Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday January 31.
What Is the Golden Cross and Why Does It Matter?
There is a lot of chatter lately about a Golden Cross pattern developing in the chart of the S&P 500. Technicians see the Golden Cross as the ultimate bullish signal, and some interpret it as a green signal to buy. In short, a Golden Cross pattern happens when the 50 day moving average (indicative of the short-term trajectory) crosses the 200 day moving average (indicative of the long-term trajectory.) Since 2007, the S&P 500 has shown a Golden Cross pattern 5 times, and stocks rallied 4 out of 5 times. However, some analysts also point out that there were 12 Golden Cross patterns between 1930 and 1960, and stocks only rallied half the time. Therefore, the best strategy is to conclude that the Golden Cross is a bearish signal, but only one tool and not the sole reason to go on a buying craze. The fact that the 50 day moving average has been moving flat to up and the 200 day moving average has been moving flat to down indicates a resulting rally could have staying power, and investors should not be in too much of a hurry to jump in.
Cramer sees an upsurge in ultra-discretionary buying among the very wealthy. Even though there is hardly any snow, Polaris (PII), producer of snowmobiles has been performing well. The stock is only 2 points off of its 52 week high and is up 14% year to date. Polaris reported a 2 cent earnings beat with revenues rising 26%, but guidance was lower than expected. In spite of the 5% dip the stock took because of this disappointing guidance, shares rebounded 4.1%--an indication that investors do not want to abandon the stock. Management has a reputation for being conservative on guidance, and even lowballing at times. In 2011, the company gave modest guidance of 11% revenue growth and a 13% growth in earnings, but the result the following quarter was a 33% rise in revenues and 50% earnings growth.
Polaris has a few new products in the pipeline and has expanded internationally; it should see returns from its manufacturing plant in Brazil this year. While the company has 10% exposure to Europe, Polaris was able to raise prices without losing market share. Even though the stock has risen 67% in the last year, it still has room to run, with a multiple of 14 and 17% growth. Cramer would consider buying Polaris on a pullback.
Cramer took some calls:
MGM (MGM) along with other casino stocks, is coming back, along with Las Vegas real estate. Cramer thinks MGM is the best spec in the casino space.
CEO Interview: Tom Farrell, Dominion Resources (D)
Dominion Resources (D) boosted its dividend by 7% to yield 4.2%, and has the best of both worlds; solid yield and a strong underlying business. Dominion is a producer and transporter of energy, and has the nation's largest natural gas storage facilities. The company reported a 2 cents earnings beat, and management has been buying back stock because they are confident of a future upside. While some analysts were concerned about the company's 2.5 billion debt, Tom Farrell explained that utilities need leverage to build new facilities. He is not worried about EPA regulations, because many of Dominion's coal plants have been cleaned up already. Providing electricity to data centers will continue to be a large part of Dominion's business, and demand from data centers should double in 3 years. "Dominion is the best growth story utility that I know," said Cramer.
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