Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday May 9.
It is impossible to invest in stocks and never make a mistake. Cramer admitted on Monday that he got Motricity (MOTR) wrong when he got behind it as "the on ramp to the internet superhighway." Motricity provides feature phones with the capability of connecting to the internet. The IPO was very successful, and the stock saw a 76% gain before dropping into a funk from which it has been unable to emerge. The stock reported a one cent earnings beat, disappointing revenues and saw a 14% decline the next day. Recently, the stock crept up 5.7%, and Cramer would use any increase as a selling opportunity.
Motricity's management has backed off on its earlier guidance and has not met its targets. While Motricity handles 76% of feature phone traffic, the move towards smartphones has been so quick and so aggressive that Motricity may soon become obsolete. Although Motricity's management pledged to innovate as its market got smaller, the company has yet to produce a fresh idea. Motricity is a definite sell.
CEO Interview: Herbjorn Hansson, Nordic American Tanker (NAT)
In the oil tanker industry, it is not so much the supply and demand of oil that determines the success of these companies but the supply and demand for rigs. Even though Nordic American Tanker (NAT), the industry leader, has a pristine balance sheet, beat earnings by one cent and reported that bear spot rates are up 19%, the stock is just above its 52 week low. There are simply too many ships in the industry, and that is what is keeping NAT's stock down.
When asked how he was able to raise the dividend CEO Herbjorn Hansson replied, "the industry is in trouble and we wanted to put some 'cream on the cake.' We are the strongest shipper out there and we are in excellent shape." Hansson sees recovery in shipping much sooner than many analysts. When asked why he is buying up ships, the CEO replied that he is playing with an eye to the long-term. It is worthwhile to buy ships now that they are cheap and make money later when shipping turns around. When asked about piracy concerns, Hansson replied that every crew has armed guards, but that governments need to take more responsibility for security on the sea.
Cramer said NAT is the only tanker he recommends.
Cramer once again outlined his preferred ways to invest in gold. Bullion has the best value, but storage costs can be high. Gold Trust ETF (GLD) most closely follows actual gold price, Goldcorp (GG) is his favorite miner, but for investors who like more dramatic risk/reward than Goldcorp should consider Randgold (GOLD). This is a very speculative gold miner that extracts gold from Africa, and takes substantial risk in terms of security and cost to produce its gold. However, Randgold has seen some spectacular returns and is up 2,400% in the past ten years and has grown from a $150 million company to a $7 billion in the same amount of time. The stock is down 3.7% but Randgold expects to increase production by 70% this year and add five mines to its current list of two.
Civil unrest in the Ivory Coast caused a mine closing and affected earnings for Randgold last quarter. Even though the company is willing to spend extra money to extract gold from difficult to reach and risky places, the cost of production is $500 per ounce compared to gold's current price of $1,500. Bristow expects the gold bull market to last another 3.5 years. The company is transitioning one mine from an open pit to an underground structure. Underground mining is "a new game entirely," said Bristow, "but if you have the right people, you can do it."
Energy has comprised a large portion of Randgold's costs, but Bristow says that its mine in Congo is expected to run almost entirely on hydroelectric power and the company is reducing power costs by 66%. He added that he expects Randgold to triple production by 2014. "A gold company doesn't have to be big, it has to be highly profitable," said Bristow.
Word on The Street is that stocks are cheap, but Cramer thinks we should "dissect the concept of cheapness." The most important thing to consider, he continued, is that cheapness is in the eye of the beholders, and there are only beholders whose opinions matter; hedge fund managers, who are interested in playing earnings momentum and potential acquirers who are looking for which companies to buy. No matter how inexpensive a stock seems, it can't go higher without a catalyst.
Banks and tech stocks seem cheap, but when you look at the limited upside, as the government continues to attack the financial sector and Apple taking market share from former giants, these sectors don't inspire buying.
Which stocks are cheap? The stocks with the strongest earnings. Even the mammoth runs by Netflix (NFLX) and Amazon (AMZN) do not make the stocks overvalued, since they can grow as far as the eye can see. Other stocks that may seem rich but are undervalued include: Caterpillar (CAT), Ross Stores (ROST), EOG Resources (EOG),
Cramer took some calls:
Devon (DVN) has overseas exposure and production growth.
Norfolk Southern (NSC) reported a great quarter and Cramer praised the company.
Wabco (WBC) probably has more upside, but no one ever got hurt taking a profit.
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