Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday July 16.
Heinz (HNZ) is a popular defensive stock with a 3.7% dividend, but one segment is not such a great defense. HNZ's frozen food category has been slowing, and is the main culprit for the company's lowered guidance. Frozen foods have been shown to be the most cyclical and the most vulnerable to the economy of any other food category. A 9% price increase on HNZ's frozen potatoes sent consumers to cheaper, knock-off brands. An analyst from Barclays suggests that HNZ would be wise to spin-off or sell its frozen foods division to concentrate on growth in its stronger areas. While the company has not discussed this plan, it has spun off stale segments before, with considerable success. Getting rid of its frozen food business would create value and could increase revenue growth by 4-5%.
While government statistics show a decline in retail sales, news from individual companies is contradicting this data. Target (TGT), Wal-Mart (WMT) and Costco (COST) are all hitting 52 week highs. Auto companies are seeing a rise in domestic sales: General Motors (GM) reports a 16% increase, while Ford's (F) sales are up 7%. Financials are surprisingly strong, with better than expected numbers from Citigroup (C), JPMorgan (JPM) and Wells Fargo (WFC). JPM's scandal seems to be behind it, and WFC has become the largest and most aggressive lender in the U.S. with 30% share of the nation's mortgage market. Its refinancing business is up 43% from the first quarter and its loan growth has been 31%. Loans have been strong, but defaults are not increasing. Cramer would look at how companies are performing for a cue on the economy, not at government numbers.
Cramer took some calls:
Yahoo (YHOO) has a new CEO, Marissa Mayer, but Cramer said he won't opine on the CEO or the stock until he has done some research.
Gannett (GCI) had a good quarter and it's managed well.
With the fight against obesity as a long-term trend, investors may wonder what is the better sports club stock: Life Time Fitness (LTM) or Town Sports International Holdings (CLUB). Life Time has more locations than CLUB, but fewer members. LTM might be nearing saturation and is facing competition. LTM, however, is free from competition concerning pricing, because it targets a wealthier demographic that values premium service over low prices. LTM generates revenues not just from membership, but the premium services and daycare it offers at its facilities. LTM has a revenue growth of 11.6% and 5.4% same store sales versus just 5.6% revenue growth and 4.5% same store sales for CLUB. LTM has a multiple of 14 with a 16% growth rate compared to CLUB, whose multiple is 15.6 and has a 10% growth rate. Cramer thinks LTM is the clear winner, but neither stock should be bought before it pulls back.
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