Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday August 18.
Cramer was asked on Twitter why he was so critical of SodaStream (SODA), a company that lost 34% of its value after it gave tepid guidance on its earnings. He had warned investors to take profits in July, because the stock had seen huge gains. There were several unanswered questions about SodaStream's conference call, and CEO Daniel Birnbaum explained the company's story on Mad Money.
While business in America is booming, and has triple digit growth, said Birnbaum, the U.S. comprises only 20% of SodaStream's business, with 80% of its market in other countries, especially Europe. While the holiday season is expected to be strong for SodaStream in the U.S., in Europe, it is very much a spring and summer story. Therefore, guidance for the next quarter was not as strong as analysts expected. While this may seem like deceleration, then according to this definition, the company has been in deceleration for ten years, and yet it has doubled in the past two years.
When asked about challenges posed by the difficult economy, Birnbaum said SodaStream is a value proposition and saves customers money they would otherwise spend on bottled soft drinks. The vast majority of customers are satisfied with the product, and the return rate is only 3%. Sales are still strong in most of Europe, with 25% household penetration in Sweden.
Management did not seem so enthusiastic about its display in Costco (COST) stores because they wanted to build brand awareness first. SodaStream is being sold in Costco on a trial basis, and management has a wait-and-see attitude. Birnbaum noted that Green Mountain's (GMCR) Keurig was introduced in Costco in 2008 only to be rolled out in 2009, and is still enjoying popularity.
"I did not do a good enough job explaining the business (on the conference call)," admitted Birnbaum, "...we are a 'different animal." One thing analysts missed was the advantage of SodaStream moving into restaurants with a device that will create sparking tap water. While many customers do not like to drink ordinary tap water, the device will fully filter and purify the tap water before adding carbon dioxide. "This will save money and is a great solution," said Birnbaum. "We will have our brand footprint on millions of tables."
"Those who have this stock should hold onto it," said Cramer. "This is a good explanation of the story," and SodaStream is a broken stock, not a broken company.
CEO Interview: Marc Benioff, Salesforce.com (CRM)
While Cramer has been bearish on tech of late, Salesforce.com (CRM) is one of the handful of tech names he would consider buying right now. CRM is one of the pioneers of cloud computing, which is one of the few areas in tech that is working. The stock has seen a 23% decline in the last month, but this decline is unfair, given its 4 cent earnings beat, 38% rise in revenues and bullish full year sales forecast. The stock has seen a 300% gain since Cramer got behind the stock in 2008. The company's clients are mainly companies who want to update their technology to include social networking, mobile applications and to save money on hardware. The stock is likely to see gains on its Dreamforce conference in San Francisco, which is expected to be the largest tech conference.
"We are all about growth, growth, growth," said Marc Benioff. He highlighted the company's unexpected 38% rise in revenue, even in a difficult economic environment. Salesforce is the largest name in cloud computing with 100,000 corporate customers, including the record 6,000 new clients it added this past quarter. Salesforce's deferred revenues give it visibility for the next two quarters,. and deferred revenue has risen 37%.
Cramer is bullish on Salesforce, and says it is one of the few tech companies that can be owned right now.
A Look at the Shopping List: Con Edison (ED), Verizon (VZ), Enterprise Products Partners (EPD), Bristol Myers (BMY), Darden (DRI), International Paper (IP), Kimberly Clark (KMB), Windstream (WIN), Dominion (D), Honeywell (HON). Other stocks mentioned: Urban Outfitters (URBN), TJX Stores (TJX)
Cramer took another look at his shopping list of stocks which he recommended buying during down days. His general strategy during the current volatility is to sell stocks that aren't working when they pop and use the cash to buy good stocks when they are hammered. However, out of his entire list, there is only one stock that dropped low enough to start buying. Honeywell (HON) was the only stock on the shopping list that dropped low enough to buy, down 3 points on a downgrade which seemed to be more about the macro situation than any problems with the company.
Con Edison (ED) has been the best performer on the list, and is a great utility with a high yield.
Verizon (VZ) is doing well in spite of labor issues.
Enterprise Products Partners (EPD) is performing consistently along with the other MLPs.
Bristol Myers (BMY) is a good defensive stock that yields 5%.
Dominion (D) actually rose.
The fact that these stocks outperformed the market on a very bad day is a testament to how well they may hold up in a rough patch. With the bad news, including disappointing employment numbers, NetApp's lackluster quarter and problems with European banks, dividend stocks will replace bonds as the economy weakens, because interest rates will drop. Dividend stocks are also safe from short sellers, since short sellers pay nothing for shorting stocks with no dividends, but since they have to borrow a stock to short it, they are also responsible for covering the dividend.
Cramer took a call:
After a gloomy day for stocks, with a 420 point decline in the Dow, it is easy to give up and conclude that it's the 2008 recession story all over again. Cramer emphasized that the current situation does not mirror 2008, since the Fed seems to be in control, and there is still some good news from earnings reports. Bank of America (BAC), as Cramer predicted earlier in the week, got hammered along with the other banks, and might be in freefall mode. In fact, banks and tech are the most dangerous parts of the market. Tech is going down in part because of the terrible consumer price index which is mainly caused by the fact that gasoline prices are not declining, in spite of the fact that oil prices have dropped. NetApp (NAT), a major "tell" for tech in general, since it is the leading name in data centers, reported an in-line quarter with disappointing guidance. They blamed the deficit conflict in Washington for a dramatic decline in orders. The Street thought of NTAP as a strong company that could weather the economic storm, and the stock plummeted. Cramer would stay away from all banks and most tech, even as these sectors comprise 25% of the S&P 500. The only tech stocks he would buy are Apple (AAPL), Amazon (AMZN) and Salesforce.com (CRM).
Cramer took some calls:
BP (BP) and Conoco Phillips (COP) are among the greatest values right now. BP can raise its dividend and COP is splitting the company. Cramer would put half a position in either on Friday morning and another half a position when the stocks drop 4-5 points.
Gold is likely to decline because margin rates are going to be raised. Cramer would use the decline in gold, when it happens, as a buying opportunity.
Coke (KO) is a great growth stock that is down $1.50 and is worth buying.
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.