Cramer's Mad Money - Zipcar's Pain Is Hertz's Gain (6/11/12)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday June 11.

Hertz (NYSE:HTZ), Zipcar (ZIP)

While, in many cases, a small, rapidly growing company might have an edge over a larger peer, thanks to a unique product or service, in the case of Zipcar (ZIP) and Hertz (HTZ), the tortoise beats the hare. Zipcar (ZIP) is a stock that might have peaked, and was winning in the industry with its car sharing service, which allows customers to rent cars by the hour. However, there is nothing proprietary about this service, and with larger fleets of cars, Hertz and Enterprise now have their own by-the-hour car rentals. Zipcar has fallen 43% since it came public last year and is down 22% so far this year. Worse, ZIP is seeing a deceleration of its membership growth, which is at 25% compared to 55% the previous year. It may be the case that ZIP has already filled the niche, and its best days are over; this is ironic, since it has only now begun to be profitable after 12 years in the business.

Meanwhile, Hertz is the leading car rental service at airports, but is diversifying beyond this area and is taking market share from competitor, Enterprise, and is increasing its non-airport locations by 12% this year. The company also rents industrial equipment, and this business generates 15% of the company's revenues. There is talk that Hertz is making a bid for competitor Dollar Thrifty. While 35% of HTZ's sales are from overseas, its business in Europe is stable and it is growing in Brazil and China. The company beat earnings by 5 cents a share with a 10.2% increase in revenues. It is worth buying Hertz, which has a multiple of 8 and a growth rate of 12%, rather than ZIP, with a rich multiple of 29 and growth prospects that might not meet expectations.

When Will We Know The European Crisis Is Over? Stocks mentioned: Bristol-Myers (NYSE:BMY), Verizon (NYSE:VZ), AT&T (NYSE:T), CurrencyShares Euro Trust ETF (NYSEARCA:FXE), iPath DJ-UBS Copper Total Return Sub-Index ETN (NYSEARCA:JJC), Kellogg (NYSE:K)

The Dow sank on Monday on dissatisfaction with Spain's bailout, which seems to many to be nothing more than a band-aid. However, Verizon (VZ), AT&T (T) and Bristol-Myers (BMY) were strong performers on Monday. As volatility in Europe persists, there is likely to be instability ahead for stocks. Cramer outlined 5 signs that might indicate an end to the crisis:

1. When there is actual capital invested in troubled banks and countries, and not just loans.

2. When gold has a sustained move. Gold spiked briefly on Monday, only to fall back down.

3. When the euro, as measured by the CurrencyShares Euro Trust ETF (FXE), gains strength and moves to 130. Currently, FXE is at 124.

4. When bond yields go down and prices go up.

5. When copper, as measured by the iPath DJ-UBS Copper Total Return Sub-Index ETN (JJC), moves up substantially. Copper measures economic growth, and the lack of growth in Europe is as big a problem as its debt.

Cramer took a call:

Kellogg (K) missed its quarter and is in the penalty box until it shows strong performance.

Coke (NYSE:KO) and Pepsi (NYSE:PEP), ConAgra (NYSE:CAG), B&G Foods (NYSE:BGS)

For a long time, at least from the point of view of The Street, Coke (KO) "was it." Now, Pepsi (PEP) is the stock to buy. The very things that were working for Coke and against Pepsi have switched, and now Pepsi's headwinds have become tailwinds. KO was the preferred stock because of its 80% overseas exposure and its focus only on beverages, which kept it more insulated from commodity costs. With raw materials declining and Europe in the doldrums, Pepsi, which has a large snack segment, will benefit from lower grain prices and the fact that it has only half of KO's European exposure. Since KO's stock has performed better than Pepsi's, KO's yield is also lower. The 40% international exposure Pepsi has is not so much in ailing Western Europe, but in Russia, China and India, where its Mountain Dew product outsells colas. Pepsi's management is cutting costs and investing more in advertising and product development. Cramer got rid of his charitable trust's KO holdings, one of its longest-held positions, in favor of Pepsi.

Cramer took a call:

ConAgra Foods (CAG) doesn't have the growth Cramer wants to see or compelling brands. For brands, growth and yield, Cramer prefers B&G Foods (BGS).

Chart Industries (NASDAQ:GTLS), Westport Innovations (NASDAQ:WPRT), Caterpillar (NYSE:CAT), Royal Dutch Shell (NYSE:RDS.A)

When Westport Industries (WPRT), which makes technology for natural gas engines, announced a deal with Caterpillar (CAT), the stock surged 32%. However, Chart Industries (GTLS), which makes actual equipment and storage tanks for liquefied natural gas [LNG] has only risen 5% since the announcement. Even more bullish news for Chart was that Royal Dutch Shell (RDS.A) is planning to build natural gas fueling lanes along the interstate. The increase in natural gas fueling stations should go right into Chart's bottom line. While 58% of Chart's sales are from outside of the U.S., this is an advantage, since overseas customers are willing to pay up for natural gas, and GTLS is a great play on the exportation of natural gas. The stock is down 13% since April, but the company beat earnings, reported a backlog up 35% and has a record level of orders. Cramer thinks Chart is a buy on current weakness.


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