Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday November 1.
CEO Interview: Richard Hill, Novellus (NVLS)
One theme that is working even on down days is the seasonal rebound in tech, and a good way to play it is in the semiconductor sector, which is growing even as numbers haven't been outstanding. Novellus (NVLS) reported a bullish quarter with a 5 cent earnings beat and with revenues slightly below expectations. However, upside guidance was dramatically raised with next quarter's bookings expected to rise at least 10%. Novellus has made one of the most aggressive buybacks Cramer says he has seen, and while he is skeptical of many buybacks, this repurchase reduces the float significantly, cutting the share count by 66%. NVLS has risen 59% since 2009, and Cramer expects more upside.
CEO Richard Hill discussed the increase in demand for memory. The company often deals with sudden spurts of cyclical growths when new technology causes its customers to re-outfit an entire factory. Novellus aims to make chips "better, faster and cheaper." When asked why NVLS' buyback is so aggressive, Hill explained that he thinks NVLS is extremely undervalued compared to its competitors, especially with the company's prospects and cutting edge technology. When asked about a critic from Citigroup who said Novellus seemed to be taking the company private, Hill responded, "If no one else wants it, everyone inside wants it, but people are starting to understand the value." Cramer believes in Novellus' buyback strategy and would buy the stock on a decline.
CEO Interview: David Farr, Emerson Electric (EMR)
Emerson Electric (EMR) is a major supplier of processed automation systems. It focuses on power conservation, communications platforms for data centers, tools, motors and other devices for industrial use. EMR has strong exposure to growth in emerging markets, but is expanding domestically as well. The company has a history of raising its dividend for 55 consecutive years, and upped its yield by 16% to 3.2%, the biggest dividend boost Cramer says he has seen this quarter. The company beat earnings estimates by 2 cents in what was a "horrid environment," according to Cramer.
CEO David Farr explained that the dividend has always been a priority for the company as a way of rewarding its shareholders. The company also uses its cash for research and development, stock buybacks and acquisitions, but the yield is a major focus. Farr expressed confidence in the future of China, where the emphasis now is on increased productivity rather than cheap labor. While 60% of Emerson's sales come from outside the U.S., Farr sees great potential at home and a possible comeback for non-residential construction for 2012. Cheap natural gas is making it possible for companies to invest domestically, and domestic fossil fuels provide U.S. businesses with a competitive advantage. Farr believes Washington will soon get the memo about natural gas, domestic oil and energy independence. Cramer is bullish on Emerson Electric.
CEO Interview: Frank Semple, MarkWest Energy (MWE)
With the oil and gas drilling boom in the U.S., there is a tremendous demand for new pipelines. MarkWest Energy (MWE) gathers, processes and transports natural gas and is an MLP, with a 5.9% distribution which analysts predict could be raised by 10% annually. Since its IPO in 2002, MWE has grown its distribution by 109%, and investors could double their money in 12 years by reinvesting the distribution.
Frank Semple explained that the company was able to undertake a plan to spend $2 billion to grow the company while raising the distribution. Marcellus and Utica are likely to be key drivers of the company going forward. The company has implemented successful safety measures and its recent investment has created hundreds of direct hires and thousands of jobs indirectly. Semple said the country needs a comprehensive energy policy to increase energy self-sufficiency.
Cramer said, "This is the kind of stock you can own through a downturn."
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