Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday May 26.
Diamond Foods (DMND) is one of the "best and brightest snack food companies on Earth" and hit a 52 week high on the success of its brands such as Pop Secret and Kettle Chips. The company is buying Pringles from Procter & Gamble (PG) for $2.5 billion, and Cramer thinks the acquisition will make Diamond a "global snacking powerhouse." The stock has seen a 70% gain since Cramer got behind it in October 2010 and is up 47% since last December.
Cramer asked CEO Michael Mendes how Diamond will succeed with Pringles where Procter & Gamble didn't. Mendes pointed out that 60% of Pringles sales are outside of the U.S, and demand for the snack is growing. Pringles also has a whole wheat version of the favorite snack that will appeal to health-conscious consumers. When asked about competition, Mendes replied there are "unlimited opportunities" in the global snack universe. He added that the company has substantial experience dealing with fluctuations in commodity costs. The company continues to transform brands it purchases and has seen success with its 100 calorie portion-controlled items.
"The stock has had a big move," Cramer said. "You do the homework. I'm a believer in Diamond Foods."
"Stocks that make you healthier make you wealthier," said Cramer, discussing the bull market in natural and health food. Hain Celestial (HAIN) produces Terra Chips, Celestial Seasonings, Soy Dream, Earth's Best and other healthy items. The stock has risen 93% since Cramer got behind it last year, and the company reported a 2 cent earnings beat on a 30% year over year rise in revenues. Hain has a clean balance sheet and is continuing to make smart acquisitions.
CEO Irwin Simon says the company has seen substantial growth in most of its brands, including Celestial Seasonings teas, Earth Best baby food, and has developed a ready-to-drink organic baby formula. While the company is growing substantially through acquisitions, half of the growth was organic and driven by the success of existing products. Hain is adding to its dairy free beverage selection with Hemp Dream and Coconut Dream, its Greek yogurt business has tripled and the newly acquired Sensible Portions brand has doubled. Carl Icahn was so impressed with Hain's story when Cramer interviewed Simon a year ago that he became a shareholder. Hain has significant shelf space at Whole Foods (WFMI) which plans to grow its store count from 315 locations to 1,000 in the next five years. Wal-Mart (WMT) is also expanding its healthy offerings.
"Everyone wanted to see a takeover (of Hain). We are getting some great performance from them as a stand alone company," said Cramer.
4 Top Bull Markets: Deere (NYSE:DE), Potash (NYSE:POT), Apple (NASDAQ:AAPL), Qualcomm (NASDAQ:QCOM), Eaton (NYSE:ETN), Honeywell (NYSE:HON), Kinder Morgan Partners (NYSE:KMP), Herbalife (NYSE:HLF), Panera (NASDAQ:PNRA), Chipotle Mexican Grill (NYSE:CMG), Weight Watchers (NYSE:WTW), Colgate (NYSE:CL), Big Lots (NYSE:BIG)
On "featureless days with wayward action," it is important to keep in mind what bull markets are working. Cramer identified four bull markets and the winning picks in each category.
Cramer took some calls:
Colgate (CL) is good but not great, but it is always going to be around and has decent emerging market growth.
Big Lots (BIG) reported an awful quarter. its acquisition and buyback is not impressive without growth. "They are not executing as well as they used to," while its competitors are performing well.
Costco (NASDAQ:COST) Ain't So Bad After All
Costco (COST) reported a 3 cent earnings beat and the stock went down after earnings. The headlines told a tale of woe about the quarter, but Cramer doesn't think the quarter was bad at all; Costco regularly declines after a substantial run-up, and Costco had rallied 17% since March. Gross margins were fine, same store sales were up 12%, the company is adding 20 new locations next year, and 25 the year after, 12 of which will be overseas. While 75% of business is currently domestic, the company is expanding internationally, particularly in Asia. Costco is opening four new stores in Japan in addition to the locations that have opened their doors for the first time since the disaster. With 26% of Costco stores in California, the company will reap the benefits of the recovery in the state's economy. Costco's membership cards provide steady revenue stream which has risen 10% and the company has been able to raise its fees from $40 to $50. Membership renewal is 90%.
Don't believe the headlines, Costco is a buying opportunity.
The Future of Oil Futures
It is no secret that oil futures are easily manipulated, but it seems to be news to some people. The root of the problem is the small margin requirements which allow speculators to manipulate oil futures. Fund managers can move up prices at the pump with a small amount of capital. Oil futures manipulation was the cause of the soft patch in April. Cramer reiterated his plea that margin requirements should be raised.
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