Cramer's Mad Money - The United States of Apple (7/20/11)

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Includes: AAPL, AMZN, BBRY, CMG, CRM, DVMT, ETP, GOOG, HLS, HPQ, IBM, KMP, MSFT, NOK, RVBD, VMW
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday July 20.

The United States of Apple (NASDAQ:AAPL) other stocks mentioned: Nokia (NYSE:NOK), Research in Motion (RIMM)

Cramer compared the USA, the United States of America, with another USA, the United States of Apple (AAPL). With the stock rallying 10 points when the rest of the market did almost nothing, Cramer made the case that Apple is much better-run than the country. While America is struggling under the weight of its debt, Apple has $76 billion in cash and no debt. Some are critical of the fact that the company is sitting on its cash, but Cramer thinks Apple is waiting for the right opportunity, and the company's situation is preferable to that of a debt-laden desperate company.

Before CEO Steve Jobs took his medical leave of absence, Apple seemed like a one-man show. Now it is clear that Apple is more of a democracy with a corporate ecosystem that involves generating great ideas through consensus and executing them perfectly. In Washington, debates are filled with rancor and partisanship. While America is trying to remain competitive, Apple is eliminating the competition, making the likes of Nokia (NOK) and RIM (RIMM) nearly obsolete.

While many Americans feel the best days of their country are behind it, Apple is focused on the future, not on its past. Cramer is raising his price target for the stock from $400 to $500.

CFO interview: Jack Hartung, Chipotle Mexican Grill (NYSE:CMG)

Chipotle Mexican Grill (CMG) has long been one of Cramer's favorite growth stocks and has seen a 130% gain since he got behind it in January 2010. The stock fell 14 points initially after its earnings report after hours on Tuesday, but gained back to close down only 3 points down by Wednesday. Those who sold in panic were too hasty and didn't do their homework, since the factors that caused the disappointment are only temporary blips on CMG's bull market screen.

The company missed earnings by 4 cents, but this was due to higher food costs, particularly avocado prices, which should go back down in the near future. CMG weathered a similar storm over high tomato prices early this year. CMG also had to pay legal expenses due to a federal probe over working documentation - another temporary problem. The company is increasing prices by 4.5% to deal with raw costs, and CFO Jack Hartung thinks that loyalty will keep customers coming back. The long lines at stores attest to the company's pricing power, and Hartung discussed CMG's strategies to make its quick, efficient, friendly service even faster, with the capacity to serve up to 300 people during lunch hour in its busiest locations. Sales rose 22.4% and the company saw a 10% increase in same store sales. Hartung added that the company is concentrating on the "food culture, the people culture and the business model," and is not overeager for excessive expansion. The company has opened up one restaurant in London and another in Paris and is seeing success with its first steps into the overseas market. Hartung noted that consumers are becoming more curious about the ingredients in their food, and will have a deeper appreciation for Chipotle, which uses only premium and organic products.

Cramer thinks CMG is best of breed and it "hasn't even scratched the surface" internationally; "I'm not backing away one bit."

HealthSouth Corporation (NYSE:HLS)

Talks in Washington about the deficit have investors worried about healthcare stocks that might be vulnerable to Medicare cuts. However, sellers of HealthSouth Corporation, which manages inpatient, private rehabilitation facilities are being hasty. The stock has taken a 15% haircut over Medicare fears, but the company has already had its budget cut several years ago, and the bad news is priced in. Only 1% of the Medicare budget is used for inpatient rehabilitation, so the threat of cuts is not dire. HLS may be an attractive takeover target with 36 acquisitions made recently and similar companies bought for premiums of 30-40% more than their stock prices.

HLS has 97 rehabilitation facilities and has 50% market share in the industry. The company has sold off its low margin surgical and diagnostic centers, has reduced its debt and generates $300 million in cash flow annually. With a $2 billion market cap, HLS is the right size for a takeover. Its competition is comprised of either non-profits or companies that can't stay afloat. In fact, HLS might be in a position to buy one of these failing outfits.

Quiz Cramer: KinderMorgan Partners (NYSE:KMP), Energy Transfer Partners (NYSE:ETP), Microsoft (NASDAQ:MSFT)

Cramer took questions from his live audience.

QE3: Ben Bernanke should talk less and do more, but Cramer is satisfied that he is at least focused on keeping the country out of a second recession.

Retirement portfolio: For conservative investments, high-yielding MLPs like Kinder Morgan Partners (KMP) and Energy Transfer Partners (ETP) have much better returns and might even be safer.

Microsoft (MSFT) video games are hot for the company, but they barely move the needle. There is hardly any movement in its corporate sales; "I'm afraid Microsoft will stay cheap."

EMC (EMC), VMWare (NYSE:VMW), IBM (NYSE:IBM), Salesforce.com (NYSE:CRM), Google (NASDAQ:GOOG), Amazon (NASDAQ:AMZN), Riverbed (NASDAQ:RVBD), Hewlett-Packard (NYSE:HPQ)

There are two techs: the winning side with data centers, cloud, the internet and Apple, and the losing side with flash, PCs and disk drives. The strong players, especially Apple, but also including EMC (EMC), VMWare (VMW), IBM (IBM), Salesforce.com (CRM), Google (GOOG) and Amazon (AMZN) are devouring the weaker tech plays like Riverbed (RVBD) and Hewlett-Packard (HPQ). Apple is zooming forward ahead of the rest of the winners with chatter about its upcoming i-Cloud release, but good news for Apple is often bad news for anyone who competes with it. In spite of its price tag, rather than running to Apple derivatives, the cheapest and best way to play Apple is still Apple.

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