meeting last year's numbers.
Fortunately, Clean Harbors is not just about oil spills, but is one of the chief hazardous waste disposal companies, has 65% market share in the incinerator business and 60% share of the nation's landfills. The industry has very high barriers to entry, which means a limit on competition, and there have been no new incinerators built in recent years. A full 80-90% of CLH's revenue comes from long-term contracts which provide the company with substantial earnings visibility for the future. The stock is up 25% since Cramer recommended it in June 2010 and 17% since CEO Alan McKim last appeared on Mad Money in November.
McKim discussed Clean Harbors' continuous growth over the last 30 years with a 20% compounded growth rate for the last decade. The company owns 9 out of the 13 commercial incinerators in the U.S. and is planning to expand its holdings. CLH's acquisition of Eveready, is a "home run," says McKim and allows the company to expand further into Canada and provide lodging to workers who travel from other areas. Clean Harbors is developing solutions to make natural gas fracking safer for water supplies, with an emphasis on recycling and reusing frack water.
Cramer concluded there is more to Clean Harbors than last year's Gulf of Mexico disaster. "It is such a great long-term story, for multiple years. I would stick with CLH."
Off the Charts: The Energy Sector - Schlumberger (NYSE:SLB)
The fundamentals and charts agree: Schlumberger (SLB) paints an "extremely bullish picture" of the oil services industry. Cramer thinks this aspect of the energy business is the place to be, since oil services companies benefit the most from the rising price of oil.
Tim Collins, technical analyst at TheStreet.com, points out that, according to Schlumberger's daily chart, it's rallying nicely. The stock was trading sideways since September and couldn't break out of its pattern of higher lows but flat highs. This wedge pattern was broken last week when SLB rallied and it looks like the stock will move "higher and higher." In addition, Schlumberger tends to perform best when it is overbought, and its "strength begets strength." Trading volume in the stock has been consistent, which shows steady demand for the stock.
The weekly chart indicates a "well-defined downside." SLB is breaking out of its cup and handle formation which began last April. Both Collins and Cramer think the stock could go to $100. Collins suggests waiting for a pullback in the stock, which currently sits at $91, but Cramer doubts this pullback is going to happen. Schlumberger is "best of breed in size, technology and financial returns," and its oil field service revenues are equal to those of all of its major competitors combined. While SLB is already the safest way to play the group, Cramer would buy deep in the money calls in case the stock sells off after its earnings report on Friday. When listening to the company's conference call, Cramer would pay attention to information about international markets and the possible resurgence of the Gulf of Mexico. "Do not miss this conference call," Cramer warned.
Cramer said people kept asking him, "Is Citigroup (C) okay? Do you still like Citigroup?" Down an average of 7% after earnings, as he predicted, how can the decline be a shocker? "It is exactly as I said it would be. Right down to the percentage." Citi is "an overcapitalized international behemoth" which will be buying back shares and paying a dividend in a year. It has a leg up on every domestic bank with its overseas exposure. Credit problems are much improved over last year and Citi Holdings is no longer a negative. This is the cheapest bank on book value, said Cramer,"If people don't understand this story, they should stay out of it," but Citigroup believers should "keep buying Citi."
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