Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday February 16.
Air Products & Chemicals (APD) has finally given up its year-long attempt at a hostile takeover of Airgas (ARG), during which the latter was pressured to accept a lowball bid of $70. Airgas' board unanimously rejected the $70 bid as too low, and after a court case, APD finally walked away from its attempt to take over Airgas. The takeover talks stalled Airgas' stock price even as it consistently beat earnings, and Cramer now believes this is a breath of fresh air for Airgas.
CEO Peter McCausland expected earnings to grow over 20% and thinks that investors will now pay attention to the company's long-term plan to increase value. Cramer confronted McCausland about his decision to have a $300 million buyback in lieu of more dramatic dividend increases. The CEO made the case that the buyback was intended to accommodate shareholders who had a short-term horizon and was meant to facilitate the transition of the shareholder base. Cramer responded, "Why are you helping these jokers out?! Why not let them get a bad price and let the good shareholders get a good price." McCausland responded that he doesn't put shareholders in "good" and "bad" categories, he just recognizes that investors have diverse objectives. McCausland says he sees earnings going above the pre-recession levels and expects a peak expansion of margins. Cramer commented, "The cap has been lifted. Airgas is now free to trade. The stock goes higher. I would buy, buy, buy."
After a dismal January, gold is back and is just 4% off its high. However many gold stocks have yet to catch up, and may provide buying opportunities. Agnico-Eagle Mines (AEM) is still 13% off its high, Eldorado (EGO) is down 17% and Barrick (ABX) is still 11% down from its former level. Cramer says these figures are surprising given the scarcity of the yellow metal, the fact it is now a currency rather than just a commodity in a world where countries are printing too much paper currency. Cramer says he will be bullish on gold until it comprises 5% of portfolios worldwide, up from its current level of 1%.
One of Cramer's favorite growth gold stocks is Agnico-Eagle mines, which has its assets in safe areas. However, the company recently reported earnings of 53 cents when The Street expected 62 cents. Boyd admitted the company should have produced more gold, even though 2010 saw its total production of a million ounces, which was higher than the year before. The main problem is with Metal Bank, one of the company's mines; "It comes down to one asset, and that should be fixed in about six months."
The company is confident about its future and set its four year production growth at 50% and its asset growth at 16%. Agnico Eagle raised its dividend and reinvested the rest of its profits into new projects. Boyd admitted that January was tough, with silver and gold selling, but he was pleasantly surprised that gold did not dip below $1,300, and the company is seeing increased demand. "We are going through a period of central bank buying," Boyd explained, and with banks like JP Morgan accepting gold as collateral, the yellow metal is re-establishing itself as a monetary asset.
Cramer commented, "It is tricky to mine. It is tricky to get it out of the ground. But they have got it in the ground, and maybe that is what really matters. I'm sticking with AEM."
Opportunity Costs: Deere (DE)
Who couldn't have foreseen Deere's (DE) blowout quarter or its $2 stock rise? The bears are happy to complain about food inflation, but when it comes to stocks like Deere (DE), they inconsistently continue to be bearish. When food inflation hits, farmers benefit, and when farmers have more money, they buy more tractors. What was with the doom and gloom about Deere? It proves the media is consistently bearish rather than logical. Cramer calls negative headlines "opportunity costs" that keep investors out of stocks, even the stocks that benefit from the global problems they groan over. Cramer would stop reading headlines and starting doing research.
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