Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday February 22.
Dot.coms are partying like it's 1999. While there are only a handful of optical component plays still standing after the dot.com disaster, the survivors are rallying: Agilent Technology (A), JDS Uniphase (JDSU), Oclaro (OCLR), Oplink (OPLK), EXFO Electro-Optical Engineering (EXFO), Ixia (XXIA). Optical component plays were all the rage in the late 1990s until everyone realized these networks were not going to get built. The demand for the buildout is here, more than a decade later, and these companies don't just have great fundamentals, their charts look terrific.
TheStreet.com technician Tim Collins thinks Agilent (A) is the lowest risk play, but singles out Oclaro (OCLR) as having the most potential. The stock tends to rally hard after breaking resistance, and doubled in six months after breaking resistance in 2009. OCLR has been hitting a ceiling for a long time, and when the stock breaks through, Collins thinks it could rise from $15 to $30 or $40 in 12 months. The Relative Strength Index and all other indicators are flashing green, but the stock price is still lagging behind. Once the price rises, OCLR is going to be ready to party hard.
CEO Interview: David Snow, MedcoHealth Solutions (NYSE:MHS)
On Tuesday, when stocks sold off, Cramer said it is important to have at least one defensive stock in every portfolio. He recommended MedcoHealth Solutions (MHS), a healthcare cost containment play and a pharmaceutical benefits manager. The company manages drug plans for employers, unions and other agencies and tries to find the best prices for its customers. While some investors have lost interest in the stock because not many drugs are going off patent early in the year, Cramer called this "foolish short-term thinking," since the latter part of the year will see Lipitor going off patent and a slew of other drugs going generic, a total of $31 billion worth of medications.
MedcoHealth reported in-line earnings, better-than-expected revenues and reaffirmed guidance, but the stock was off 5% on Tuesday. CEO David Snow attributes the sell-off to concerns about the Middle East and profit taking. The company sells at a low 15 multiple with an 18% growth rate and is up 40% since August, when Cramer said David Snow made "the very best cold shot ever" on the show when he called a bottom in MedcoHealth. Snow says the quarter was "phenomenal" with strong prescription margins, sales growth and strong projected growth. Service revenue growth was 58%, and the company is making acquisitions and advancing into the genetic testing space. "Healthcare reform is not just about unit costs, but practicing smarter medicine," said Snow. The CEO plans to buy back shares aggressively and sees the sell-off in the stock as an opportunity to purchase more shares. Cramer is bullish on MedcoHealth.
CEO Interview: David Crane, NRG Energy (NYSE:NRG)
With oil at the highest level in 2 years, it is worth looking at energy plays. NRG Energy (NRG) got "really and truly hammered," down 4.4% after what many thought was a disappointing quarter. However, Cramer thinks NRG Energy is so low it is intriguing; "This is the most forward thinking utility in America." While a good portion of the company's business is quite traditional, the company is building out an electric vehicle system in Houston, Texas, is developing solar solutions and is seeking a loan guarantee to build two nuclear reactors in Texas. NRG is flush with cash with $12 per share.
CEO David Crane believes energy independence is a viable goal and the unrest in the Middle East only gives more impetus to the drive for energy autonomy. Solar is actually profitable for NRG, partly because of the lack of competition in the space, and in part thanks to government stimulus money which should help the solar business continue to be profitable for the next 3-5 years. Concerning solar, Crane said, "There are no dominant players, and we want to be that dominant player."
The Pain is Not Over: Goldcorp (NYSE:GG)
"The pain is not over," said Cramer. Those who can take the pain of international chaos, potential Chinese rate hikes, rising gasoline prices and commodity price hikes, should hold their positions and sit out the panic. However, it might be a good idea to sell gains even though stocks are down 2% on mayhem in Libya. Cramer would not buy stocks now except for Goldcorp (GG), and cautions patience. While he does imagine a rally will happen again someday in the near future, it is a good idea to wait a bit. For the short-term sellers will outnumber buyers. "My biggest worry, about higher oil, is coming true."
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