Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday February 6.
With conspicuous consumption on the rise, one would expect Coach (COH) and Tiffany (TIF) to be trading in lockstep. In fact, Coach is just a few points off its 52 week high and Tiffany is 19 points below its 52 week high. Tiffany lowered guidance, and the holidays were slow for the retailer; same store sales rose just 4% for November and December when The Street was expecting a high single digit number. Tiffany is down 2% for the year and Coach is up 19% year to date. Both companies get 20% of their sales from Japan and have strong demand in China. While Tiffany's exposure to China is larger, with the country generating 18% of sales compared to 4% for Coach, Cramer thinks Coach has more potential to grow in China. The main factor in Tiffany's decline was the reduction of Wall Street bonuses, a development that cut into its customer base. Coach has a larger market share, 29% of handbags, but Tiffany doesn't dominate any specific category, and tends to be for weddings or only for very high-end customers. Tiffany was hurt by European woes, because 12% of its sales are from the Continent, while Coach has barely any exposure to Europe. Tiffany will not discount to move merchandise, and this is a disadvantage, since customers are often looking for bargains. Its gross margins were only 58% compared to Coach's of 73%. Both stocks trade at 19 times earnings, but Coach has stronger growth and better fundamentals.
Harry Winston (HWD) does not have the earnings and is not a great stock.
With the Dow dropping 17 points on Monday, some stocks unexpectedly rocketed higher, including Green Mountain Coffee Roasters (GMCR), Netflix (NFLX), and Whirlpool (WHR). While Whirlpool reported a strong quarter, the 16 point move in 4 days seemed hyperbolic. WHR has been disappointing for a while, and there were even rumors of a dividend cut. Short sellers held 10% of WHR's stock going into the quarter, but when Whirlpool delivered a knockout quarter and raised estimates, the shorts had to cover their positions. GMCR and NFLX have also been disappointing stocks to own, but short selling drove them up. Their moves are a question of supply and demand of available shares, not of fundamentals.
Cramer took some calls:
Coinstar (CSTR) may be in the middle of another short squeeze. Cramer thinks the stock could rise 12 points.
Joy Global (JOY), which specializes in mining equipment, and Caterpillar (CAT), with exposure to both industrials and mining, might seem like similar stocks, but they are significantly different. Joy Global trades at a multiple of 11.5 with an 18.7% growth rate, which gives it a PEG ratio of 0.61. Caterpillar has a multiple of 10 with an 11.4% growth rate and a PEG of 1.88. CAT may seem more pricey than JOYG, but it deserves to trade at a premium, because it is a diversified industrial with stronger end markets. A full 66% of JOYG's revenues come from coal mining, and this exposure could be risky for them if the EPA cracks down on the use of coal. While China has a huge appetite for coal, it put the brakes on its economy last year, and demand is rising only moderately. Caterpillar has as much business in China, or perhaps more than JOYG given the huge demand for infrastructure in the country. Caterpillar said hopeful things about Europe, but JOYG is being hurt as coal is being phased out as an energy source in many European countries. Joy Global's main competitor is Caterpillar, since CAT acquired Bucyrus, JOYG's former rival. Cramer doesn't think JOYG can compete effectively with Caterpillar, given the latter's size since the Bucyrus acquisition. He prefers CAT, but would wait for a pullback before buying.
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