Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Segment, Thursday February 3.
CEO Interview: Frits Van Paaschen Starwood Hotels (HOT)
Starwood Hotels' (HOT) story is about as hot as it gets and is the best way to play the recovery in travel. The company runs 1,000 properties in 100 countries, with half of its profits from outside the U.S. Starwood has one of the strongest rewards programs for loyal customers. The company is making the transition from owning real estate to becoming a manager and franchiser of hotels. "We are focused on brands, and managing hotels is a very different skill set from managing real estate," said Van Paaschen. "I've always been a brand guy."
The company recently beat earnings estimates by 13 cents and saw a 13.5% rise in revenue year over year. A key metric, revenue per available room, rose 10.1%. The Street was fairly indifferent to Starwood's strong quarter because the company had a very bullish analyst day in December. The stock is up 60% since Cramer recommended it last March, and he thinks Starwood is on a multi-year tear.
When asked why the hotel industry didn't suffer as much as commercial real estate in general during the recession, Van Paaschen replied that since 9-11, few hotels were build in the U.S, and the industry was far from saturated. Currently, the company is seeing an over 90% occupancy rate, which is an indicator of an economic recovery. The CEO added that he isn't worried about the effect of technology on the business traveler, since outsourcing will necessitate more travel to emerging market countries. "Travel patterns are changing...I think there is going to be more travel," he said. The growing middle class in China and India is bullish for Starwood's future, as it is seeing growth in its high-end hotels in these countries.
"This stock is a double," Cramer declared.
There is a sea change in tech as semiconductors, which were once seasonal plays, are now performing well in what used to be "off" seasons. Skyworks Solutions (SWKS) saw higher than expected sales, and TJ Rodgers, CEO of Cypress, commented that the fourth quarter, which is usually not so great, was bullish. Cypress (CY) makes chips that power the touch screen of virtually every smart gadget except for the iPhone and the iPad. "When you see a non-Apple (AAPL) touchscreen, you think Cypress," said Cramer.
The company reported a better than expected quarter and is up 75% since Cramer got behind it last October (it has seen a 450% gain since he initially recommended the stock in 2008). Rodgers says he feels confident that the current "super cycle" will last since it is consumer based and inspires more faith in sales; "At least I don't have to worry about a warehouse filled with cell phones that don't get sold." Cypress has the advantage of programming existing chips with new functions rather than having to make a new chip from scratch for every order. "Ii think there is a lot more ahead. You are a great manufacturer and a great engineer. The stock goes higher," said Cramer.
The bears tried to make the news sound like doom and gloom on Wednesday, but they didn't prevent stocks from rallying at the end of th e day, in spite of a dour opening. The retail numbers were better than expected, in spite of the inclement weather this winter. While many were expecting a poor showing from Estee Lauder (EL), the cosmetics maker performed well and the stock rose 11%.
There were also worries about the bond auctions in Europe, but these fears were unfounded as Spain reported it will have to borrow less money than it has in the past. Currently, rising raw costs are the bogeyman that colors the interpretation of every earnings report, but while commodity inflation does effect companies, it is not having quite the negative effect The Street expected. Whirlpool (WHR) has had more difficulty than most companies with this issue, but Kellogg (K) and Hershey (HSY) have rallied, and are able to compensate for rising raw costs by raising prices and cutting other costs. "We're just not getting the negative memo about inflation," said Cramer.
Gold is Bottoming: Goldshares ETF (GLD)
After a lackluster January for the yellow metal, it looks like gold is bottoming now that February is here; gold was up 18 points on Thursday. Technical analyst Tim Collins predicts that if GoldShares ETF (GLD) breaks through the $131 ceiling it should go up at least 5 more points. Cramer says its "smooth sailing" now for gold.
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