Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday January 27.
From Minor to Major: Eaton (ETN), Caterpillar (CAT), United Technologies (UTX), Potash (POT), Parker Hannifin (PH), Alcoa (AA), Netflix (NFLX), Qualcomm (QCOM), Apple (AAPL), Verizon (VZ), F5 Networks (FFIV), Salesforce.com (CRM), Cirrus Logic (CRUS), Acme Packet (APKT), Sara Lee (SLE), Red Hat (RHT)
The market doesn't always make beautiful music, but lately Cramer has been hearing the change from the minor chords of the market, healthcare and consumer stocks, back to the major chords, industrials and tech. Strong performances from Eaton (ETN), Caterpillar (CAT) and United Technologies (UTX) called the tune. As raw costs increase, agriculture is back and growing, especially Potash (POT). Industrials that were down are now coming back, led by Parker Hannifin (PH) and Alcoa (AA).
Netflix (NFLX) reported a monster quarter with a $27 rise in stock price after it soundly beat estimates and reported accelerated revenue growth. Netflix now comprises 20% of internet traffic in the evenings, although no one was talking about this stock a year ago. Qualcomm (QCOM) is the backbone, if not the nervous system of cellphones, and provides the intellectual property needed for 3G and 4G. Cramer said QCOM reported the best quarter he has seen in a long time for the company. As Cramer predicted last week, Cirrus Logic (CRUS) did indeed redeem itself with its Apple (AAPL) contracts and went 18.8% higher. Those who are still skeptical about smartphone growth should listen to Verizon's call (VZ), and Cramer would buy F5 Networks (FFIV) and Salesforce.com (CRM) aggressively, since the cloud will remain in the sky.
Cramer took some calls:
Acme Packet (APKT) got sold off but is "doing terrific." The sell-off was an overreaction.
Sara Lee (SLE) is cheap but not worth it, even amid takeover rumors. This company is going to be hurt by high raw costs.
Red Hat (RHT) is doing fine and was sent down by F5 Network's quarter. Cramer would buy into weakness.
CEO Interview: Dan DiMicco, Nucor (NUE)
When so many great stocks have had runs, Cramer suggested looking for "Rodney Dangerfield" stocks that don't get respect. Nucor is such a stock; now that the steelmaker is turning the corner, no one seems to care. Cramer would double down on Nucor since its earnings are "about to explode higher." The stock is up 14% since July and investors "ain't seen nothing yet." Steel tends to recover late in the business cycle and will soon have its day in the sun. Nucor's revenues rose 31% with improved operating results and utilization rates up 58%. As steel prices have increased, Nucor has successfully had six consecutive price increases.
CEO Dan DiMicco is known for his cautious comments, but he sounded quite optimistic about the company, which was taken down $1.10 on Thursday on profit taking. Cramer commented about Nucor: "When things go right, you are a lean, mean, money making machine." DiMicco credits the company's tremendous leverage and low cost structure. The company has invested $6 billion since 2007 and plans to invest another billion in the next year. DiMicco is "cautiously optimistic" about the economic turnaround and expects demand to increase. The company is currently operating at 70% capacity and will be in a very good position when it reaches 90% capacity. "We are a long-term focus company." Nucor has increased shareholder return 7.3 times in spite of the economic downturn.
While DiMicco is pleased at the opportunity to raise prices, given strong demand, he thinks demand in the U.S. is unlikely to improve dramatically until the economy starts growing more aggressively. He decried the unfair practices by trading partner, and such "distorted and predatory trade practices" have caused "long-term structural problems" between the U.S. and its trading partners.
"You think there has been a move here, but you don't know what happens to steel companies when they kick in late cycle!" exclaimed Cramer. "I'm a buy, buy, buyer of Nucor!"
Procter & Gamble (PG), the ultimate safety stock, reported better than expected earnings, but the stock lost 2 points on worries of rising commodity costs that are putting the squeeze on the company's margins. "This is one fabulous company," Cramer said, but gross margins contracted by 190 basis points and "that's awful," since the contraction trumped P&G's earnings beat. "We like producers of commodities and not users of commodities," Cramer explained, encouraging investors to buy producers of raw materials like Potash (POT) and Alcoa (AA) and to lighten up on consumers of raw materials like P&G and McDonald's (MCD)
Cramer took some calls:
Deere (DE) is going to $100. it might come down a bit for a discount, but either way, it's going higher.
Treehouse (THS) gave one viewer a 43% gain. Perrigo (PRGO) is also a buy, and Cramer has noticed an absolute correlation between recalls of Johnson & Johnson (JNJ) products and increased sales for Perrigo.
Cramer is not worried about the SPDR Gold Trust ETF (GLD) or the metal in general, and suggested waiting for a pullback in February, because January is a down month for gold on profit taking and the IMF selling the yellow metal.
A caller asked about Nvidia (NVDA), a huge grower Cramer got behind this past summer; "I told people to buy it at $9, $10 and $11. You caught a double. Cut that position in half and let the rest play." He told another viewer to sell Cisco (CSCO) and buy F5 Networks. When asked about when to take profits, Cramer explained he doesn't suggest taking a profit after 10%, but 20% is the first level to start lightening a position. If the fundamentals are good, ride it out. Cramer would not touch any stocks in the shipping sector, since too many ships are being built and not enough are being sold. Finally, Cramer praised Verizon as a stock that has a great cash flow. "We have caught a lot of money in Verizon. It is still good."
Jim Cramer was up 31% in 2009. Click here now to sign up for Jim's Action Alerts PLUS and trade alongside him. Special discount for Seeking Alpha users.
Get Cramer's Picks by email - it's free and takes only a few seconds to sign up.