Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday, March 4.
8 Earnings to Watch: Ciena (CIEN), Brown Forman Corp (BF.A), Dick's Sporting Goods (DKS), Diamond Foods (DMND), Molycorp (MCP), Clean Energy (CLNE), Pall Corp (PALL), Hibbett Sporting Goods (HIBB). Other stocks mentioned: Cisco (CSCO), Bank of America (BAC), Nike (NKE), Under Armour (UA)
After the best jobs report in two years, with the unemployment rate dipping below 9%, the Dow still dropped 88 points. While all eyes used to be on jobs, "employment is becoming a sideshow," and even what companies say about their earnings might be of less importance than oil prices. Cramer discussed earnings for the coming week, but with the caveat that if oil continues to rise, nothing these companies say may ultimately matter.
Ciena (CIEN): Cramer predicted this stock would see $30 when CEO Gary Smith appeared on Mad Money last spring and the stock was at $18. Now Ciena is just a few cents shy of that target and should go higher because of the need for Ciena's technology to transition effectively to an internet with full voice, video and data capability. The company's clients are the leading names in tech and telecom, and Ciena is crushing Cisco (CSCO). Cramer wants to hear what management says about the company's recent acquisition.
Brown Forman Corp (BF.A): This discretionary liquor company is "a fascinating indicator for the strength of the consumer."
Diamond Foods (DMND): Diamond has promised good things, but the 45% short position weighs on it. Cramer thinks this battleground is worth watching.
Molycorp (MCP): This is "the single most logical play on rare earth minerals outside of China." These minerals are needed to make electric car batteries, but the company has no earnings, little revenue and a massive valuation. Cramer wants to know if the company has money, what its plans are and if the harsh EPA regulations are going to be relaxed.
Clean Energy (CLNE): With the brutal attacks against natural gas and the fuel's low price, Cramer doesn't think this stock is worth investing in without significant subsidies.
Pall Corp (PALL): The retirement of this company's CEO might provide an opportunity for this filteration play to be taken over.
Hibbett Sporting Goods (HIBB): If Dick's reports a good quarter, Cramer would recommend buying HIBB before the quarter, although he doesn't think the company is as well run as DKS.
Cramer would keep an eye out for Bank of America's (BAC) analyst meeting, the first in four years. He wants to hear about the company's spinning its bad loans off into a bad bank and what management has to say about the mortgage putback issue. He predicts BAC will only have to pay 10% of what the pundits are predicting.
The most raging bull right now is in the coal sector, said Cramer, and metallurgical coal pricing season is a huge catalyst for the group. Metallurgical coal is the coal used to make steel and currently, miners and steel producers are securing their contracts. Anglo American, a metallurgical coal company just secured a contract for $330 per metric ton, 46.6% higher than the previous contract. BHP Billiton (BHP) plans to take advantage of surging prices by making their benchmarks monthly rather than quarterly.
Cramer would play the Met coal trend with Walter Energy, a pure play on met coal which exports close to 100% of its coal and has the most open contracts in the industry. The stock is up 49% since Cramer recommended it last year, and after a quarter in which it reported lower production than expected due to specific issues with mining, the stock is down ten points off its high. With a 33% increase in Met coal demand worldwide and supply disruption because of the Australian storms, Walter's stock is going higher. The company is going to acquire Canadian company Western Coal for $3.3 billion loonies. Together, they will become North America's largest coal producer with 95% Met coal, and they are expected to produce 17 million tons this year. Cramer would buy Walter Energy hand over fist before the merger in April.
CEO Interview Mark Ellis, Linn Energy (LINE)
Linn Energy (LINE) is a natural gas and oil MLP play with a 6.9% yield and 90% of its payout tax deferred. The company has expanded dramatically in the past few years and now it has 2.4 trillion cubic feet of proven natural gas reserves. The company is actually making money from its natural gas, in spite of the low prices, because its prices are hedged at $6 until 2013, compared to the current rate of $4. Production is up 20%, and the stock has risen 170% since Cramer got behind it last May and 15% since November. This is all the more impressive, given that the company has issued two secondary offerings during this period to fund new acquisitions.
While Linn Energy aims for organic growth, "The core of our growth as a company is through acquisitions...and the acquisitions have to be accretive immediately," said Mark Ellis, CEO of Linn. Currently the company has high margin properties in the Permain Basin and the Bakken Shale, and is expanding its oil assets. Cramer is bullish on Linn.
CEO Interview: Joseph Gromeck, Warnaco Group (WRC)
Warnaco (WRC) is an apparel company that sells at a bargain; just a few points off its 52 week high, the company has a multiple of 12 with a 17% growth rate. This company designs, sources and distributes intimate apparel and swimwear and 74% of its revenues come from Calvin Klein. Warnaco is expanding overseas with 56% of its revenues coming from outside the U.S., 38% growth in China in the past year and 87% growth in Brazil. The company is up only 4% since Cramer got behind it in November, but he thinks Warnaco deserves the chance to play catch-up. The company beat earnings estimates by 3 cents a share and gave cautious guidance.
CEO Joseph Gromek discussed the company's launch of CK One which will comprise 10% of its underwear business and is looking to expand its stores overseas, especially in China. Rising cotton costs are a challenge which the company was addressing by buying Egyptian cotton, which was 18% cheaper than the cotton produced in many other countries. Given the recent crisis in Egypt, WRC lost its cotton supply for a week, and that is the main reason it gave cautious guidance. With labor costs rising in China, Gromek says he is diligently looking for other sources of cheap labor.
Cramer says WRC is "The cheapest apparel company that I follow."
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