Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday March 5.
Ascena (ASNA), a stock many investors have never heard of, reported a blowout quarter, with a 16 cent earnings beat and a 14.6% increase in revenues, which were much higher than The Street expected. The stock has risen 39% since the beginning of the year. So what is Ascena? The company formerly known as Dress Barn changed its name because it has other brands besides Dress Barn: Justice, which specializes in "tween" girls and Maurice, for the 20-something crowd. Same store sales for the company are up 8%. The three stores are designed for the more value-oriented customer, but Dress Barn is revamping its image to include slightly more expensive, more stylish selections, but is doing so gradually to avoid losing loyal customers. Justice has been hugely successful, with 12% same store sales, thanks partly to the fact that it is the only retail brand dedicated solely to the tween girl demographic. ASNA trades at a multiple of 13 with a growth rate of 15. Even though the stock is up 50% in less than 6 months, it is still worth buying.
Caterpillar (NYSE:CAT), National Oilwell Varco (NYSE:NOV), Alcoa (NYSE:AA), Freeport McMoRan (NYSE:FCX), Pfizer (NYSE:PFE), Merck (NYSE:MRK), McDonald's (NYSE:MCD), AIG (NYSE:AIG), Sara Lee (SLE)
There was slight weakness in the market on Monday because of the news that China has lowered its growth forecast. While this is bad for industrials, the sector had been declining ahead of this announcement; Caterpillar (CAT) started slowing two weeks ago, and Freeport McMoRan (FCX) has been trading down for a while. Alcoa (AA) has been stopped in its tracks for a while. National Oilwell Varco (NOV), which usually "trades like a hedge fund plaything," is down 8% in just 2 weeks.
Cramer wouldn't overestimate the effect of China on the U.S. markets, given the strength of domestic stocks lately. The industrials might be taking a breather for a bit, and it is time for defensive stocks, which have been sluggish so far this year, to have their day in the sun. Cramer would keep an eye on Pfizer (PFE), Merck (MRK) and McDonald's (MCD); all three have been stalled so far this year, but showed signs of life on Monday and might be headed higher.
Cramer took some calls:
AIG (AIG) is selling some assets, and Cramer thinks management is making effective decisions.
Sara Lee (SLE) has not been one of Cramer's favorite stocks in the past, but the spin-off of its coffee and tea division could be a game-changing strategy for the company. However, Cramer thinks the stock has run up too far, and would wait for a pullback.
New Tech: Dupont (NYSE:DD)
Cramer featured Dupont (DD) as a "new tech" stock; he recommends broadening the definition of "tech" to include any company that uses science and innovation to create profits. The secret to major growth stocks is their ability to adapt and innovate, and Dupont has been a leading innovator for 200 years. Dupont has annual conferences designed to discuss ways to solve pressing global problems through technology. Dupont is the second largest chemical company in the world, but has huge diversification into the energy and agriculture industries. Dupont, which yields 3.2% and has risen 200% in the 3 years since Cramer got behind it, is creating materials to make cars more lightweight, and therefore, more energy efficient. Dupont also produces waterproof synthetic materials, and new ingredients for food products. Dupont produces genetically modified seeds which produce higher yields, and some are bug and drought resistant. Emerging markets make up one-third of sales, and the company is able to grow earnings at an annual rate of 10%, with a multiple of 11. Cramer said Dupont "Is one of the most innovative firms I have ever seen. The stock could go much higher."
CEO Interview: Bob Dutkowsky, Tech Data (NASDAQ:TECD). Other stock mentioned: Hewlett Packard (NYSE:HPQ)
Tech Data (TECD), a wholesale distributor of tech products, reported an 11 cent earnings beat, but missed on revenue estimates, and the stock fell 7%. TECD had run up over 40% since August, and since it gets 60% of its sales from Europe, a modest revenue miss was probably not unexpected. CEO Bob Dutkowsky spoke of "pockets of strength" in Northern Europe; for the U.K. market, it was the best quarter in 11 years. While 22% of the company is levered to Hewlett Packard (HPQ), Dutkowsky is not worried about HPQ's lackluster performance lately, because TECD specializes in HPQ products that sell well. The company specializes in data centers, mobility, software and consumer electronics, and has moved away from highly commoditized items such as disks. TECD is flush with cash, and may make more acquisitions and institute another significant buyback. Cramer made the point that, if the company is doing this well with Europe in the doldrums, it is going to do even better when Europe recovers. Cramer thinks Tech Data is cheap.
General Motors (GM) is jumping on the natural gas wagon with its truck that runs on natural gas. Cramer thinks the natural gas revolution is here, and mentioned that it only took diesel 7 years to become the major fuel in the U.S. Natural gas is too cheap to ignore, although some environmentalists are still engaged in the fight against fracing. Cramer thinks Clean Energy should do a secondary offering to raise money so they can build up natural gas stations throughout the U.S.--that is how big Cramer thinks the trend is going to be.
Jim Cramer's Action Alerts PLUS: Trade right alongside a Wall Street pro! Start your 14-day FREE trial today.
Get Cramer's Picks by email - it's free and takes only a few seconds to sign up.