Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday April 27
Ben Bernanke Gets it: Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX), Hess (NYSE:HES), Cummins (NYSE:CMI), Johnson & Johnson (NYSE:JNJ), Perrigo (NYSE:PRGO), Walgreen (WAG)
Cramer called Fed Chairman Ben Bernanke the "Pied Piper of the stock market," with the indices rising higher following his press conference. Bernanke is "a powerful force for good," and his policies are bearing fruit in the form of job creation and business formation. When a reporter asked Bernanke why he persisted with his policies if they weren't creating improvement, Ben Bernanke urged viewers to look to the stock market bull run as a sign of an improving economy.
"Bernanke gets it better than anyone else in government." Washington seems to be almost "embarrassed" by the stock market and does not use it as a barometer of financial health. However, when stocks are strong, businesses can grow, create jobs and create more products which consumers will buy because they feel more confident. Bernanke is creating an environment in which stocks can go higher. Even though he is not responsible for Amazon's (AMZN) $14 rise, Netflix's (NFLX) 7 point rally, Hess's (HES) 2 point uptick on its oil discovery in Africa or Cummins' (CMI) 8 point gain, his policies are good for stock. While some claim he is creating inflation, if that were the case, stocks would be crushed, because the stock market hates inflation.
Cramer took some calls:
Walgreen (WAG) missed its last quarter, but the decline as a buying opportunity. It is not too late to buy Walgreen.
CEO Interview: Steve Holmes, Wyndham Worldwide (NYSE:WYN). Other stock discussed: Marriott (NASDAQ:MAR)
Every portfolio needs a shareholder friendly stock in a company that consistently boosts its dividend and buys back shares. Wyndham Worldwide (WYN), best-known for its popular hotels Ramada and Day's Inn is also the "timeshare king." The company recently beat earnings estimates by four cents and saw a 7.4% rise in revenues. WYN announced it is buying back 500 million more shares and boosted its dividend by 25% in February, one of the most substantial yield hikes of any company so far this year. Even though the dividend is at a modest 1.75%, dividend growth is up 113% in the past year, and the actual yield would be higher if the stock didn't keep rising. The stock is up 52% since Cramer got behind it in February 2010 because the lodging industry is recovering worldwide. WYN is improving its balance sheet and should see double digit growth in the next few years.
Steve Holmes said the company increases the dividend at pace with its own growth; the business grew 25%, so the yield hike was 25%. Concerning buybacks, when the company is not looking into a new acquisition target, it usually buys back shares. The CEO discussed strength in all of the company's segments, with the most aggressive growth in the lodging business. Timeshares were a major growth business, but now WYN is considering a deployment of capital from that segment to other places.
WYN's exchange business is a leader and the largest in the industry. The company charges its members a fee for joining as well as a transaction fee. Concerning the timeshare segment, Holmes noted that while timeshares produce only 20% of revenues for its competitor Marriott (MAR), the timeshare business MAR is spinning off will give more transparency to the valuation of WYN's timeshare business. According to one analyst, if spun off, WYN's business could be worth $45-50 a share.
Cramer praised WYN's broker business and its strong asset backed bonds. Holmes said the company recently did a successful $400 million bond deal, but he wants to "keep his options open," and isn't "running into" the bond business.
"This is one incredibly cheap stock and a well-run organization," said Cramer. "Yes, it has had a big move. I think it can go much higher."
CEO Sally Smith, Buffalo Wild Wings (NASDAQ:BWLD)
One of the surest ways a restaurant chain will reach prominence is if they have a unique idea and are a regional to national growth story. Buffalo Wild Wings (BWLD) has both of these qualities with 753 locations in 45 states. It has plenty of room to grow, particularly in the Western part of the U.S. and in college towns in the Northeast. BWLD delivered a "sizzling hot" quarter with an 8 cent earning beat and 19% revenue growth. Same store sales grew 3.9% for company-owned stores and 1.7% for franchises. The stock has risen 12% since Cramer recommended the stock on February 11, and the stock trades at a multiple of 24 times earnings with a 21% growth rate.
While other restaurants are suffering from rising raw costs, Sally Smith reports the price of wings have fallen dramatically from their record highs in 2010, and wings will continue to be cheap for the next 2 or 3 quarters. BWLD has been one of the few companies that has been able to keep menu prices low, and with its raw costs falling, margins will improve even more dramatically. Smith discussed expanding new locations into California, Seattle, Philadelphia and Boston. BWLD is expanding its beer offerings, increasing taps from 20-24 to 30-36 to include regional and local beers which are in high demand.
"This is a great story," said Cramer. "I am a huge Buffalo Wild Wings fan. The stock goes much higher."
Stop, Look and Listen: Panera Bread (NASDAQ:PNRA), Chipotle Mexican Grill (NYSE:CMG), eBay (NASDAQ:EBAY), Wal-Mart (NYSE:WMT)
One of the worst mistakes investors can make is to trade from gut reactions to headlines about earnings. If you don't do some research before pulling the trigger, says Cramer, you are "begging to lose some money." Cramer predicted Panera (PNRA) would sell off after the quarter because expectations were too high. The company had a modest upside surprise and a boost to its forecast, and the stock jumped up $1.50 on the news. However, buyers didn't pay attention to the kinds of issues that plagued Chipotle Mexican Grill (CMG), such as prices and raw costs. When the reality that a raised forecast was not enough to mask the company's other problems, Panera dropped $1.75.
Amazon was honest on its conference call about how it had to invest in its business to compete with Wal-Mart (WMT) and eBay (EBAY). However, on the news of expenses, sellers panicked and sold the stock down 4 points. However, upon deeper consideration of the real issues, buyers ran into Amazon and sent the stock up $14. While sometimes the swift do profit, more often than not, a little sober thinking and research would have created greater gains and would have prevented profound losses.
Jim Cramer was up 31% in 2009. Click here now to sign up for Jim's Action Alerts PLUS and trade alongside him. Special discount for Seeking Alpha users.
Get Cramer's Picks by email - it's free and takes only a few seconds to sign up.