Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday December 21.
10 Reasons To Like Nike (NKE)
Cramer correctly predicted that Nike (NKE) would beat its earnings estimates. A good indication of management's confidence was its 16% dividend boost a few weeks ago. But how did Cramer know to buy the stock ahead of the quarter? He shared with viewers his checklist for deciding that a stock is a buy.
1. Demand: Nike has been creating demand for decades with its innovative products and sharp advertising.
2. Numbers: look at total addressable market (which in Nike's case is $75 billion) and how it ranks compared to competitors (Nike is the top player for sports footwear and number two for athletic apparel).
3. Catalysts: The NBA lockout is ending, the 2012 Summer Olympics is a great selling point and Nike is going to have a new release of its Converse brand in China.
4. Futures orders: Nike's futures orders were up 15%.
5. Costs: Nike can pass higher raw costs on to customers. With cotton prices declining 60% since last March, Nike should see an improvement in its bottom line.
6. Geographic Breakdown: Emerging markets and the U.S. make up the bulk of Nike's sales, and they are up 26% and 21% respectively year over year. The European business is struggling, but problems there are offset by Nike's main markets.
7. Accelerating revenue growth is increasing for Nike.
8. Inventory: Nike's inventory has hit a plateau and should continue to decline.
9. Reinvention: The company is continuing to revolutionize the sports shoe market and its advertising strategy.
10. Culture: Nike is not just a shoe company, but a lifestyle.
Cramer would continue to buy Nike; "It's a terrific stock to own."
Oracle (ORCL), Emerson (EMR), CarMax (KMX), Enteprise Products Partners (EPD), Kinder Morgan Partners (KMP), Bristol Myers (BMY), Pfizer (PFE), Merck (MRK), Verizon (VZ), ConEd (ED), Duke Energy (DUK), Altria (MO), Kellogg (K), General Electric (GE), ConAgra (CAG), McDonald's (MCD), Kraft (KFT), Kimberly Clark (KMB)
The Dow closed up 4 points on Wednesday in spite of some ugly news, particularly from Oracle (ORCL), which reported one of the worst quarters Cramer says he has seen from a company that did not pre-announce to the downside. In fact, Oracle made bullish comments about Europe a few weeks ago, only to reveal on the conference call that their orders from Europe were actually slowing. Cramer thinks Oracle should have warned The Street ahead of time, but because it didn't, high expectations caused a drop in the stock. Emerson (EMR) gave disappointing news about industrial orders and CarMax (KMX) reported a down quarter. High flying momentum stocks got shot out of the sky. In this environment, Cramer would continue to buy MLPs like Kinder Morgan Partners (KMP) and Enterprise Product Partners (EPD) and high-yield defensive stocks and strong performers like: Bristol Myers (BMY), Pfizer (PFE), Merck (MRK), Verizon (VZ), ConEd (ED), Duke Energy (DUK), Altria (MO), Kellogg (K), General Electric (GE), ConAgra (CAG), Nike (NKE), McDonald's (MCD), Kraft (KFT) and Kimberly Clark (KMB).
Disney (DIS) had a rough year in 2011, but management implied a bright future when it raised the dividend by 50% a month ago. While Disney has raised its yield 6 times in the last 8 years, the increases were not more than 16%. A dramatic dividend boost may bring the yield to just 1.7%, but Cramer is as interested in the expression of confidence as he is about the level. The company has diversified entertainment offerings including ESPN, theme parks, films and other products. Two main worries have been over Disney's theme parks and its struggling film business. Theme park attendance is up, although by a small number, but its construction of a Disney Park in Shanghai, scheduled for 2016, is promising. Disney has changed its strategy for its movies to concentrate on fewer films but with stronger international appeal; among the films scheduled for release in 2012 is a Muppet film, the Avengers and a prequel to Wizard of Oz. Investors should look at Disney's future, not at its past, and should buy it at its current low price.
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