Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday May 14.
CEO Interview: Bob Iger, Disney (DIS)
Following the disappointment of John Carter, Disney (DIS) has gotten revenge against bearish statements with The Avengers, a success that demonstrates the power of a great acquisition, namely Disney's merger with Marvel. "The Avengers exceeded our expectations," explained CEO Bob Iger. "...We are fortunate to have Marvel, which is a great brand and a great franchise with great people." The Avengers, which will inspire a sequel, a TV series and eventually a theme park ride, will give Disney earnings visibility for years. Disney is firing on all cylinders with the success of its theme parks and cruises. The domestic business is strong, "Europe is a little bit softer, Asia is on fire," especially the parks in Hong Kong and Japan. When asked about the viability of television advertising with fragmentation caused by the internet, Iger said a 30-second television commercial on ABC still has a huge impact. Disney has 103 channels around the world, most with high ratings. When asked about what Disney is going to do with extra cash, Iger says he intends to raise the dividend, buy back stock and invest in the business. Cramer is bullish on Disney and would buy the stock on any dip.
Cramer gave seven reasons why U.S. stocks, even when they decline over the turmoil in Europe, will not go down as hard or stay down as long.
1. Many U.S. companies and sectors have no European exposure.
2. Declining commodity costs (the result of problems in Europe) are bad for industrials but good for companies that depend on raw costs staying low.
3. The American consumer is alive and spending, even on discretionary items.
4. Sought-after brands and trends tend to be born in the U.S.A. these days.
5. American companies are getting attractive takeover bids.
6. U.S. banks are stronger and better-capitalized than European banks. While the $2 billion loss for JPMorgan (JPM) was nothing to sneeze at, the company might still report a decent quarter. If a European bank faced the same loss, it would be severely crippled.
7. The U.S. is in recovery mode in many segments of the economy, including housing and loans.
Cramer took a call:
Best Buy (BBY) is a stock Cramer would stay away from.
It isn't so hard to figure out whether or not to get in on the Facebook (FB) IPO before Friday; a dramatic first day pop is almost a foregone conclusion, and Cramer would try to get as many shares as possible ahead of the IPO. There are 337 million shares issued with a range of $28-$35, but the price is likely to be much higher than $35, given the intensity of demand. Whether to buy the stock in the aftermarket (not something Cramer would recommend for an ordinary internet IPO), depends on the valuation and price. If FB is priced at $50, it is a buy, but if it rises to $80, it may be too rich, and Cramer would find other days besides Friday to buy it on a decline, although in such a case, investors will have to be patient.
Facebook has seen a 45% rise in revenue over last year and a 33% increase in users. Currently, 901 million people use Facebook out of 2 billion people online worldwide. By 2016, Facebook could have 1.5 billion users, which means almost everyone will be on Facebook. It is estimated that 25% of time spent on the internet is spent on Facebook, which means that Facebook might be even more revolutionary than Google (GOOG) was in the area of advertising. This is definitely a stock worth buying, but Cramer doesn't think an $80 price on Friday will provide a low enough basis, so fortunate are the investors who get in on the actual deal.
Cramer took some calls:
Checkpoint (CHKP) didn't make their numbers, and the stock should be avoided.
Pitney Bowes (PBI): the dividend is too high and is a red flag.
There has been a vicious decline in the price of gold lately, and Cramer would use the current low price as an opportunity to buy the yellow metal, which has been the best-performing asset class of the last decade. The SPDR Gold Trust (GLD), the proxy for gold which is Cramer's first pick, is down 1%, but most miners are down double digits. Randgold (GOLD), which has returned 2,310% in the last decade, is down 24% since the beginning of the year. The company has four mines in Africa and is opening a fifth in 2013. CEO Mark Bristow says the political instability is not as big a problem as many investors might think, since management is made up of nationals rather than expatriates. The company has increased production by 19%, but faces issues of production costs, which are partly mitigated by saving on fuel and reducing the use of diesel in favor of hydroelectric power. The mine that Randgold is scheduled to open has 20 years of resources which will cost $600 an ounce to mine. Mark Bristow doesn't think gold prices will decline much further, and indicated the volatility is due to uncertainty about the current state of the global economy. Cramer says Randgold is his main gold pick after GLD, and calls it a "growth gold stock."
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