Cramer's Mad Money - Walgreen's Loss May Be CVS Caremark's Gain (11/21/11)

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Includes: BMY, CVS, DIS, ESRX, FUN, GILD, HAR, LLY, MRK, SNY, WBA
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday November 21.

CVS Caremark (NYSE:CVS), Walgreen (WAG), Express Scripts (NASDAQ:ESRX), Pharmasset (VRUS), Eli Lily (NYSE:LLY), Bristol-Myers Squibb (NYSE:BMY), Sanofi Aventis (NYSE:SNY), Merck (NYSE:MRK)

Cramer would buy CVS Caremark (CVS), since the company may be the main beneficiary from the ongoing dispute between Walgreen (WAG) and Express Scripts (ESRX). While Cramer once liked WAG and believed the disagreement between WAG and ESRX over prices of prescriptions would be resolved, the contract is due to expire on January 1st 2012, and the companies are still locked in conflict. It is estimated that, if no deal is made, WAG could lose $1 a share and 90 million prescriptions that might be filled at CVS. While in 2007 Cramer was a critic of the CVS Caremark merger, after a difficult integration, the combined company is taking share and should benefit from the increase in generics, as $37 billion worth of drugs will go off patent in 2012. CVS trades at a multiple of 11.8 with a 10.5% growth rate, and Cramer thinks the stock may be a buy ahead of its analyst day on December 22.

Cramer took some calls:

  • Pharmasset (VRUS) was a winner for one caller, and Cramer suggested taking profits and keeping some cash on the sidelines to buy Bristol Myers (BMY) or Sanofi Aventis (SNY) on weakness.
  • Merck (MRK) is not a sell on its litigation issues, but it doesn't have the growth Cramer wants to see. However, the company is better than it once was and has raised the dividend.
  • Eli Lily (LLY) offers a decent dividend but doesn't have enough growth.

CEO Interview: Dinesh Paliwal Harman International (NYSE:HAR). Other stock mentioned: Disney (NYSE:DIS)

Harman International (HAR) is a turbo-charged growth stock that surged 20% after its excellent earnings call in October only to be taken down with the rest of the market. HAR makes high-quality sound systems used in 80% of luxury autos, has had contracts with major stadiums, the Oscars, Disney (DIS) amusement parks and airports. The company is working on delivering social media through sound in cars. HAR has been successful in cutting costs dramatically: "If you want to be a profit leader," CEO Dinesh Paliwal said, "you have to be a cost leader." The company has a record $15 billion in backlog that provides visibility for future earnings, and has reported 8 consecutive quarters of top and bottom line growth. HAR is seeing a 68% growth rate in emerging markets.

"This is the kind of growth stock you have to get into when things settle down," Cramer said.

President/CEO Interview: Matthew Quiment, Cedar Fair (NYSE:FUN)

Matthew Quiment, formerly of Disney, is the current President and incoming CEO of Cedar Fair (FUN), which operates amusement parks in the U.S. The company has been refinancing its debt and is a powerful dividend story. Cramer predicted it would raise its yield to $1 per share. Not only did it meet this target, but Fun's new goal is $1.60 for 2012, which would mean a 7.5% yield, and $2 a share for 2013, which would bring the dividend to 9%. Cedar Fair should do well even in a slow economy, because it offers a variety of entertainment, meals and shopping for an average of $40 per visitor. FUN offers options for budget conscious and higher-end customers: "We are a great value." FUN is introducing two major new rides: Dinosaurs Alive and Leviathan. October was the strongest month in 2011 because of FUN's Halloween activities. When it comes to buying new parks, Quiment said, "We are keeping an eye open for accretive acquisitions." Since FUN's parks are located only in the U.S, the stock is unlikely to feel any pain from Europe.

Is Gold Still a Buy?

The vicious decline of gold seems counterintuitive; after all, gold tends to decline when economic times turn chaotic. However, the fear of deflation is fueling worries that everything will be worth less. But Cramer thinks gold will go back up after it flails around for a while, and gave three reasons why:

  1. Europe will print more money and cause the euro to decline.
  2. Demand for gold from central banks and emerging markets has never been greater.
  3. It is difficult and expensive to mine gold. In other words, we don't have enough of it.

Cramer would use temporary declines in the yellow metal to buy some physical gold, preferably bullion. .

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