3 Victim Stocks - Cramer's Mad Money (5/7/08)

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Wednesday May 7. Click on a stock ticker for more analysis.

CEO Interview: Ray Milchovich , Foster Wheeler (FWLT)

Cramer says FWLT was unfairly punished on its conference call, and gave back its gain in spite of its strong earnings report. Ray Milchovich said the call focused on the company’s soft spot, its power business that accounts for just 9% of the company’s revenues. He said the problems in that segment are temporary and are based on delays due to environmental and financial concerns; “We believe that this is simply a moderation,” Milchovich said, “not a sea change or a cycle in the market.” Nevertheless, its power division had an “all-time record earnings quarter” and FWLT’s engineering and construction businesses “continue to be robust. The opportunity in the marketplace exceeds that which we and our competitors can serve.” Cramer said analysts acted as if the sky was falling on FWLT but “it isn’t.”

Schering-Plough (SGP) Cramer revisited his faulty call on Schering-Plough back in March when the stock was hammered as the result of almost “sensationalistic” coverage of a cardiology conference during which the company’s drug Vytorin was panned. However, nothing was said at the conference that wasn’t common knowledge, remarked Cramer. Nonetheless, the media, including the New York Times, had a field day with SGP and the stock plunged 26% in one day. So what was Cramer’s mistake? He admitted to having been greedy and staying in the stock after it reached its target price in the $30s. Instead, he decided to hang on and watched the stock drop to $14. However, SGP’s story might have a happy ending; CEO Fred Hassan has bought back stock, applied cost-cutting measures that could save the company $1 billion and is preparing for a strong pipeline of new drugs. Cramer would buy SGP.

CEO Interview: David Pyott: Allergan (AGN) As in the case of Foster Wheeler, AGN’s powerful quarter which beat consensus estimates in sales and earnings per share and “blew out the numbers in R&D” was obscured by the conference call during which the analysts concentrated mainly on AGN’s weak spot: domestic sales of Botox. Analysts chose to ignore AGN’s 23% increase in sales and its 15% earnings per share increase and focused on an area that comprises just 10% of the company’s sales. This doesn’t take into account that Botox sales are rising internationally at double the domestic rate. David Pyott says he is weathering the storm, adding “we just continue to deliver and perform, these things just iron themselves out.” Cramer says AGN is a buy at $52.

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Comments

[Jersey]

Who said timing wasn't everything, I bought SGP at 13 and change, ka ching, ka ching, ka ching

[RMGreenwald]

All of the noise around the cardiology conference was just that: noise, not substance. The fundamentals, prospects and pipeline didn't change for SGP, and Fred Hassan continues to be a solid leader who brought in a great management team that is leading a solid turn-around effort. The dramatic price drop was a golden opportunity to be greedy when others were fearful: I was already long SGP and added more to my position. Cramer should have done the same.