Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday January 26.
SunTrust (STI), Huntington Bancshares (HBAN), PNC Financial (PNC), Goldman Sachs (GS), JP Morgan (JPM)
One of the quickest, easiest and least risky ways to make money is to get in on a bank's secondary offering. The trick is to decide which is the next bank most likely to repay TARP money. SunTrust (STI) seems to be a likely candidate after its solid quarter with in-line earnings and raised guidance. SunTrust was hit hard by the recession, especially since it was levered to the troubled real estate market in Florida, but the company reported improved credit and significant declines in non-performing loans.
TheStreet expects SunTrust to issue a secondary in March; Cramer would get in ahead of the announcement. He notes other stocks that have risen significantly after secondary offerings: Huntington Bancshares (HBAN) is up 12%, PNC Financial (PNC) has risen 13% since February and Cramer thinks it is the cheapest and has delivered the best quarter so far. Larger banks have also seen significant upside after secondary offerings; Goldman Sachs (GS) moved up 31% and JP Morgan (JPM) saw a 28% gain. Another advantage of secondary offerings is they spawn a "virtuous circle" of analyst upgrades. Cramer predicts more analysts will make their ratings more bullish on SunTrust following a secondary and drive up the bank's stock price.
Cramer suggests looking into the SunTrust secondary now before it happens; "You have to be in on it."
Trust is hard to come by, especially when CEOs say business is booming but end up just blowing smoke to make themselves look better. The key is to listen to "bankable" CEOs who have a proven track record of performance. Skyworks (SWKS) CEO David Aldrich appeared for the first time on Mad Money since the stock was in the double digits. After the stock was hammered on F5 Networks' (FFIV) merely in-line quarter which brought down many tech stocks, Aldrich explained that there was no real decline in business, especially since Skyworks makes materials for the iPad. Those who listened to Aldrich caught a gain in the stock.
PPG Industries (PPG) reported a terrific number, but the stock sold down. CEO Charles Bunch, who first appeared on Mad Money in 2009, set the record straight about the company's business, and now the stock has hit its 52-week high. Cramer has backed Monro Muffler (MNRO) since 2008. CEO Robert Gross told Cramer there was nothing to worry about, and the company reported a solid quarter with "amazing" earnings guidance.
Lennox International (LII), Watsco (WSO), Masco (MAS), Stanley Black & Decker (SWK), Owens Corning (OC), Home Depot (HD), Lowe's (LOW), Ethan Allen (ETH), Weyerhaeuser (WY), AvalonBay Communities (AVB), Trex (TREX)
According to the newspapers, housing is in the doldrums, but Cramer had strong words for what he called the Lysenko-style phony science and "pure Soviet style reporting." He says the media is "cherry picking scientific results to support their ideological anti-housing bias."
According to the Case-Shiller Index, housing prices declined 1% in November and 1.6% since last year. On this data point alone, the newspapers were ready to declare that housing was dead. Cramer doesn't think the Case-Shiller index is the most reliable measure, since it only measures 20 cities, and is not necessarily representative of the entire country. While, at least as far as the mainstream media is concerned, anyone who dares disagree with the Case-Shiller index "might as well hit himself in the face with an ice pick," Cramer gave four better ways to gauge the housing market:
1. Federal Housing Finance Agency [FHFA] Index. This is based on zip codes and reflects the market in larger areas of the country. This index showed housing prices unchanged from October to November, and the number is calculated using purchase prices and is more rigorous and representative than Case-Shiller.
2. National Association of Realtors industry data. This data is prepared by economists, not the realtors themselves, and showed home sales were up 12% in December, the fifth increase in the last six months. Inventory fell 4.2% in December. The media hates this metric because it is assumed to be biased in favor of the housing industry, but Cramer followed this association's data when housing was at its lowest point and the data was appropriately bearish at that time.
3. According to the Census Bureau, new home sales are up 17% and the price of new homes has risen 12% in the last month.
4. Housing-related stocks tell a bullish story; Lowe's (LOW) is up 32% since August, Home Depot rose 38% since July, Ethan Allen (ETH) is up 48% since July, and Lennox (LII), Watsco (WSO), Masco (MAS), Owens Corning (OC), Stanley Black & Decker (SWK) and Trex (TREX) have seen similar gains.
The President was Pitch Perfect
For those on TheStreet who were concerned about President Obama's State of the Union Speech, Cramer had this to say: "What the heck did you want the President to say?" In fact, Cramer said the speech was "terrific" compared to what he expected and what he would have expected two years ago. He thinks it would have been inconceivable a couple of years ago that President Obama would discuss the stock market as a sign of economic health. "It was a speech about how we need to harness private business to be more competitive...this was a speech about how we beat the Russians in the Cold War and how we are going to beat the Chinese in the business war." Cramer added, "Not only does Obama care about your 401k, he wants it to go higher."
Cramer congratulates the President for recognizing that Americans are aspirational citizens who aren't satisfied with just getting by but want to make money. "He is a capitalist Democrat," Cramer declared. While Cramer was a critic of the President in the past for anti-business reforms, "that's history," he declared, "Whatever you think of the President, it was a bullish speech...and it will continue to help the tone of the market...this was a multiple expanding speech."
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