Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV program, Thursday May 12.
Shame on You! Cisco (CSCO)
Cramer provided yet another example why investors should do their homework before buying a stock and not relying on headlines to tell the whole story. The headlines said Cisco (CSCO) had beaten expectations, but that was before The Street had digested its lowered guidance. The stock rose and then sold off on this final realization that Cisco's quarter was not a good one. These investors don't know that Cisco usually trades on guidance, and didn't look closely enough at the situation before buying. "Shame on you," he told those who bought Cisco. "I hope you learned your lessons."
CEO Interview: Michael Johnson, Herbalife (HLF)
Although many people used to dismiss companies like Herbalife (HLF) as mere "pyramid schemes," Herbalife is now a force to be reckoned with. The company is finding that direct sales people who give one-on-one testimonials are more effective than advertising in emerging markets. Sales in India are up 154%, and Brazil and Russia each saw a 28% increase in sales. Herbalife reported a 22 cent earnings beat with a 28% increase in revenues and raised guidance. The company boosted the dividend by 60%, and while Herbalife's payout is still a modest 1.5%, the dramatic increase shows confidence. Herbalife's stock has gained 161% since Cramer got behind the stock in 2009 and is up 39% since the CEO came on the show in March.
CEO Michael Johnson discussed the "trust model" for sales, with customers buying products based on trust they have in the salesperson, who may be a neighbor or a friend. The company has released a special vitamin called "24 Hour Athletes" for athletes and for people who just go to the gym.
"Job well done," Cramer told Johnson. "You nailed this one." He added a prediction that Herbalife will grow from a $6 billion business to a market cap of $10 billion.
CEO Interview: Patrick Daniel, Enbridge (ENB)
Why recommend an oil-related play with the price of oil going down? Cramer said that Enbridge (ENB), which runs the largest pipeline in North America, is not levered directly to the price of oil, since it gets its revenues from fees and contracts, which give the company earnings visibility for the future. Enbridge raises its dividend consistently by an average of 11%; its current yield is 3.3%. The company accounts for 13% of U.S. oil imports and 65% of Canadian exports. Enbridge has pipelines in the Bakken shale, offshore pipelines and transports 50% of the natural gas in the Gulf of Mexico. Enbridge also is diversified into alternative energy, such as solar, wind, geothermal, waste heat and fuel cells.
The company recently delivered an earnings beat of 2 cents with mainline volume rising 12% and the oil sands volume gaining 40%. The company is up only 4% since March and may be a "steal." CEO Patrick Daniel commented, "We've been around 60 years and this is the strongest growth we've seen...this trend should continue for five years." While Daniel doesn't see North America becoming completely fuel independent, he sees a dramatic rise in self-sufficiency on the horizon. Enbridge has the advantage of owning the largest crude oil pipeline in the world and can deliver oil anywhere in North America.
"We like growth and we like dividend," said Cramer.
CEO Interview: Skip Mackenzie, Washington Real Estate Investment (WRE)
While the data indicates that real estate is not a good place to be, Cramer says he would prefer to hear from the companies themselves rather than pay too much attention to government data. Washington Real Estate Investment (WRE) is a REIT that didn't bear the brunt of the recession, since its properties are mainly in Washington D.C. which doesn't feel a decline as badly as other parts of the country. The REIT delivered a 2 cent earnings beat and a 6.3% increase in revenues. The dividend is a generous 5.3%, and the company has raised its dividend consistently for 49 years.
CEO Skip Mackenzie says the real estate market in Washington D.C. tends to accelerate after a big decline. When asked about the company's decision to sell off its industrial assets at a time when the industrial sector looks poised to spring back, the CEO replied that WRE's industrial segment isn't a traditional type of industrial, but includes home improvement contractors. The company's industrial wing was tending to exacerbate the lows; "We are in a defensive mode to smooth things out." While things were slowing down, WRE is seeing a "pickup in activity. No question."
When asked about cash flow and the dividend raise, Mackenzie discussed the REIT's commitment to raising the dividend; "It is the very fabric of our company." WRE expects to see a rise in occupancy rates from 80% to the historical high of 93-94%.
"You know how much I like 5% yielders," said Cramer. "You've got to check this one out."
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.