Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday May 31.
CEO Interview: Mandy Chirico, Phillips Van Heusen (NYSE:PVH). Other stock mentioned: Ralph Lauren (NYSE:RL)
Not all apparel makers are created equal. After Ralph Lauren (RL) reported a "hideous quarter," things seemed dire for retail, until Phillips Van Heusen (PVH) reported good news. PVH produces the majority of ties and men's shirts found in most department stores and is outperforming because of the strength of its stellar brands. The stock has risen 70% since Cramer got behind it in 2008 and 10% since the CEO appeared on Mad Money in March. How is PVH succeeding where other apparel makers are not?
"The story is all Calvin and Tommy," said CEO Mandy Chirico. Both brands grew 15% in the past year and the company is managing rising cotton costs by raising prices consumers are willing to pay given the power of the brand name. Tommy Hilfiger is taking Europe by storm, and Europeans are paying almost double what Americans pay for Tommy items. While other apparel makers complain that Russia is a hard market, PVH is seeing 20% growth in the region. PVH is clearly a company that is taking share and is standing out from other apparel makers.
CEO Interview: Kevin Loughrey, Thompson Creek Metals (NYSE:TC)
While Cramer usually reserves his speculative picks for Fridays, he dedicated a segment on Tuesday's program to discussing Thompson Creek Metals (TC), a pure play on molybdenum that is expanding through acquisitions to obtain gold and copper assets. While TC is 100% molybdenum currently, it expects to be just 50% molybdenum and 50% other metals by 2015. Molybdenum is the material that makes steel stronger and longer-lasting and is in huge demand in China where steel production is revving up. While Cramer wouldn't be in a hurry to buy TC and would wait for a dip, he thinks it is an excellent long-term speculative play.
Cramer asked CEO Kevin Loughrey why the company is expanding beyond its pure play, and the CEO discussed the "great opportunity" the Terrane Metals acquisition is providing the company. TC is able to keep production costs low and has received substantial financing for future projects. When asked about the drop in production forecasts, the CEO responded that this decline is planned and temporary and will recover with new mining projects. Loughrey is not concerned about environmental regulations, since TC has developed a process of toasting molybednum through which 99% of the sulphur can be used to create sulphuric acid rather than polluting the atmosphere.
With Memorial Day weekend over, summer is here and "the season of debauchery has begun," said Cramer. Diageo (DEO) is a great play on liquor all year long and has premium brands with the broadest name recognition: Johnnie Walker, Captain Morgan, Smirnoff's, J&B, Tanqueray, Bailey's and Guinness. Even though Diageo is a British-based company, it is the largest distributor of liquor in the U.S. which provides Diageo with 34% of its sales. The real story is in emerging markets where the growing middle class is now ready to pay up for the best liquor. Although emerging markets make up only 10% of Diageo's sales, the company expects the number to grow to 20% in the next few years.
Diageo is revamping its business model to remove layers of decision making and save costs. It is splitting up its international divisions and expects 20% growth overseas, 50% of which will be organic. Diageo is seeing double digit growth in Asia and Latin America and has generated $3.3 billion in cash, which it could use to buy new brands. The stock trades at a multiple of 15 with a 9% growth rate which is accelerating.
Cramer took a call:
Altria (NYSE:MO) may be in trouble because of tighter restrictions on smoking, and Cramer is not as bullish on the stock as he once was.
Four Way Rally: PowerShares Financial Preferred Portfolio (NYSEARCA:PGF), Sequans Communications (NYSE:SQNS), AFLAC (NYSE:AFL), Prudential (NYSE:PRU)
The rally is global. The 128 point rise in the Dow did not begin in America, but the rally on Tuesday was kicked off by the rise of a few percentage points in China, followed by the strongest numbers from Japan since the natural disaster. Europe rose 2%, and finally the U.S. saw a rise in its averages even as the consumer confidence and housing news was not so bright. Cramer noted this has been perhaps the first major global rally since the beginning of the year, and since there were four individual players involved, it is not something to be dismissed.
Cramer tooks some calls:
PowerShares Financial Preferred Portfolio (PGF) is a "good piece of paper with a great return" even as the financial sector is suffering; "I am not concerned about that ETF."
Sequans Communications (SQNS) has doubled since Cramer recommended it two weeks ago. He would take profits; it is too late to buy the stock now.
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