Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday September 27.
CEO Interview: Joseph Papa, Perrigo (PRGO)
It is hard to argue with the new high list, stocks that are beating the market. Perrigo (PRGO) is one such stock that has benefited from providing private label brands to stores that reap higher margins from knock-offs over branded products. Recently, the company had an analyst day, and the stock is up $2.81 on the bullish news. Once customers switch to private label from branded products, 91% keep buying the discounted items, even in a strong economy. The stock is up 111% since Cramer got behind it in February 2010, but its recent solid quarter and smart acquisitions mean more upside.
Customers save 30-50% on Perrigo's private label brands, and international consumers are realizing these benefits as the company expands overseas. Joseph Papa says that $10 billion worth of medicines are expected to go from prescription only to over the counter. Perrigo will be there to profit from this transition.
Cramer is bullish on PRGO and noted that every time analysts have been bearish on the stock, it bounces back.
The Dow rose 170 points on news the Europeans might develop a TARP-style program for their banks. There isn't a logical reason for such a strong correlation between U.S. stocks and Europe specifically, but it is best to accept that what goes on in Europe is going to affect the movement of domestic stocks. One reason for the rally is that not long ago, stocks were priced for disaster. While there are signs things will continue to get better, it is still a good idea to be cautious.
Cramer took some calls:
Berkshire Hathaway (BRK.A) Warren Buffett's buyback is not a reason to buy Berkshire stock; the fact that the stock is cheap is the best reason.
The rally has increased investor confidence, but technical analyst Richard Ross still paints a gloomy picture for gold and the S&P 500. Looking at the daily chart of the S&P 500, Ross sees a floor caused by the recent rally, but the index has still been stuck under its 50 day moving average for two months and it has made a double top pattern, which is a very bearish sign. The monthly chart shows the index breaking out of its head and shoulders pattern for further declines in the future. However, in spite of the bearishness, Cramer notes that Ross is not saying that the decline will be a free fall, but there will be a bottom somewhere at which stocks can be bought.
Gold has fulfilled predictions of a decline made by Ross, as the yellow metal has tumbled dramatically. If it goes below 1,500, gold could dip as low as 1,350. Cramer thinks Ross is too downbeat and would use pullbacks in gold to buy.
Cramer took some calls:
Cramer thinks silver is too speculative to buy and its industrial uses are actually a disadvantage, because industrial stocks are out of favor right now. While silver might seem cheaper than gold in dollar amounts, it is actually more expensive.
CEO Interview: Martin Mucci, Paychex (PAYX)
Even though August employment numbers were terrible, Paychex (PAYX) tells a more positive story, and Cramer thinks this payroll management company is a better read on the employment situation than the government, since it has as its clients 564,000 small businesses. The company yields 4.5% and is a turnaround story. It recently reported a 3 cents earnings beat on stronger than expected revenues.
Net income for Paychex increased 13%, and checks per customer increased 2% over the same quarter last year. The company is seeing organic growth and is making smart acquisitions. Clients are still hiring and client retention has improved over last year. PAYX's 401(k) business is growing revenues at 12%. Cramer likes the company's dividend and added, "This is the kind of stock I recommend in this environment."
With news that the long-waited Dreamliner is finally going to be released, Boeing's (BA) stock should rise along with Allegheny Technologies (ATI), which makes titanium for the aircraft. Precision Castparts (PCP) is also a great aerospace play that can be bought with deep in the money calls. Hexcel (NXL) was downgraded, but Cramer thinks the stock has some upside. Honeywell (HON) is a buy not just because of the Dreamliner, but on its overall strength as a diversified industrial. Alcoa (AA) has been an unfairly punished stock which can be bought. The story about the Dreamliner can transform all of these stocks that have been pummeled into buys.
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