Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday May 31.
CEO Interview: Gregg Engles, Dean Foods (DF)
Dean Foods (DF) is the perfect example of a stock that is working in this environment. It is a purely domestic company that is thriving on lower commodity and fuel costs and has rallied 27% since the beginning of May. Cramer lauded Dean Foods' "phenomenal performance," and called it "the best turnaround stock of the era." He added that Dean Foods reported the best quarter he has seen since the beginning of 2012. Just a year ago, the company was facing high fuel costs and lower milk prices, but the situation has reversed; "We were dealt a tough hand, " admitted CEO Gregg Engles. The main driver of Dean Foods' upside is the milk-alternative business, including its White Wave All-Pro milk substitutes, organic dairy and Silk Brand plant milks. This area, a few years ago, produced 15% of the company's revenues and now is responsible for 31% of its revenues. While "real" milk volumes are soft, Dean Foods is winning on its diversification and concentration on healthier alternatives. "This business is on fire, and Dean Foods is worth more than its stock price," said Cramer.
With treasurys at a 10-year low, it is a wonder why some investors are running for false shelter into bonds. A better choice would be to invest in conservative stocks with high yields, like Honeywell (HON), 3M (MMM) and Wal-Mart (WMT). While some would be wary of 3M and HON because of European exposure, Wal-Mart is a domestic stock which may raise its dividend.
Cramer took a call:
McGraw Hill Companies (MHP), Apple (AAPL)
McGraw Hill Companies (MHP) is splitting up two divisions which never seemed to belong together: its financial division, Moody's and its textbook company. The financial company will be a growth stock and the textbook company will be a value stock. MHP has been a declining stock, but its textbook business might see an upside, as a new set of educational standards will increase demand for new textbooks, and since the company has made a deal with Apple (AAPL) to have textbooks on the iPad. The company trades at 12 times earnings with an 11% growth rate, and its divided segments are worth more separate than the company as a whole.
Wynn Resorts (WYNN)
What do investors do when analysts disagree? It helps to analyze the conclusions and to see which one is right; however, in some cases, both analysts can be right. This is the case of Wynn Resorts (WYNN), which received an upgrade from Goldman Sachs, but JPMorgan cut Wynn's numbers. The stock has been hit hard lately and has fallen 23% in a month over worries about a gambling decline and a slowdown in China. However, Goldman Sachs thinks these problems, along with present litigation, are baked into the stock price. Wynn is building a new casino in the hottest part of Macau, due to be completed by 2016, and it's hopeful that Wynn can pay a special dividend.
JPMorgan analysts are more concerned with near-term economic problems. There is a decline in VIP gambling, which makes up 40% of Wynn's revenues. The macro economic factors combined with lower gambling rates are too tough to ignore. Cramer's verdict is that, while Wynn is a solid company with competent management, it is not the stock to buy in the current environment. He thinks both analysts are right, but Goldman Sachs' bearish picture should not inspire buying a stock with a catalyst 4 years away. Cramer advised investors not to be in a rush to buy Wynn Resorts.
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