Cramer's Mad Money - The Gap Is Back (5/29/12)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday May 29.

The Gap (NYSE:GPS) Is Back

The Gap (GPS) was once a powerhouse, but in the last few years, at least until last year, it seemed to have lost its way. Revenue declines were dramatic, and same store sales were flat or negative for 8 straight years. Under the leadership of new CEO Glen Murphy, the stock is up 49% over last year. The CEO effected the turnaround by keeping goals modest, expectations low and finding the best people for the job. Murphy focused on getting to know what the customer needs and wants, and cut excess stores. While gross margins have been down because of cotton prices, the reversal downward of commodities will be a tailwind for the company. GPS only has 6% European exposure, is growing dramatically in China and has raised its dividend.

Alcoa (NYSE:AA), Wells Fargo (NYSE:WFC), Toll Brothers (NYSE:TOL), Post Holdings (NYSE:POST), Siemens (SI)

Good stocks are being pulled down on European woes once again. Industrial stocks that should be higher, like Alcoa (AA), which reported a good quarter, have been hit with worries over Europe. Restaurants and retailers are benefiting from low gasoline prices, but it hardly seems to matter. News from Wells Fargo (WFC) and Toll Brothers (TOL) have indicated a turnaround in housing. However, full confidence in the domestic economy can't be sustained without a comeback in employment.

Cramer took some calls:

Post Holdings (POST) has been optimistic and is making more money even though present earnings haven't been so hot. The stock is "dirt cheap" and has an "exciting story."

Siemens (SI) is not a "buy" simply because it is a European stock, but it is a good company.

CEO Interview: Mike Thaman, Owens Corning (NYSE:OC)

Bullish news from Toll Brothers has indicated a comeback in housing, and this is good news for Owens Corning (OC), which gets 64% of it sales from building materials. Its recent quarter was tough, but guidance was positive, and CEO Mike Thaman looks forward to a strong second half of the year. He said the company needs to see a more positive pricing environment and improvement in insulation and composites. Thaman noted a few signs of a housing turnaround, including lower inventory and positive data from homebuilders. OC has instituted a buyback, and Thaman says he may consider raising the dividend.

While Cramer is cautious about OC, since it has underperformed and has some European exposure, he encouraged investors to do their homework and come to their own conclusions about OC.


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