Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday November 18.
Cramer discussed earnings to watch in the coming week:
Hewlett Packard (HPQ) has been getting some positive press, but Cramer says he needs to hear upbeat remarks from the company. He expects a disappointing quarter given problems with expensive disk drives and competition.
Tech Data (TECD) is not a buy, but Cramer would pay attention to its conference call, since the company is a good read on the tech industry.
DSW (DSW) has not been performing well, but might be a speculative buy.
Pandora (P) has not been profitable and the stock has been a "bust."
Deere (DE) may, as usual, put a negative face on good numbers. Even though the agriculture story is strong long-term, management tends to be conservative, and Cramer might buy the stock if it declines after earnings.
Cramer took some calls:
Cramer expects more tumult from Europe and would recommend sticking with high-yielding stocks.
While investors may want to invest in environmentally friendly stocks, few of these green stocks are friendly to a portfolio. Cramer compared Green Plains Renewable Energy (GPRE) and EOG Resources (EOG). At first glance, GPRE seems much cheaper; it is a $10 stock with a low 6.3 multiple. EOG is a $97 stock with an apparently rich multiple of 22. Looking at the PEG ratio (the price-to-earnings multiple divided by the growth rate), GPRE, with a 6.5% growth rate has a low PEG ratio of 1, which Cramer might usually consider cheap. However, compared to GPRE, EOG is "absurdly, insanely" cheap with a growth rate of 69%, which gives it a PEG ratio of 0.3. EOG is the top producer in the Bakken and Eagle Ford shales. In fact, its assets in the Eagle Ford are worth the entire value of the company, which Cramer thinks should be valued at 42% above its current level. The company reported a solid quarter and should still be a buy even if oil goes lower.
GPRE is a well-run company and is the largest producer of ethanol. However, Cramer wouldn't invest in any ethanol stock because the margins get squeezed as corn prices inevitably go higher. GPRE, like all ethanol plays, relies on government subsidies, and there is no guarantee that these subsidies will be renewed, especially with the rancor in Washington. While it feels good to invest with environmental plays, oil and gas is still a better bet than alternative energy.
CEO Interview: Jim Sinegal, Costco (COST)
One of the greatest retail minds in recent history is stepping down in January. Jim Sinegal, founder and CEO of Costco (COST) is retiring, and Cramer spoke to the CEO, who created the third largest retail chain in the country. When asked about the mood of the consumer, Sinegal says comps seem to be strong and he isn't seeing signs of weakness, but added the next 10 days will be crucial in determining how strong sales will be during the holiday season. The company recently increased rates for premium membership, but customers have not shown signs of resistance, and Sinegal said the money will be used to continue to create value for customers. While there are many Costco stores, saturation seems far away; even though there are 50 locations in LA, Sinegal thinks the company could open 20 new locations in LA without reaching saturation. Costco has been successful at the "healthy cannibalization" strategy of reducing lines at existing locations by opening new stores close by. Top line brands are still selling well, and Sinegal thinks large-screen televisions will be a major item for the holidays. While some retailers worry about not selling enough televisions, Sinegal says he is more worried about undersupply than excessive inventory. Sinegal remains proud that Costco is one retailer that offers employees generous healthcare benefits while keeping prices low for the customer.
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