Cramer's Mad Money - A Kinder, Gentler Pipeline Play (4/28/11)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday April 28.

CEO Interview: Richard Kinder, Kinder Morgan Partners (NYSE:KMP). Other stock mentioned Kinder Morgan (NYSE:KMI)

Some stocks are like cash machines. Kinder Morgan Partners (KMP) is a huge pipeline play with a 5.9% dividend which it raised by 7% last week. KMP has a long history of raising its dividends and the stock is up 77% since Cramer got behind it in 2007, with the S&P 500 down 5% for the same period.

KMP has 24,000 miles of pipeline that transports oil, natural gas and carbon dioxide. The company acts like a virtual toll road operator with its fee-based business model and is not a hostage to low natural gas prices.

Richard Kinder discussed the difference between his company, Kinder Morgan Partners (KMP) and Kinder Morgan (KMI). KMP has a higher dividend, 5.9% compared to 4% for KMI, but the latter has a higher growth rate of around 10% while KMP has a growth rate of 5%. Investors who prefer more conservative growth but a higher dividend opt for KMP.

All of KMP's 5 business segments have been exceeding expectations and are going to continue to do better than KMP's budget in 2011, Kinder said. If this turns out to be the case, Kinder expects to raise the dividend. The company is adding 700 million cubic feet a day of capacity in the Eagleford shale and is looking to better utilize existing pipelines in the Bakken. KMP is also tackling the issue of price differentiation between WTI and Brent crude; the price of WTI is not going higher because of oversupply due to problems with transportation and storage. KMP is laying down more pipes to transport WTI and is making partnerships with rail companies to carry more WTI.

When Cramer asked if KMP will consider exporting natural gas, Kinder said if the demand and the overseas contracts are there, the company is prepared to export the fuel. Cramer called KMP "One of the most consistent players since we started the show....this is a low risk, high reward company, and Richard Kinder is the best man in the oil and gas industry."

CEO Interview: Dan Hesse, Sprint (NYSE:S). Other stocks mentioned: Apple (NASDAQ:AAPL), AT&T (NYSE:T), T-Mobile (OTCQX:DTEGY), Research in Motion (RIMM)

Sometimes it pays to bet on the underdog. Sprint certainly fits that description; once it finally got its house in order it got slammed with the news of the prospective merger between AT&T (T) and T-Mobile (OTCQX:DTEGY), which would give control of 80% of the wireless industry to two companies. However, the fact that Sprint has a great turnaround story engineered by its superior management cannot be denied. At the CTI Wireless Convention, shortly after news of the fateful merger surfaced, Sprint CEO Dan Hesse, "refused to accept the hand he had been dealt" and said he was determined to build an even better company.

Hesse fulfilled his promise; in its recent earnings, Sprint's loss was less than expected, 15 cents compared to the 22 cents TheStreet predicted, a 2.8% rise in revenue and a churn number at record lows. Sprint rallied 6.7% after earnings.

Dan Hesse commented that while management had expressed concern over the impact of Apple's (AAPL) iPhone on Sprint's net adds, the numbers for net adds soared higher. Sprint added 800,000 subscribers, nearly double what The Street predicted. "The churn number is the most important metric when looking at profitability...and we had the best churn quarter in Sprint's history...this is the 13th consecutive quarter we've improved customer satisfaction." One way Sprint is accomplishing this is to offer a variety of plans to fit each type of customer.

Research in Motion's (RIMM) report of lower demand should not affect Sprint significantly, according to Hesse. "It is an indication that RIM is losing market share." When asked about the proposed merger between AT&T and T-Mobile, Hesse says the Justice Department and the FCC will have its say. "We believe a strong, competitive market is best for the industry long term...we are against the merger." When Cramer asked if the companies should compensate Sprint if the merger is permitted, Hesse stated, "I am a competitor. I am looking to win the game," but emphasized, "The merger should be stopped."

"That was a monster good quarter," Cramer said, "When you can have that kind of quarter when the competition introduces the iPhone, you have to think about where that stock is going."

