Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday September 13.
Best Buy's (BBY) Buyback Disgrace. Other stock mentioned: Amazon (AMZN)
Best Buy (BBY) missed its quarter "by a mile," said Cramer, and dropped $1.60 to a level where it is now down 31% for the year. The company has lost its way and has been artificially propping up its stock rather than using the money to invest in its business. Its share buybacks have been in vain, and BBY has squandered its funds. Nowadays, Best Buy should be called "Best Browse," because it is the place customers go to look at a new TV before they actually buy it on Amazon (AMZN). While management keeps claiming buying back stock is good for shareholders, what they really should be doing is reviving the company; "They should be ashamed," said Cramer.
CEO Interview: Tom Ward, Sandridge Energy (SD)
Sandridge Energy's (SD) stock got crushed recently, down 20% after a quarter that disappointed The Street. Cramer sees a lot of potential in this $7 oil and gas exploration stock, especially since it has transformed itself from mainly a natural gas company to one that is 80% levered to oil. Analysts punished the company for raising capital expenditures, but CEO Tom Ward thinks the stock decline is "unexplainable," and the company is on target to triple its EBITDA and double its production in 3 years. Ward emphasized that Sandridge gives yearly, not quarterly, production guidance, and it is ready to meet its goals. To analysts who question where Sandridge will get the funding for its projects, Ward pointed out that the company only has to raise $1 billion, and the company has already shown success in raising $1.9 billion in financing recently. Sandridge could easily do another royalty trust, and it has plenty of assets to fall back on; "We have ample ways to raise a billion dollars." The company has hedged 85% of its oil. "We think we should be spending aggressively," explained Ward, "as long as we hedge and have ways to raise capital."
"We caught a gigantic move in Sandridge," said Cramer, "and I think we are about to catch another move."
Nvidia (NVDA), Arm Holdings (ARMH), Micron (MU), Pandora (P), Mastercard (MA), Visa (V), Apple (AAPL)
While Cramer has been bearish on tech since the spring, tech season is approaching. In 9 years of the last decade, tech has been a laggard in the summer months only to pick up in mid-September. The technical data backs up this trend. The SOX Philadelphia Semiconductor Index compared to the S&P 500 has been a dramatic underperformer, and has been down 20%. Compared to the Nasdaq 100, SOX has been trending down and did not break out against it until now, when it has finally surpassed the Nasdaq 100. The move is strong, since it is making higher highs, up 5% from the recent bottom. According to the weekly chart, SOX is gaining momentum and at the same time, seems to be oversold. The last time the SOX showed this pattern, semis performed well for months afterward. The SOX is showing higher highs since it broke out above $365 and might be forming an inverse head and shoulders pattern, which is a very bullish sign. Tim Collins of TheStreet.com thinks SOX could reach as high as $450, but a more conservative prediction is up to $395, if the market remains relatively stable.
Cramer would consider buying Nvidia (NVDA) now that business is "smoking" and the stock is off ten points. Arm Holdings (ARMH) will benefit from the increasing sales expected for Apple's (AAPL) devices.
Cramer took some calls:
Pandora (P) has dim prospects, since the company has yet to be profitable.
Mastercard (MA), Visa (V) should not be threatened by the new trend of paying by smartphones, because "these are very clever, forward-looking companies...secular changes are in their favor and not against them." Both have strong fundamentals and have been given a respite from government scrutiny.
Micron (MU) is far too "PC centered" to consider buying.
Societe Generale (SCGLF.PK), Citigroup (C), AIG (AIG)
When contemplating the possibility of a Lehman-style bank collapse in Europe, Cramer suggested looking at what set Lehman apart from Citigroup (C), which was bailed out by the government and Washington Mutual, which was bought. Lehman was more of a brokerage than a real bank and it denied anything was amiss. Societe Generale (SCGLF. PK) is making similar unconvincing assurances. While Lehman had subprime mortgages, Societe Generale has shaky debt from the poorer countries in Europe. Any default on these loans could spell trouble for the French bank and the European economy. If Societe Generale can be bailed out like AIG (AIG), that would be a bright spot, but there is a disturbing suspicion that the bank could be another Lehman. Could this happen? "What matters most is that I even have to ask the question," mused Cramer.
UPS (UPS), FedEx (FDX), Cummins (CMI), Caterpillar (CAT), Deere (DE), JoyGlobal (JOYG), International Paper (IP), Target (TGT), Ross Stores (ROST), Qualcomm (QCOM), Broadcom (BRCM), Altera (ALTR)
Why did we go up on Tuesday? There was no news from Europe and good news from American companies. Transports brought stocks up, and Cramer thinks the importance of this sector is vastly underestimated. The trucking industry says business is booming, and volumes and prices are strong. This bullish report was backed up by Cummins (CMI) whose management says that engine orders are rising. Transports have been causing trouble for stocks of late, as rails have been hit and the airlines have been crushed. Analysts have been negative on FedEx (FDX), but this negativity has been undeserved, and UPS (UPS) has an analyst meeting which should bring good news about the industry. If UPS tells a compelling story, it might be time to take a look at International Paper (IP), Target (TGT), Ross Stores (ROST), Caterpillar (CAT), JoyGlobal (JOYG) and Deere (DE).
Tech has been perking up after a long, dark decline, and Cramer would look at semis like Broadcom (BRCM), Qualcomm (QCOM) and Altera (ALTR).
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
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.
