Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday January 30.
How to Play the Facebook IPO
Facebook is taking market share with display ads and doubled its revenue since last year. This social networking giant is "the real deal." Cramer would get in the deal but advises investors to pay attention to the number of shares offered, not just the valuation. If the bankers are offering just a few shares, they are orchestrating a quick pop. In that case, investors should be ready to take quick gains. If the share offering is generous, investors may be able to hold Facebook's stock for a longer amount of time.
Newell Rubbermaid (NWL) has been a serial disappointer, but seems ready for a long-awaited comeback. After underperforming for years, the company reported a strong quarter last Friday and saw its stock price jump 8%. This producer of favorite brands like Rubbermaid, Sharpies and Calphalon has been losing investors money since the merger between Newell and Rubbermaid, and afterward, lost 85% of its value by 2009 with the recession. The company cut its dividend by 69% in 2009, but last year, it raised its yield in May by 60%; NWL currently yields a modest 1.7%. NWL has nearly tripled since 2009 and is now just 40% off its 2007 highs.
The turn in housing is one reason to take another look at Newell, but company-specific issues are more compelling. NWL initiated a program called "project renewal," which consolidated its 3 operating units into two and reduced its 13 global businesses to just 9. Its new CEO, Michael Polk, is committed to improving brands and limiting exposure to good more vulnerable to competition and commodity prices. Polk was formerly the CEO at Unilever (UL) where he transformed UL into a more competitive, faster growing company. NWL is sheltered from European woes, with only 10% of sales coming from the Continent and 70% from the U.S. The company sells at a multiple of 10.3 with a 9% growth rate. Estimates are still conservative, and although the stock rallied hard on Friday, it isn't too late to buy. Cramer advises investors to take their time and wait for a pullback before buying.
The Europe Amnesia Factor: Caterpillar (NYSE:CAT), Eaton (NYSE:ETN), Cooper Industries (CBE), Boeing (NYSE:BA), Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC), U.S. Bancorp (NYSE:USB)
The averages were punished on Monday morning, only to rally back in the afternoon, with the Dow closing down 7 points. Could the markets be overly influenced by the situation in Europe, as they were late in 2011? At the beginning of 2011, the U.S. was relatively weak, Europe was performing well, China was raising interest rates to deal with inflation and emerging markets were moving along. The beginning of 2012 sees the U.S. gaining in strength on the increase in oil drilling, housing builds and auto production. Europe is facing a recession, and while China is gradually easing up on its economy, the process is going to be gradual; emerging markets are growing, but not aggressively. Cramer doesn't think U.S. stocks are as vulnerable as they were to Europe last year, but the first half of any given trading day might see some selling on European fears. However, the European "amnesia factor" might set in, as it did on Monday, on good news from domestic companies, and stocks are likely to recover by the end of the U.S. trading session. Caterpillar (CAT) doesn't seem to be hindered by Europe, and Eaton (ETN) and Cooper Industries (CBE) reported strong quarters. The aerospace cycle is in full swing, regardless of Europe, with Boeing (BA) and its Dreamliner. While European problems still have an effect on domestic stocks, they don't loom as heavily as they did in the latter part of 2011.
Cramer took a call:
One trend that is working in the current environment is the demand for highly discretionary items. Now that the domestic economy seems to be on a path toward growth, stocks like Brunswick Corporation (BC) with heavy exposure to luxury boats and boat engines and a smaller fitness and bowling segment, are performing well. Last Thursday, BC reported a strong quarter, with a lower than expected loss and a 20% increase in boat sales. Thanks to its reduction of $450 million in fixed costs, the company saw operating margins rise 600 basis points. The average age of power boats is approaching 15 to 20 years, and many wealthy consumers may be ready to replace their yachts. The average decline in the industry has been 30%, but BC "is the last boatman standing," with a 10% increase last year. Management said on the conference call, "we expect to have sustainable earnings and revenue growth even in a flat market." If the economy revs up BC should see even more growth. The stock trades at a multiple of 11 with a 13% growth rate. Although it has run up 15% since last year, BC is still 7 points off its 52 week high.
Cramer took some calls:
Berkshire Hathaway (BRK.B) is reaping the rewards from its Burlington Northern acquisition and its insurance business; "I like Berkshire Hathaway," Cramer said.
The rebound in semis is here and the way to play it is with semiconductor equipment companies like KLA Tencor (KLAC). The company blew out its earnings last Thursday, and was the best tech earnings report Cramer says he has seen so far this year since Apple (AAPL). The stock rose 5% but has since pulled back a bit, and may be offering a buying opportunity. KLAC beat earnings by 7 cents with a 95% increase in orders since last quarter. Rick Wallace said the mobility space is on fire as well as e-readers; "We are seeing broad support...the level of depth and breadth of demand for our products is huge." KLAC is seeing a 12% increase in cash flows and is committed to offering a solid dividend. Wallace says the mobility sector represents a "super cycle" which might resemble the drive for PCs in the 1990s. Cramer is bullish on KLAC.
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