CEO Interview: Rick Goings, Tupperware (NYSE:TUP)

The middle-classification in emerging market countries is reminiscent of the change that happened in the U.S. in the 1950s. Tupperware (TUP) as in the 1950s, is allowing women to create wealth without rocking the boat domestically; the trend is "Women's Lib through a Tupperware party." This direct seller is not just a purveyor of plastic storage containers anymore, but is creating proprietary products designed to fit their customers' circumstances. Tupperware recently introduced its Quick Chef food processor which runs manually without electricity, and is popular in India where only half of all households have electricity. Quick Chef is also a top item in France, where electricity is abundant, because of the quick convenience it provides.

Tupperware is taking Indonesia by storm, but is still slow to expand in Russia. Rick Goings said the Russian economy is more complex and products are more expensive there. The CEO says he intends to use extra cash to raise the dividend and buy back shares. The company reported a 5 cent earnings beat with a 14% rise in revenues. The stock has risen 218% since Cramer got behind it in 2006 and 19% since Goings appeared on Mad Money in March. "The stock isn't done," said Cramer. With a Tupperware party held somewhere in the world every 7 seconds, "Tupperware reported another fantastic quarter, and now you know why," Cramer said.

Lie Low for Heaven's Sake: Bank of America (NYSE:BAC)

Bank of America chose a fine time to announce it would start charging higher interest rates for customers who miss their payments. Elizabeth Warren, who is expected to head the Financial Consumer Protection Agency has declared war on banks who profit at the customers' expense. Cramer urged banks to avoid following Bank of America's example. "Accept a lower level or profitability. Lie low, for Heaven's sake!"

A Stupidly Optimistic Market: Norfolk Southern (NYSE:NSC), Pepsi (NYSE:PEP), Wellpoint (WLP), Constellation Energy (NYSE:CEG), Gen-Probe (NASDAQ:GPRO), Express Scripts (NASDAQ:ESRX), Hercules Offshore (NASDAQ:HERO), SPDR Silver Trust (NYSEARCA:SLV), Weatherford (NYSE:WFT), Procter & Gamble (NYSE:PG)

With bad news about jobs and a GDP growing just 1.8%, stock somehow just keep chugging along. How can stocks do so well when the economy doesn't seem to be improving, and is it worth buying stocks? With the Nasdaq at its 2000 level, people fear another crash like the bust. However, Cramer thinks comparing the present situation to the eve of the disaster is like comparing Apple to oranges. The companies in 2011 that are moving indices higher are making real revenues and have significant upside, while the "oranges" of 2000 were rancid stocks, many of which were basically worthless and hopelessly overvalued. The reason companies are performing well while the U.S. economy is tepid at best is that many of these companies are only based in the U.S. while their hearts and their profits lie overseas. Emerging market growth is sending stocks higher regardless of what is happening on the domestic front. "There are more ways to win in this market than in any market I have seen in my life," said Cramer.

Takeovers are happening right and left with Constellation Energy (CEG) and Gen-Probe (GPRO) for sale. Norfolk Southern (NSC) is up 5.5% because of thriving business transporting goods to ports for export. Pepsico (PEP) is a money creating business, and as countries become "middle-classified" they buy more Doritos. Wellpoint's (WLP) strong numbers made the HMO sector rally. "It is a stupidly positive market and has zero memory for disappointment." Express Scripts (ESRX) fell 10% on a lackluster quarter, but two days later, it moved up to a level exceeding that of where it was before it reported. Procter & Gamble (PG) was even up on a disappointing quarter. While Akamai (NASDAQ:AKAM) gave dismal outlook and RIM guided down, Cramer said these two stocks are "rancid," and are not on the move up.

Cramer took a few calls:

iShares Silver Trust (SLV) is complicated. There is a lot of day trading and the ETF is prone to sharp declines. It is not going to crash, but there are air pockets. Cramer thinks SLV is a bit too volatile, "but gold suits me fine."

Hercules Offshore (HERO): Cramer does not want to be levered to U.S. drilling. He would consider buying Weatherford (WFT) rather than HERO, even though WFT has missed a few quarters.


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