Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday April 23.
While Wal-Mart (WMT) might have declined anyway, given that Monday was a down day, a scathing New York Times article might have been mainly responsible for WMT's nearly $3 decline. The article alleged that WMT executives bribed Mexican officials and then tried to cover it up. While the expected fines might not eat too much into the company's profits, the impact of the investigation could be tremendous, especially during an election year for both Mexico and the U.S. The punitive measures against WMT could go beyond mere fines, and since the company is facing stiff competition from dollar stores and low-end retailers, it might be too distracted by the investigation to perform well. WMT is a sell on any decline.
Amazon (AMZN) is employing a "take no prisoners" approach to spending its way to competitiveness, and while it is in a spending cycle, Cramer doesn't expect AMZN to make much money.
Comparing Limited Brands (LTD), Macy's (M) and Nordstrom (JWN), Cramer prefers Macy's, although LTD is also performing well. The only reason Cramer isn't more bullish on JWN is that it has had a big run.
With the Dow falling 102 points, it seems that Europe is again in the driver's seat. Earnings season has been good so far, and investors have been led to expect that the strength of the U.S. economy would inoculate it from European woes. Ross Stores (ROST), which has no exposure to Europe and sports some of the best numbers of any retailer, was down $1 only because, as a member of the S&P 500, it was guilty by association. Big Money is fond of trading S&P 500 futures, and when they are bearish on bad macro news, they send even decent stocks south. Cramer would continue buying Celgene (CELG), Lululemon (LULU), Starbucks (SBUX) and other growth stocks with the caveat that investors might have to take the pain of a few down days when hedge funds bet against these stocks for issues that have little to do with the companies themselves. These bears tend to rule for several days, but good growth stocks usually are rescued by the bulls eventually.
Cramer took some calls:
Xerox (XRX) did better than expected, and investors got excited. The fact that XRX was up one penny on a down day might mean that Xerox might improve, but Cramer says he has not liked the stock.
CEO Interview: Sandy Cutler, Eaton (NYSE:ETN)
During the current earnings season, Cramer has observed a bullish pattern among great American industrial companies reporting strong results. Eaton (ETN), which has exposure to multiple bull markets, including planes, trucks, aerospace and power management, increased its dividend payout to 3.2%, but is up only 9% to date. The company beat earnings by 2 cents, with a somewhat light revenue rise of 4.1%, and raised its earnings and revenue forecast. Eaton's electric and aerospace segments are particularly strong, and the company is benefiting from the increase in non-residential construction, which management predicted would come back by the second quarter of 2012. When asked how he predicted this trend, CEO Sandy Cutler explained that Eaton receives orders far in advance, and the company has a keen advantage in terms of visibility.
Autos and aerospace are going strong, but the company is not as bullish on China as it has been in the past, and Europe poses a "difficult challenge." Still, Eaton is thriving on the revival of domestic construction, with 5% growth in its domestic end markets compared to 2% abroad. The truck segment has been weak in Brazil, and should remain tepid for the year, but in spite of that, Eaton is seeing a 7% increase in sales and is looking forward to a record year for 2012. Cramer says "a lot is going right for Eaton," and he thinks the stock should be trading higher.
Recent IPOs can be counted on to see huge gains on the initial day only to fall in the aftermarket. While a few IPOs have been worthy of investment, these are exceptions to the rule. Cramer recommends that for most IPOs, investors should take the money and run and not to buy in the aftermarket.
Tumi (TUMI) saw a 47% gain on its initial public offering, but its rich multiple of 35 is hard to justify, given that it is a small company. Unlike Michael Kors (KORS), it is not putting up stores at a rapid rate, nor does it have strong same store sales. Cramer would buy Coach (COH) instead of Tumi, because COH is an established company with a multiple of 18 and a 16% growth rate.
Splunk (SPLK) is growing at a rapid rate and is a huge beneficiary of big data. It rose 109% on its IPO, and has been the strongest performing IPO of the year. However, it is trading at 20 times sales, compared to larger competitor, best-of-breed Salesforce.com (CRM) which only trades at 9 times sales. Cramer thinks SPLK is not as overvalued as Tumi, but neither are buys.
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