Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday January 5.
The elixir of employment growth is reviving the market, and the Dow dived early on Thursday only to rebound and close down just 3 points. With improvements in employment, the U.S. may be less vulnerable to European woes, will see a stimulation of industrials, retail and financials. Employment will improve consumer confidence and may awaken the tired housing industry.
Cramer took some calls:
Netflix (NFLX) is a stock Cramer regrets not telling investors to get out of soon enough. It has risen 8 points on takeover rumors and news of improvement in subscriptions, but Cramer thinks Netflix will continue to go back and forth and doesn't want to own it.
Cramer reiterated his bullishness on gold; it is preferable to silver and should comprise 10-20% of every portfolio.
CEO Interview: Tom Ward, Sandridge Energy (NYSE:SD)
Sandridge Energy (SD) is an independent oil and gas producer which has made the major switch from mainly natural gas to half oil and half natural gas. Now oil generates 80% of the company's revenues. Sandridge has significant oil and gas assets, but its stock fell on worries of a cash shortfall; the company planned to spend $1.6 billion on drilling but has a cash flow of only $500 million. The stock got hit, but has started to turn around since it monetized assets and has risen 23% since December.
The CEO is committed to raising capital by selling assets, doing more IPOs and has been successful at hedging. Ward says the company has 1.5 million acres of land and would like to get the amount down to 1.1 million by monetizing these assets. Cramer is bullish on SD.
With the Dow gaining 5.5% for 2011, Cramer continued his "Diamonds of the Dow" series discussing top stocks in the index. General Electric (GE) was a laggard in 2011, down 3%, but Cramer thinks this diversified industrial company is set for a turnaround in 2012. One indication is management had the confidence to raise the dividend 13.3% to yield 3.7% currently. A full 55% of its revenues come from late cycle businesses, those that perform well in the latter point of an economic turnaround. Cramer thinks the economy has reached this point, evidenced by GE's 16% growth in industrial orders and increasing demand for its power generation equipment in emerging market countries. The low cost of natural gas is a boost to its turbine business and aerospace is taking off, meaning more sales for its engines, which power Boeing's (BA) Dreamliner, and other planes.
GE Capital, its financial segment, has been a drag on the company, but it is one of the few financials doing well, and it reported a 79% increase in earnings. As financials improve, so should GE Capital. GE trades at a multiple of 11.7 with a 13.4% growth rate. Cramer would buy GE if it pulls back after it reports.
Cramer took some calls:
Siemens (SI) is a well-run company and inexpensive, with a yield of 4%. However, Cramer sees slow growth for SI with European troubles. He would own GE instead.
United Technologies (NYSE:UTX) paid too much for its recent acquisition and this concern has been a lid on the stock.
CEO Interview: Nicholas Akins, American Electric Power (NYSE:AEP)
American Electric Power (AEP) is a power transmission company with a generous 4.6% dividend. It is currently negotiating with the EPA on a delay of new regulations for coal plants. If the EPA agrees to give AEP more time to comply, shareholders could see a significant gain in the stock. CEO Nicholas Akins said,"We need a regulatory approach that is sound and consistent." The EPA wants AEP to comply by 2015, but the CEO thinks a more reasonable time frame would be 2020. The company was told 20 years ago to switch over its natural gas plants to coal and now the EPA wants the company to switch away from coal in a short amount of time. "We need time to get there," Akins said. Cramer noted that a Presidential victory by Rick Santorum, who has criticized the proliferation of such regulations, would be good for AEP.
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