Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday December 14.
Beloved stocks tend to get slaughtered on bad days, especially when investors are fearing another 2008 Great Recession scenario. No matter how good the fundamentals, it's time to avoid Fossil (FOSL), Lululemon (LULU), Salesforce.com (CRM), Green Mountain Coffee Roasters (GMCR) and Priceline (PCLN), even as the latter stock reported a good quarter and has a story that might work in a recession: saving money on travel. However, even good news from these stocks will be ignored on increasing worry, so it is better to stay away.
"Something had better go right soon," Cramer said on Wednesday after the Dow sank 130 points. He outlined 10 things that are going wrong in the world economy.
1. The FXE (FXE) which gauges the health of the euro fell through its long term support level of $130.
2. The European stock market is moving only in fits and starts.
3. European economies are slowing on fears of soaring unemployment.
4. Interest rates are rising while economies are weakening.
5. There is a huge number of Italian and Spanish bonds for sale, but no one wants to buy them.
6. Commodities are collapsing, but oil is not moving down.
7. The Chinese economy is slowing, and the Chinese are inwardly focused on their inflation problem. They cannot be counted on to save the world.
8. Fed Chairman Ben Bernanke basically has said that he's done all he can do.
9. U.S. leadership in the face of the European crisis is absent; "Where is (Treasury Secretary) Tim Geithner?" Cramer asked.
10. Many of Europe's banks will be nationalized.
In this environment, Cramer would use temporary rallies on hopeful news to sell stocks and raise cash. He would stay away from banks, European stocks, low yielding industrials and much of tech. This means not touching 50% of stocks. He would focus on high-yielders and thinks General Mills (GIS), which raised its dividend by 9% and should benefit from falling raw costs, may be a buy, but his emphasis is on making sure there is plenty of cash on hand. "Europe is all that matters right now, and it is hideous."
Cramer took some calls:
Martin Mariette Materials (MLM) is making an acquisition. Investors who want to play this deal should get in and get out fast.
When asked about buying gold and silver, Cramer said he feels sure gold will bottom as it did in 2008, but right now, it is a falling knife and he would stay away.
CEO Dick Heckmann, Heckmann (HEK)
A minor environmental incident with fracing water in Wyoming got the notice of the EPA and seemed like a setback for natural gas, but Cramer said it only makes the case stronger for companies like Heckmann (HEK) which is the "one stop shop" for shale water solutions. The company treats fracing water and recycles or disposes of it in safe facilities.
When asked about the domestic drilling trend, Founder and CEO Dick Heckmann said, "I've never seen anything so exciting." Water is an important component in the drilling process, since each well requires 8,000 gallons of water, and much of this water comes back up to the surface. In the early stages, most of this water can be treated and recycled, but eventually, it needs to be disposed of. Heckmann says the problem in Wyoming was due to poor handling of fracing water, and it is the company's job to ensure that this water is dealt with properly.
When asked why fracing is so controversial, Heckmann replied that no one predicted four years ago that domestic drilling would grow so dramatically. The cost of drilling is one third the price of solar and wind development, and "ruins the price structure" for alternative energy. Therefore, opponents are change-resistant and are relying on outdated notions. Heckmann predicts that by the end of the decade, the U.S. will be a major exporter rather than an importer of oil and natural gas, and currently, 22 states rely on drilling for job creation and their revenues. Heckmann's trucks run on natural gas, which is half the price of diesel and is a clean fuel; "I have not seen one negative since we put these trucks on the road." When asked about a takeover, Heckmann replied, "We have so much to build. Business is going well. As long as this country needs natural gas and oil, we've got a long road ahead." Cramer is bullish on Heckmann.
Walter Robb, Co-President and COO of Whole Foods (WFM)
On the calamity in Europe, many stocks are getting hammered and don't deserve to be down so much. Cramer would put these names on a shopping list, since many of them are well outside of the European blast and should bounce back. Whole Foods (WFM) has been slapped around because it is perceived as a high-flying stock, but its underlying business is strong and driven by the huge trend in healthy eating. The company has seen accelerating same store sales for 8 consecutive quarters and has a strong balance sheet. It boosted its dividend by 40%, and while the current yield is only 0.8%, it should be raised again in the future.
Co-President and COO, Walter Robb discussed the company's momentum and lift in pre-holiday sales. WFM could put up 1,000 additional stores. The company has successfully passed on commodity costs, which Robb thinks have peaked. When asked about the company's concentration on margins versus sales, Robb said margins are a concern, "but any retailer worth their salt is going to push for sales." WFM is very competitive with its high quality products; "We've gone from fringe to cutting edge," said Robb. While Trader Joe's is a "worthy competitor," WFM's stores are bigger, have a wider selection of produce and perishable items and "our team is our secret sauce. I'm not saying Trader Joe's doesn't have it, but we've got it." WFM has started Wellness Clubs as a test, "It is a minor investment but an exciting extension." When asked about economic concerns, Robb discussed the disconnect between capital markets and the robustness of the day-to-day business; "I see opportunities like I've never seen before." Cramer is bullish on WFM.
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