Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday September 26.
The rise in the Dow, up 272 is proof that panic is not a strategy. Just a few days ago, investors were looking to bail from stocks, but the action on Monday canceled these fears. In short, Europe is now adopting the kind of reforms they initially rejected, TARP-style banking reforms proposed by Secretary of the Treasury, Tim Geithner. On the news that there may be a solution to the ongoing economic malaise in Europe, stocks soared.
What could investors have bought to profit from this rally? FedEx (FDX) was unjustly punished because the management was perceived as being downbeat even as the company reported a decent quarter. The stock declined from $72 to $66, and has already come back somewhat, but has further to run. Norfolk Southern (NSC) was guilty by association with some coal companies that gave bearish news, even as its management said business would be strong. There were big moves in Dupont (DD), Johnson & Johnson (JNJ) and McDonald's (MCD), and the moves higher should continue. While Carl Icahn doesn't seem to be buying Clorox (CLX), the dip on this news is a buying opportunity on the strength of the company's fundamentals. "Remember," Cramer said, "No one ever made a dime panicking." Investors should remember this advice next time there is a bear raid.
Cramer took some calls:
A caller asked about how viable a buy Alcoa (AA) is on Boeing's (BA) Dreamliner. Cramer suggested buying Allegheny Tech (ATI), but added that he is still a believer in Alcoa, since many of its aluminum fasteners are used in the construction of the plane. While AA is a much-hated stock with a bad chart, Cramer believes in the company's fundamentals.
McGraw Hill (MHP) is a very shareholder friendly company, and Cramer would be a buyer.
CEO Interview: Harold Hamm, Continental Resources (CLR)
Oils are some of the cheapest bargains in the stock market. Continental Resources (CLR) has the most acreage in the Bakken, the largest oil discovery in American history. The stock has fallen 7 points and is now just 3 points away from its 52-week low. The stock has suffered from the price disparity between higher-priced Brent Crude and West Texas Intermediate [WTI]. CLR trades at a multiple of 14.6 with an 18% growth rate. Even if the price of Brent goes down, the stock should be sustained with its 29% production growth.
Harold Hamm said that he saw the price disparity between Brent and WTI coming and has been sending 75% of the company's oil to areas where it can fetch a higher price. The company has been buying back shares and is benefiting from more clement weather. The company has a backlog of orders and doesn't see a slowdown in its Asian markets. Cramer noted that every time CLR has dropped significantly, it has bounced back, and he would buy.
One group of stocks that does better in a recession than when the economy is strong is the prison industry. As state governments seek to raise money, they are increasingly engaging in contracts to sell their prisons. At $10-30 million per prison, the state of Florida is expected to raise significant cash by selling 29 of its prison facilities. The company with most direct exposure to Florida prisons is Geo Group (GEO), but Corrections Corporation of America (CXW), with many of its prisons in California, is also a good play on the trend. Neither of the stocks suffered any significant downturn during the recession. GEO trades at a multiple of 11 with a 12% growth rate, and CXW trades at a multiple of 14 with a 10% growth rate. Cramer would be a buyer of GEO on the catalyst of the privatization of many of Florida's prisons, but either stock is a buy as a long-term defensive play.
CEO Interview: Daniel Junius, Immunogen (IMGN)
Immunogen (IMGN) announced groundbreaking news about its treatment for breast cancer, which targets cancer cells and spares healthy cells. The new treatment works better than other drugs on the market with a 41% reduction in the return of malignancy and 50% fewer side effects. The stock has risen 63% since Cramer got behind it in November 2009, and the stock is 5 points off its 52 week high.
Daniel Junius discussed the progress of the drug's approval, and believes one version could be approved as early as next year. The treatment could have other indications, and could be used to treat women who have had tumors removed, before the disease has spread further. Also, it could be used for 20% of gastric cancers. Cramer thinks the stock has been a winner and will have continued upside.
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.