Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday July 24.
Barbie Beats The Boy Toys: Hasbro (HAS) and Mattel (MAT). Other Stocks Mentioned: Dreamworks Animation (DWA), Sony (SNE), Research in Motion (RIMM), Eastman Kodak (EKDKQ.PK), Radio Shack (RSH), Nokia (NOK)
Cramer pitted Hasbro (HAS) and Mattel (MAT) in a battle of the toymakers, with Mattel emerging as the winner. As the second half of the year begins, sales ahead of the holiday season are going to be a growing concern for the two companies. HAS and MAT have a lot in common, aside from their position as top performers in the same industry; both have similar multiples, yields and both delivered decent earnings. Mattel edges past Hasbro because it has more exposure to girls' toys, such as dolls, and, therefore, does not need to game the next big motion picture sensation. Girls tend to be loyal to their dolls and buy additional clothes and accessories for the same doll, while boys' tastes for toys tend to change with every new hot summer trend. A full 42.5% of Hasbro's toys are boy-oriented, and the company has tough comparisons to beat, with last year's Transformers hit. In addition, Hasbro has more exposure to board games, which are getting crushed by online competition. Some of Mattel's board games have themes adapted from online entertainment, such as its Angry Birds board game.
Mattel jumped 10% after its strong quarter, and although its revenue yoy was flat, its core brands showed strong growth. Hasbro delivered a 9 cent earnings beat, but revenues were down 11%; this is the second quarter in a row of revenue decline for Hasbro, which has slightly more exposure to Europe, 30% compared to Mattel's 25%. While Hasbro's yield is slightly higher, 4.1% compared to Mattel's 3.6%, both have very similar PEG ratios. Mattel trades at a multiple of 12.7 with an 8.5% growth rate, and Hasbro's multiple is 11.3 with a 7.4% growth rate. While their dividends and PEG ratios are quite similar, Mattel is the superior stock, based on fundamentals. Cramer would wait for a pullback before buying.
Cramer took some calls:
Dreamworks Animation (DWA) has not been doing so well. "I don't want you in the stock," said Cramer.
Sony (SNE), Research in Motion (RIMM), Eastman Kodak (EKDKQ.PK), Radio Shack (RSH) and Nokia (NOK) are examples of stocks that won't see a turn, and Cramer urged investors to resist the urge to bottom feed in these stocks.
Apple (AAPL), Eaton (ETN), ConocoPhillips (COP), Kinder Morgan Partners (KMP), Pfizer (PFE), Johnson & Johnson (JNJ), Altria (MO), Pepsi (PEP), Coca-Cola (KO), Procter & Gamble (PG), Cooper Industries (CBE), Eaton (ETN), Verizon (VZ), AT&T (T), Kellogg (K), WebMd (WBMD), Intuitive Surgical (ISRG), Under Armour (UA),
With the Dow down for the third consecutive session, Cramer would look for dividend stocks and special situations. Apple (AAPL), which got hit hard following its failure to beat estimates for sales and earnings, and after giving "hideous" guidance, is a special situation. Last week, Cramer warned that Apple's quarter was "transitional," although Apple management's citing weakness in Europe is something to take to heart. Still, the release of the new iPhone and iTV should be huge, and Cramer would buy Apple on weakness.
As Cramer has noted before, when stocks drop so that their yields rise to around 4%, there is often a kind of bottoming in the stock, because people want to hold onto it for its dividend. Eaton (ETN) is making a transformative acquisition of Cooper Industries (CBE), and now yields 4%. ConocoPhillips (COP) and Kinder Morgan Partners (KMP) yield in the 4% range, and should benefit from a bottom in natural gas. Supply is becoming less of a problem, since drillers have slowed down production, and recently, natural gas rose from $2 to $3.
Pfizer (PFE) was barely down after an unsuccessful trial of its Alzheimer's drug. Johnson & Johnson (JNJ) also has a stake in the treatment. Since both stocks yield above or around 3.5%, they might be worth buying. Altria (MO) is as good a dividend stock as it ever was, with its consistent yield raises. Verizon (VZ) reported a good quarter, but it wasn't considered good enough by The Street; Verizon could be worth buying. AT&T (T) is a strong dividend stock with some growth.
Defensive stocks, such as Pepsi (PEP), Coca-Cola (KO), Kellogg (K) and Procter & Gamble (PG) can be "pay to wait" plays when they start yielding around 3.5%. Utilities have run, so they may be more risky, but are consistent high-yielders.
Cramer took some calls:
WebMd (WBMD) is not a stock that Cramer likes; "There is nothing there for me."
Intuitive Surgical (ISRG) is a high multiple stock that "has to be perfect" to avoid a sell-off and have no economic sensitivity. Since it is levered to Europe, Cramer would avoid buying.
Under Armour (UA) has run up, and it is worthwhile to ring the register, because UA has a high multiple, and can be vulnerable to market volatility.
What agriculture stock is a "Buy" given the record-setting drought? Monsanto (MON), which makes drought-resistant and other genetically engineered seeds, has benefited from the lack of rain. The stock is trading less than 3 points off its 52 week high. However, according to its daily chart, the stock has a slight wedge formation that could signal a small pullback. Monsanto dropped just below its floor of $85 to $84.50, only to close the day above $85. Technician Tim Collins of The Street.com, thinks MON could fall as low as $80-83, and on that decline, he would buy the stock aggressively, because he predicts a long-term gain in the stock. In fact, Monsanto is one of Tim Collins' 5 favorite stocks expected to perform well at least until the end of 2013. The stock is trading at strong volume, and as long as the Relative Strength Index holds up, the stock could roar as high as $90 in the next month. Cramer noted that the correlation between Monsanto's price and the price of corn is becoming stronger. There might be a pullback in Monsanto if there is rain, but the stock's inverse head and shoulders pattern tells Collins that the stock could see $120-130 in the next 18 to 24 months, for a 54% gain.
CEO Interview: David Wenner, B&G Foods (BGS)
B&G Foods (BGS), the purveyor of favorite household brands, delivered a 2 cent earnings beat, and has given a 25% return since Cramer got behind it in May, particularly for its 3.9% yield. While revenues were a bit light, they were still up 14.8% yoy. CEO David Wenner noted that the decline of specific brands at BGS were half of those in similar categories among competitors, while the Cream of Wheat brand was up 4.9%. Cream of Wheat is finding its way onto the shelves of more dollar stores and convenience stores, and is appearing on the West Coast for the first time in a few states. Its instant varieties, particularly the chocolate-flavored Cream of Wheat, is gaining popularity and customer loyalty. Mrs. Dash has 80% of the market in salt substitutes. Wenner indicated that the company is looking to make another acquisition, and Cramer thinks BGS is a good stock for the current economic environment.
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