Cramer's Mad Money - The Comeback Of 'Cereal' Disappointers (12/12/11)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday December 12.

ConAgra (NYSE:CAG), Kellogg (NYSE:K), Heinz (HNZ), Campbell's Soup (NYSE:CPB), MarkWest Energy Partners (NYSE:MWE), Tyson Foods (NYSE:TSN), IntraLinks Holdings (NYSE:IL), Plains All American Pipeline (NYSE:PAA), KinderMorgan Partners (NYSE:KMP), CurrencyShares Euro Trust (NYSEARCA:FXE), McCormick (NYSE:MKC)

Last week's advance was wiped out because of the nagging issue of European sovereign bonds, and the Dow sank 163 points on Monday. Cramer said if CurrencyShares Euro Trust (FXE) can't stay about 131 on Tuesday, there could be another down day. Many investors are in "risk on, risk off" mode depending on the day, and Cramer doesn't recommend following their lead; "That is silly, daytrading nonsense and I don't want you to get caught up in it." He would look instead to what has been consistently working: MLPs, (Cramer likes MarkWest (MWE), utilities and "cereal" disappointers in the food industry). He listed stocks that have bounced back from bottom and disappointing news:

ConAgra (CAG) reported a "nauseating" quarter in September with numbers cut and skyrocketing commodity prices. The stock has roared back.

McCormick (MKC) reported weak gross margins and met its estimates only because of a one-time tax benefit. Now the stock is taking off.

Kellogg (K) showed delay in benefit from sales, but K has moved.

Heinz (HNZ) may be the worst in the group with terrible sales and an apologetic tone from management. No sooner did HNZ bottom than it started moving up again.

Campbell's Soup (CPB) reported awful soup sales with declines from 4-9%. However, CPB is heating up.

Tyson Foods (TSN) reported poor gross margins and slowing chicken sales, but the stock seems to have bottomed.

Cramer took some calls:

IntraLinks (IL) is under investigation and keeps going up. The fact the stock is low is not enough reason to buy. Cramer says he needs to see 2 clean quarters before getting bullish.

Kinder Morgan Partners (KMP) is an MLP Cramer discusses often, but he thinks Plains American Pipeline (PAA) is also good.

CEO Interview: Rick Hamada, Avnet (NYSE:AVT). Other stock mentioned: Intel (NASDAQ:INTC)

Semiconductors have been weak performers, as evidenced by Intel's (INTC) poor earnings. Avnet (AVT) is the best read on the tech industry, since the company is a "supermarket of tech." The stock is up 18% since last August, but is still trading at a discount with a 7.2 multiple and a 14% growth rate. CEO Rick Hamada ascribes the weakness in the industry, particularly with Intel, to the general weakness in PCs, and it has been occurring for a while. AVT is keeping inventory down and making smart acquisitions; "We are very committed to M&A as an overall strategy." The company is seeing strength in Asia and the Americas and some weakness in Europe. AVT trades the best when inventories are low. Avnet has an analysts meeting on Wednesday, and Cramer expects positive news.

Hexcel Corporation (NYSE:HXL), Boeing (NYSE:BA), General Dynamics (NYSE:GD), Lockheed Martin (NYSE:LMT)

Hexcel (HXL) makes the parts that power the aerospace cycle; bullish cycles in this industry can last 7 years. Cramer thinks we are in a bullish cycle for aerospace, helped by the Dreamliner. However, Hexcel (HXL) which gets 90% of its revenue from Boeing and Airbus combined, didn't move on the Boeing upgrade on Monday. Airbus reported that 2011 was the strongest year ever for the company, and both Airbus and Boeing have huge backlogs that mean more business for Hexcel, which makes lighter airplane parts that cut down on fuel costs. Currently, 14% of planes in the air use Hexcel parts; by 2017, the number should reach 44%. While Hexcel has some defense exposure, and this sector is facing government budget cuts, most of its business is commercial, and damage to Hexcel should be limited. HXL has a wind segment, but in spite of weakness in that sector, wind is growing in the single digits. HXL trades at a multiple of 18 with an 11% growth rate; "Hexcel is trading at a discount when it should be trading at a premium," said Cramer.

Cramer took some calls:

General Dynamics (GD) has defense with some aerospace, whereas Cramer prefers Hexcel, which has aerospace but with some defense. Cramer is bearish on GD.

Lockheed Martin (LMT) is a value trap; "Lighten up on Lockheed."


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