Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday April 26.
Cramer saluted CEOs who have transformed their companies and moved their stocks:
PPG Industries (PPG): Chuck Bunch transformed a company that used to be hostage to domestic auto and construction industries into a growth play in emerging markets.
Eaton (ETN): Sandy Cutler has helped make Eaton the most important energy conservation company in the world.
Honeywell (HON): Dave Cody has overseen Honeywell in its transition from a hum-drum pastiche company to a major player in climate control and safety.
CSX (CSX): Before Michael Ward took charge, CSX was a badly-run company. Now CSX "keeps getting better and better."
Cummins (CMI): When Cummins reported last quarter, the stock sold off. Tim Solso came on Mad Money and told Cramer how he wanted to see Cummins become the premiere energy technology player in the world. North American sales rose 50% and sales grew 30% in Asia. However, the company was bashed for its conservative guidance. Recently, Cummins has beat estimates and has raised guidance. The stock is up 8% on its quarter and is not done going higher.
3M (MMM): When 3M was up only 4% from the previous year, George Buckley made bullish remarks at an analyst day in March. No one believed him, and the stock sold off. 3M is now reporting double digit growth rates and is unrolling a host of new products.
IBM (IBM): The Street laughed at Sam Palmisano when he wanted to shift the focus from PCs to software solutions. Now the CEO is having the last laugh with a market cap that excels most of IBM's competitors combined. IBM's targets were considered too aggressive, but the company is meeting and beating these targets.
Ford (F): Cramer was accused of drinking Alan Mulally Kool-Aid, but now everything that was bad about Ford last quarter is good, with its recent blowout quarter. Cramer would be a big buyer of Ford, since the stock has not rallied enough off its earnings.
Coca-Cola (KO): While there are many skeptics, Cramer expects Muhtar Kent to deliver powerful numbers next quarter and to drown out the noise of criticism with growth.
When an amateur looks at a stock, he wonders how much money he can make. When a professional looks at a stock, he wonders how much he can lose. Investors need not only to know their stocks but they need to know themselves and how much risk they are willing to take. Sometimes the decision to buy or not to buy a stock is as dependent on the personality of the investor as it is on the stock.
An illustration of the concept of risk/reward are two data center plays: VMWare (VMW) and EMC (EMC). VMWare is a high-flying stock and a play on virtualization software. In the last two years VMW is up 385%, and has shot up $12 since its winning quarter. However the stock similarly fell 12% in one day in October on bad news from one of its competitors. VMWare is a strong grower, but is very volatile. It has a 24% growth rate but trades at a multiple of 48.
EMC (EMC), which owns 80% of VMWare is a slow, steady grower. While VMWare fell 23% from January to March, EMC actually rose one point. It has a multiple of 15 with a 15% growth rate. The stock us up 185% in the last two years and has risen 6% since its terrific quarter. Cramer prefers the conservative EMC to VMWare, but says both stocks are equally good, whether to buy or not to buy depends on the potential buyer's risk tolerance.
CEO Interview: Steve Leer, Arch Coal (ACI)
Coal is king, with the price of the commodity rising higher and higher in the U.S. and a new plant in China built every week. Arch Coal (ACI) beat estimates by a penny on a 22.6% rise in revenues and raised guidance. The company mines in the Powder River Basin, a source for much cleaner coal than in other places, but Arch Coal is sufficiently diversified among several regions to have reported a strong quarter in spite of a plant closing. Steve Leer discussed the company's increase in exports by 40% last year, and the fact that world demand is skyrocketing: coal plants currently under construction will generate a demand for an additional 750 million tons of coal per year. Leer predicts coal will replace nuclear as an energy source, particularly after the disaster in Japan.
The USO (USO) is an "ETF of mass destruction." Cramer said a public service announcement should be issued about the danger of the stock. USO claims to track the price of oil, but it has risen only 10% in the last three months while oil has risen 30%. USO doesn't own oil, but oil futures, which it has to roll over at the end of every month, and actually loses prices on this rollover if the price of these futures rise. In fact, investors in USO do worse when oil goes up. There are better ETFs for tracking the price of oil, like XLE (XLE) which has risen in tandem with oil, about 30% or OIH (OIH), which is not as accurate a reflection of the price of oil, but is better than USO, since the former has a 20% gain. Cramer prefers good oil stocks as a way of playing high oil prices.
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