Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday February 28.
"Tech" isn't limited to just companies that make hardware, software and have internet solutions. Cramer encouraged viewers to broaden their definition of "tech" to include any company that is turning its innovations into profit. Under Armour's (UA) compression apparel was a game changer, because it dries faster than the typical sports apparel. However, UA is not a company that sits on its laurels; on its conference call, management said UA is employing "relentless innovation" to grab market share. Its charged cotton apparel dries 5 times faster than normal cotton and, according to management, could quadruple the accessible market for cotton activewear. UA has a water resistant sweatshirt which causes the water to roll right off the fabric.
The company is designing a lighter running shoe that is also water resistant, and may take market share from Nike (NKE). By the spring, UA will be releasing its "cold black" line of athletic gear that will reflect the sun and make athletes feel cooler. UA is growing its underwear business, and it is expanding its apparel to appeal to women customers, with Under Armour bras to be released this spring. With its constant innovations, Under Armour is able to market itself as a premium brand that has pricing power. The company grew revenues by 37%, and even its more mature core apparel business has grown by 27%. The company trades at a multiple of 29, but has a 20% growth rate to match its high multiple. UA will continue to expand powered by its technical innovations in sportswear.
Cramer took a call:
Cramer discussed the bad service he experienced at RadioShack (RSH) and doesn't think the stock is going anywhere.
With the Dow just peeking over the 13,000 benchmark before dropping below it again, Cramer discussed stocks that are "divorced' from the averages and determine their own destinies:
Priceline.com (PCLN) delivered a powerful quarter, and the stock rose 7%. The company has reinvented itself, and its business model no longer is based on a customer negotiating prices, but looking for deals. The raised guidance is what caused the stock to shoot up, especially as a show of confidence in an environment with higher gas prices. Priceline has transformed its business and is seeing results, but many analysts have yet to realize it.
Apple (AAPL) is another stock that raised its guidance, even as some skeptics think it has risen too much already. However, Apple is still too cheap; Cramer expects it to earn $55 a share in 2012, which means it is trading at a multiple of 10. The average S&P 500 stock trades at a multiple of 14, but has much less growth than Apple.
Clean Harbors (CLH) is not just a pollution clean-up play anymore, but has expanded into managing oil and gas sites. The company has changed its stripes, but analysts are too slow to realize it.
Whirlpool (WHR) has been an underperformer for a long time, and has repeatedly cut guidance in the past. Because no one expected WHR to raise guidance, the stock is now up 80%. When asked about WHR by a caller, Cramer thinks the stock could go higher, but may have made most of its move so far. He would wait for a pullback to buy.
Ralph Lauren (RL) reported flat earnings but gave a radical upward revision on its guidance, partly because of the decline in raw costs.
From these examples, an investor can learn to look for companies that change their business models quickly and have seen success, but are faced with skepticism by analysts who have yet to get the memo.
Why do stocks move the way they do? There are many reasons, but some stocks follow the leader of a certain sector. Casino stocks tend to trade together, but not always. Sometimes leaders can change places. The charts show how this happened with Wynn Resorts (WYNN), Las Vegas Sands (LVS) and MGM (MGM).
Wynn was the undisputed leader for a long time, but started showing signs of weakness last July when it had an outside bearish day, when it starts at a higher high and closes down at a lower low. Technicians consider this a sign that a stock is topping. Wynn repeated this pattern in September and then traded lower for months until it rebounded recently off a good quarter.
Las Vegas Sands filled Wynn's shoes as the casino leader when it broke through its ceiling of resistance, which had kept it in a range for 2 years. It recently has closed at $53, and if it manages to break above $54, it could go all the way to $65, based on the pattern of LVS's previous rallies. Some technicians believe LVS could see $68 before it reaches a ceiling of resistance.
MGM (MGM) was following LVS's gains and moved up 55% from where it was in December. Now MGM is pulling back, and could fall 10% from here. MGM is not a buy until this major pullback comes.
Wynn, however, seems to regaining lost territory since its successful earnings, and is above its key moving averages. If it holds above $115 and breaks through $120, it could move up to $130 or $132. It looks like Wynn is a trade and LVS is an investment. Cramer prefers LVS because it is taking market share in Macau, it trades at the same multiple as Wynn, 17, but has a higher growth rate, and Wynn is currently involved in a court dispute. LVS is the casino stock to buy, but Wynn is a close second.
Consumer goods stocks have long been seen as safe havens for investors with steady, reliable growth. However, this assumption has been challenged lately with the lackluster performance of this sector in the face of competition and commodity costs. General Mills (GIS) missed its quarter. Procter & Gamble (PG) announced a major restructuring, which will entail cutting back on domestic spending, a move that cost Pepsi (PEP) market share against Coke (KO). Cramer thinks these stocks are going the way of Big Pharma with little growth and not much to recommend them besides their yields. GIS, PG and PEP trade at multiples of 15 or 16, but with high single-digit growth rates.
Intel (INTC) and Microsoft (MSFT), however, both trade at multiples of 10 with growth rates of 10% and 11%. They have strong visibility, have commodity costs under control and are expanding into emerging markets; neither INTC or MSFT have problems with competition. Cramer would buy these two stocks before he would invest in many of the consumer goods stocks. While he would consider buying Kellogg (K) on its acquisition of Pringles, he is not bullish on soft goods stocks.
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