Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday April 7.
Cramer responded to critics who took him to task for reversing his former bullish position on tech. Cramer replied, "When the facts change, I change my mind. What else can I do?" The tech story looked strong until news came out about the tablet glut and lower Asian demand due to Chinese economic tightening and Japan's earthquake. Yet negative comments on Twitter led Cramer to conclude that "this has been one of the most unpopular calls in my six years of doing this show." However, When Ciena (CIEN) says sales are weak, investors must pay attention and change their theses, if necessary. "People are even blaming me for bringing down Apple (AAPL) and Cisco (CSCO)." While he says he feels regret for those who bought tech when he was bullish and have since lost money because the tech story changed, that is part of playing the game. When companies tell the truth, investors should take notice. "I am not being treacherous, I am just being truthful." And while the truth can sometimes hurt, serious damage can be done when investors refuse to listen to the facts.
Mad Mail: MAKO Surgical (MAKO), Safe Bulkers (SB), Intuitive Surgical (ISRG), Oncolytics Biotech (ONCY), EOG Resources (EOG), Whiting Petroleum (WLL), Continental Resources (CLR), Enbridge Energy Partners (EEP), Ruby Tuesday (RT), Pier 1 Imports (PIR), Berkshire Hathaway (BRK.A), Georgia Gulf (GGC)
Cramer answered viewers' questions about stocks:
MAKO Surgical (MAKO) is a $26 stock that is "like a MIni-me" of Intuitive Surgical (ISRG). The company makes surgical robots and has a hip application. Cramer thinks MAKO is too hot since it has yet to book a penny of earnings, and while it could be a takeover target, Cramer is concerned about competition in the space. Cramer would buy ISRG instead, but would wait for a pullback or would use deep in the money calls.
Safe Bulkers (SB) has 16 dry bulk vessels and offers a 6.3% dividend. Cramer thinks the dividend is safe, since earnings are high enough to cover the dividend, the yield won't be raised again until 2012. SB is a good house in not such a good neighborhood, since the surplus of ships is an issue for the industry. With a 14% climb in just two weeks, Cramer might consider the stock an interesting buy on a pullback, but not at its current level.
Oncolytics Biotech (ONCY) is a $5 speculative biotech which has developed a live virus that can search for and destroy cancer cells. The treatment is in Phase III. While Cramer says he is not going to argue with anyone who insists on speculating on it, he thinks it is yet another FDA approval gamble. The stock could either go up big on approval or get hammered. "That is too risky for TV...you can do it at home."
Ruby Tuesday (RT) disappointed on its earnings, which surprised Cramer, because Pier 1 Imports (PIR) which is also a tell on consumer confidence, performed well. He thinks Pier 1's bullish story is more reliable.
Berkshire Hathaway (BRK.A) has been hit by scandal, but Cramer still believes in Warren Buffett, who he believes was "snookered by Sokol." When housing turns around, Berkshire Hathaway will be a major beneficiary, and Cramer would stick with it.
Georgia Gulf (GGC) has been a rocket ship, and Cramer has been waiting in vain for it to slow down. "I missed Georgia Gulf. I'm not going to get on it now."
On the news of another earthquake to hit Japan, Cramer said that, while he regretted yet another disaster suffered by the country, Japan's reconstruction will definitely be a major story that will drive stocks in the latter part of the year. The rebuilding of Japan could cost $325 billion for the next 3-5 years, and wood will be a major material needed, especially since it stand up to earthquakes better than concrete. Even before the disaster, Japan was the largest importer of logs.
There is more to the wood thesis than Japan; China has increased wood imports tenfold in the last ten years. Canada can no longer be a major supplier, since 40% of its pine volume has been lost because of an infestation of pine beetles. Given all of these factors, analysts expect the price of lumber to increase by 10% in spite of bad U.S. housing starts.
Weyerhaeuser (WY) is the best of the group, even though it offers a comparatively small dividend of 2.5%. Cramer thinks the yield will be increased, especially since its balance sheet is clean and it has a top-notch management committed to growing the company. The company owns 6 million acres of timberland in the Western part of the U.S., which is a crucial location for easy transport to Asia. Currently, 9.6% of its revenues are from Japan. When housing improves domestically, the stock should get an added boost.
Rayonier (RYN) owns 2.5 million acres of woodland, has a 3.4% yield and 10% of its revenues are from Japan. Cramer thinks this stock is fine, but its assets are in the South and the East, rather than the West, which makes transport for export to Asia more costly and complicated.
Plum Creek Timber (PCL) offers a 3.9% dividend and is the largest owner of woodland in the in U.S., but only 20% of its assets are located in the Northwest. While PCL is a good timber play, it is too tied to residential construction and doesn't have enough exposure to Asia.
Cramer would not own Potlatch (PCH), which has a 5% yield but its dividend is a red flag because the yield might get cut. Its timber is also located mainly in the East, and while the company could be bought, he doesn't like the fundamentals well enough to consider buying it as a takeover speculation.
While investors who don't want the risk of individual stocks might consider buying iShares S&P Global Timber & Forestry Index ETF (WOOD), Cramer admits he doesn't see the point of buying the bad with the good when it is possible to buy only the best: Weyerhaeuser (WY).
How could it be that retail stocks rallied when headlines reported that oil is going back to $110? Everyone knows that higher prices at the pump put a damper on consumer confidence, and yet retail stocks were up dramatically: Bed Bath and Beyond (BBBY) rose 4 points, Pier 1 Imports (PIR) was up 10%, Costco (COST) saw a 3 point gain, Nordstrom (JWN) rose $1.50 at one point in the day and even Best Buy (BBY) saw an uptick.
Cramer says to understand this counterintuitive rally, one has to look at the story behind the story. Fund managers saw the headlines about higher oil prices and decided to become underweight retail. What they didn't know was that the consumer has actually been out spending, in spite of high fuel prices. When the fund managers saw that the story was different, they rushed in early and bought retail like mad in a desperate attempt to avoid being left behind, and retail rose dramatically. How can investors foresee the next "counterintuitive moment?" Cramer suggests trying to get inside the head of the Big Money guys and try to think about what kind of story they are telling themselves.
Lululemon (LULU) has had a nice run and is a "red hot stock." Cramer would wait for a 3-5% decline before buying.
Lloyds TSB Group (LYG) is not a bank Cramer likes and he would sell the stock.
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