Cramer's Mad Money - Allergan Sits in the American Castle (5/4/11)

 |  Includes: AGN, D, GS, NOV
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday May 4.

CEO Interview: David Pyott, Allergan (NYSE:AGN)

While other healthcare stocks sold off on Wednesday, Allergan (AGN) was in the "winners 52-week high club." Cramer has been a fan of Allergan for some time now, and the stock has increased 103% since he first got behind it in 2009 and 15% since the CEO appeared on Mad Money in February. Allergan reported another blowout quarter with a 3 cent earnings beat, a 10% rise in sales and a boosted forecast. With other healthcare stocks cutting jobs and R&D, Allergan continues to innovate and find multiple uses for its anti-wrinkle treatment Botox, which is now a leading treatment for migraines and is being tested for its effectiveness to combat bladder problems.

On the increase in staff and R&D, David Pyott commented, "We believe in the long-term and concentrate on what we know delivers." The company is increasing its hiring of salespeople, marketing staff and R&D spending. Allergan is seeing success in most of its businesses, with the eyecare segment growing 16% and a 12% rise for its glaucoma drug, for which there is increasing demand as baby boomers age and need more frequent eye examinations. Botox for aesthetic purposes is growing at double digit rates both in the U.S. and Europe and Allergan's dermal filler is seeing a 49% increase in sales for every region; "It is absolutely on fire," David Pyott said.

The use of Botox for migraines is becoming increasingly popular as 2,000 physicians have been trained to use the treatment and it has 2/3 market share among non-Medicare insurers. The one business that needs more development is lap band surgery. With the FDA creating barriers to entry, Allergan's lap band business is "sitting inside the American castle," said Pyott who said it is Allergan's objective to try to improve access to lap band surgery.

Cramer commented that 2012 is going to be huge for Allergan with the growth of Botox for migraines, and if the lap band business turns around, 2013 will be huge. "I don't have any other healthcare stock with this much visibility."

CEO Interview: Thomas Farrell, Dominion (NYSE:D)

Everyone should own defensive stocks to protect against occasional sell-offs. Dominion (D) is a company that transformed itself from a somewhat confusing pastiche of energy businesses to something more simple; a regulated utility with a growing natural gas pipeline and storage business. Dominion was fortunate to sell its natural gas assets when the price of the fuel was still high and concentrate on transporting and storing natural gas. The company yields 4.2% and has made a commitment to raise its dividend 7.5% annually for the next few years.

Dominion delivered a 2 cent earnings beat, but revenue fell 2.2% and guided to the downside. However, The Street was happy with the quarter and the company is earmarking $607 million in shares for a buyback. The stock is up 31% since January 2010 when Cramer got behind it.

CEO Thomas Ferrell discussed the building of new natural gas power plants, the completion of a coal plant and an addition of a nuclear power plant. When asked about the future of nuclear in the wake of the disaster in Japan, Ferrell replied that nuclear is not dead, but it has paused. Eventually the country will see that it will need nuclear power. Although Dominion controls some of the largest wind farms in the U.S. the CEO emphasized that wind and solar power will be marginal and the core fuels are needed to meet the country's energy needs.

Cramer thinks both Dominion's stock and its dividend are going higher.

CEO Interview: Peter Miller: National Oilwell Varco (NYSE:NOV)

Some of the best performers so far in 2011 were the biggest losers on Wednesday as industrials, oils and agriculture stocks got crushed. National Oilwell Varco (NOV) is a broken stock but an intact company with its 15% drop in the past week, and might be a buy on the way down. NOV makes products for the entire drilling process and rises and falls with the fortunes of drillers. The company recently reported a quarter that was in-line but did not impress The Street.

When valuing NOV, said CEO Pete Miller, it is best to look at the company's backlog and at what it is doing in the domestic shales. NOV is going to monetize the backlog soon and will continue to enhance productivity. Miller is not worried about political instability in the Middle East, because at some point the region will have to get back to drilling. Increasingly, drillers are needing to replace their rigs, and are opting for rigs with cutting-edge technology like those sold by NOV. The petroleum services business jumped 400 basis points on margins because of the success in the U.S. Shales. Brazil's orders should be coming through in the latter part of the year, and the country is expected to be the focal point of offshore drilling for the next few years.

While short-term, NOV might drop, Cramer thinks it will be the major oil and gas services play to own for the next 3-5 years.

The Wrong Man: Goldman Sachs (NYSE:GS)

The Justice Department is finally going after those they suspect caused the credit crisis. The problem is their prime target, Lloyd Blankfein, CEO of Goldman Sachs (GS) is the wrong man. Why not go after banks that were actually involved with bad mortgages or ratings agencies that did no due diligence? Cramer called Senator Carl Levin's battle against Goldman Sachs an "Inquisition" that would "be funny if it weren't so outrageous." The government is going after the only bank that didn't get into the foreclosure mess.


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