Jim Cramer's Mad Money In-Depth, 1/8/08: Change of the Guards

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Tuesday January 7. Click on a stock ticker for more analysis:

StarBucks (SBUX)

Sometimes a company can be transformed by firing its CEO. Cramer took a look at four companies, Starbucks, Bear Stearns, Sallie Mae and Krispy Kreme, and analyzed effects the departures may have. Although Cramer has hated SBUX since February 2007, he was happy to hear CEO Jim Donald is being replaced by founder Howard Schultz. He is now confident that SBUX will make a comeback, in spite of its excessive number of stores and lukewarm ideas recently. He thinks the coffee giant's comeback story will be similar to that of McDonald's. Cramer would buy a quarter of a position in Starbucks now, another 25% in a week and the rest after the company reports in January.

Related: Todd Sullivan asks if the change of the guard at SBUX is too little, too late.

Bear Sterns (BSC), Merrill Lynch (MER), Goldman Sachs (GS)

There were many good reasons to be bearish on BSC, which fell from $172 to $71. Although CEO Jimmy Cayne has been replaced by Alan Schwartz, Cramer doesn't think BSC will be a buy any time soon because of its exposure to mortgages, and its troubled reputation and balance sheet. Cramer would consider MER, with its strong management, brand and retail network, as a better alternative to BSC. However, Cramer's favorite financial is still GS.

Related: Roger Ehrenberg says BSC is a solid firm sinking fast.

Sallie Mae (SLM), Krispy Kreme (KKD)

Cramer thinks the CEO dismissals at SLM and KKD will have no perceptible impact, since they are broken companies and not merely broken stocks. As more students opt for grants rather than loans and graduates default, Cramer said business at SLM is so abysmal he has decided to induct CEO Albert Lord onto his Wall of Shame. KKD, is "sinking no matter who runs it," says Cramer and remarked he wouldn't touch the stock with a ten foot pole.

Related: Rationale Research says SLM may be at a crossroads.

CEO Interview: John McGlade, of Air Products and Chemicals (APD)

John McGlade reported 55% of APD's business is overseas, and with the helium shortage, the company has been able to raise prices and increase production. Cramer once again recommended buying APD and predicted the stock could rise 25% with a Fed rate cut.

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Comments

[kkin365:]

A month or two ago, Cramer said the same thing re C -- that the stock would be up a couple of points when the then-CEO would leave. Well, he did leave, but the stock was hitting a multi-year low as of yesterday. So much for the role of a CEO in a large company.

2008 Jan 09 09:54 AM