The Nasdaq composite index rose just 0.5% last week but is already up over 14% in the first 3 trading months of the year. The technology sector is out-performing both the Dow Jones (up almost 6%) and the S&P 500 (up around 9%) on the year. Jim Cramer, host of CNBC's Mad Money, was more bearish on stocks between March 5 - 8. Cramer made 45 calls in that time. 28 stocks (62.2%) were "buy" calls, while 17 stocks were "sells."
In the technology sector, Cramer was positive on 5 companies, but bearish on 4:
Sirius XM Radio Inc.
Flextronics International Ltd.
Yelp Inc. Class A Common Stock
Navistar International Corp
Sirius XM Radio (SIRI) - Buy
In an interview with Sirius' CEO Mel Karmazin, the executive pointed to a focus on free cash flow as the only metric that mattered. Sirius added over 540,000 subscribers in its most recent quarter, and has a positive cash flow of $700M for the year.
Despite Cramer's "buy" call, investors should exercise cautioun. Sirius closed recently at $2.35 and is just 3.69% from its 52-week high. On February 29, short interest increased by 285.85M shares. This is a 56.85M increase from 273.1M on February 15. Sirius is the highest-shorted company by share count on the Nasdaq index. Investors bullish on Sirius should be comforted that short-volume proved to be a contrarian signal in 2012 for stocks that performed poorly in 2011. Companies like Netflix (NFLX) and LinkedIn (LNKD) are trading higher despite the bearish bets by traders.
Corning Inc. (GLW) - Sell
Cramer was recommending Corning despite a drop in share price. Corning closed at $13.29 on March 9, range-bound between $13 and $14 in 2012. The company recently declared a dividend of $0.07, which implies a payout ratio of 12.6% and a yield of 2.1%. Corning's sub-par share performance is explained by weakness in the LCD TV market. Its SCP (Samsung Corning Precision) division performed poorly as indicated in its last quarterly earnings report. Glass volume was down more than 20%. In Korea, utilization rates and production rates were both lower in the quarter.
Corning should be considered a stock to buy at these levels. The company expects utilization rates to improve. Gross margins were at an all-time high in the third quarter despite weakness in the sector.
Baidu, Inc. (BIDU)
Cramer considered Baidu a "buy." The company is the only company in China that Cramer would consider. Baidu recovered from the October 2011 share price decline in 2012 and is up 18.94% year-to-date.
In its Q4 earnings, Baidu viewed search as a trend that would continue in China. The company also discussed its growth strategy in mobile. The company sees mobile becoming a growing percentage of total traffic. Baidu did not make any significant investments in the past in monetizing mobile traffic. This is expected to change.
Flextronics International Ltd. (FLEX) - Sell
Cramer rated Flextronics a "sell." Flextronics closed at $7.17 and is up 26.68% year-to-date. Traders should take note that short-interest in Flextronics declined by 31.3% since February 15. The short-interest was 5.6M, down from the 8.2M on January 31.
Flextronics recently reported a weak quarter. Shares dropped after the report, but have since recovered. In the last quarter, the company reported sales of $7.49B, down 4% from the previous year. The company's adjusted earnings per share were $0.18, below the $0.20 consensus from the street.
Yelp Inc. Class A Common Stock (YELP) - Sell
Newly-listed Yelp traded as high as $26. Shares closed recently at $19.80. Underwriters and the company deserve praise for the successful IPO for Yelp shares, but level-minded investors should avoid Yelp. Share strength was due to pent-up demand and speculation. Yelp's negative 19% profit margin along with a business model that is replicable by Facebook (FB) or Google (GOOG) are two reasons to avoid Yelp.