Cramer's Mad Money - How Growth Stocks Trade Together (6/6/12)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday June 6.

Chipotle Mexican Grill (NYSE:CMG), Panera (NASDAQ:PNRA), Monster Beverage (NASDAQ:MNST), Ralph Lauren (NYSE:RL), Starbucks (NASDAQ:SBUX), Ulta (NASDAQ:ULTA)

Ulta (ULTA) reported an impressive quarter that brought up the stocks in its cohort. However, this isn't the beauty and personal care cohort, but the growth sector. Cramer discussed the fact that growth stocks have their own sector, at least from the point of view of money managers. When a stock with a high multiple, like Ulta at 46, and a high growth rate report strong earnings, they are likely to bring up similar stocks. Last Friday, Cramer urged investors to watch other growth stocks if Ulta would report a good quarter, and after Ulta reported revenues up 47%, a comparable sales increase of 10% and announced it would radically increase its store count, other momentum stocks rose on the news; Chipotle Mexican Grill (CMG) roared 9 points, Panera (PNRA) was up 3 points, Monster Beverage (MNST) rose $1.32 and Ralph Lauren (RL) saw a gain of $2. With Ulta up 46% for the year and 7% on Wednesday, Cramer would wait for a pullback to buy, but Ulta's case is an object lesson on how growth stocks trade as a sector.

Cramer took a call:

Starbucks (SBUX) was lower after announcing an acquisition. Cramer would buy SBUX with the caution that it might not go higher next month, but is likely to rise substantially by next year.

Snap On (NYSE:SNA), AutoNation (NYSE:AN), Dick's Sporting Goods (NYSE:DKS), Home Depot (NYSE:HD), SPDR Gold Trust (NYSEARCA:GLD), Dollar General (NYSE:DG), Brown-Forman (BFA)

Wednesday was a "bizarre" day amid the doom and gloom of Europe. Stocks which gauge the domestic economy were up; Snap On (SNA), a barometer for the auto industry is in "raging bull mode." AutoNation (AN) says it sees car sales up 45%. Credit Suisse upgraded several homebuilders, and Dollar General (DG) reported a strong number and an increase in its buyback. Home Depot (HD) had an analyst meeting in which management sounded bullish. Ulta (ULTA) reported a "monster" quarter. However, as good as some of the news was on Thursday, without reform in Europe, there are going to be more down days for stocks ahead.

Cramer took a call:

Cramer's favorite gold play is still SPDR Gold Trust (GLD). He would sanction buying gold miners as a trade only.

Brown-Forman (BFA) reported a fantastic quarter. Cramer is bullish on the stock.

CEO Interview: Nick Akins, American Electric Power (NYSE:AEP)

The EPA is squeezing the coal industry, and utilities are picking up the bill, or having to pass it on to consumers. Tightening regulations are impacting American Electric Power (AEP), a major player in electricity transmission and power generation. The company has been a large consumer of coal, but has recently had to close down 5 of its 21 coal plants because of EPA's stricter regulations on coal. The cost of bringing the rest of the plants in line with new rules is steep, and AEP is increasing its use of natural gas instead of coal. CEO Nick Akins discussed the challenge his company is facing, and thinks the new regulations come at a poor time, when there is so much uncertainty about the domestic economy. To replace a coal scrubber at a plant costs $1 billion, and the expense is passed on to the consumer, who might face a 30% increase in utility bills. Akins believes AEP is up to the challenge posed by the EPA, but acknowledges that tough decisions are being made. Cramer thinks AEP is a good stock to own in the current environment, given that it is a domestic stock and pays a 4.7% yield.


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