Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday July 30.
The biggest bull market is housing, said Cramer. The weak pending homes number was caused by low inventories, not a dearth of demand. The so-called "shadow inventory" has been worked through, and realtors are begging banks for more foreclosures. Homebuilders have rallied so much that they are too high to buy right now: PulteGroup (PHM) said that orders were up 32%, and the stock soared 18% in one session. Standard Pacific (SPF), a stock that hasn't moved for ages, was up 5% on its report that orders rose 45%. Wells Fargo (WFC), which owns 30% of the mortgage business, discussed the turn in housing.
Since homebuilders have run so much, Cramer focused on a stealth housing play. USG (USG), with a specialty in gypsum wallboards, ceiling tiles and other building materials, is a dominant player in the space. It missed earnings by 15 cents, and the stock dropped 18%. However, expectations were inflated, and the stock had risen 89% year to date going into the quarter. Cramer thinks USG is suffering from high expectations, since prices for wallboard rose 18% and its gross margins expanded an amazing 629 basis points. Warren Buffett, who said he wanted to buy up homes, owns 16% of USG. The company is a domestic security play, with 93% of sales coming from the U.S. Cramer thinks USG is a great buying opportunity.
Cramer took some calls:
Beacon Roofing (BECN) is a good company, but will have tough comparisons, given the storms last year. Cramer would wait for a disappointment from these comparisons, and would buy the stock lower.
So far, optimistic talk about Europe has caused a few rallies, but talk can bring stocks up only so far. Cramer thinks a rally can only be sustainable if there are concrete plans of action. This week, the Fed will meet, and Cramer says Americans need to hear a real economic strategy from Bernanke. When the European Central Bank meets, there has to be a detailed policy on how to reverse the decline in Europe. The jobs report on Friday might trump any good news earlier in the week or any upsurge in stocks. Cramer would lighten up on stocks that have risen significantly, but don't have the fundamentals behind their moves.
Cramer took some calls:
Apple (AAPL) is an inexpensive stock, and Cramer thinks the iPhone 5 is going to be "huge." Google (GOOG) has a proven track record, and is also good to buy; "Everything I don't like about Facebook (FB), I like about Google."
Cliffs Natural Resources (CLF) is "the hardest stock in the world to own right now." It is down 36%. Cramer believes that coal use is going to be phased out in the U.S., especially if President Obama is re-elected.
Commodity plays are great to own when the economy is strong, but if macro news isn't good, these stocks are the first to fall. Cramer highlighted companies that are taking control of their destinies and are transcending their reputations as cyclical companies. Dupont (DD) is developing and engineering new products that are not dependent on the health of the economy. Their inventions deal with healthcare, agriculture and safety, and are products people buy even in a tough economy. Dupont yields 3.45% and has a multiple of 12. Cramer thinks Dupont is undervalued, because people still think of it as a cyclical company, and is a buy.
PPG Industries (PPG) used to focus on plate glass, but the company has diversified aggressively into higher value proprietary chemicals, optical glass and quick-drying paint. PPG is spinning off the last part of its commodity chemical business, and now 90% of its revenues come from specialized materials. The company reported a good quarter. It yields less than DD, and has a higher multiple of 14. Cramer thinks it is a great company, but not as compelling a buy as Dupont.
Dow Chemical (DOW) is a well-managed company, but it reported a shortfall and gave downbeat guidance. Dow's problem is that it is too levered to commodities and hasn't made significant transitions like Dupont and PPG have. It has a strong yield of 4.4%, which provides a floor for the stock and pays investors to wait, but Cramer thinks the wait for a turn in Dow will be too long, and he would not buy the stock in the current environment. However, those who are bullish on the U.S. economy and believe there will be growth in the near future should buy Dow, which will have the most upside of the three if there is an economic turn for the better.
Antares Pharma (ATRS) produces self-injected treatments that are increasing safety and yielding positive results. On news of its arthritis treatment, the stock soared. However, since ATRS has doubled over the last 6 months, it seems the good news is already baked in. Cramer would ring the register.
Leggett & Platt (LEG) is a diversified manufacturer of engineered products. It is number one or number two in almost all of its product categories, and 77% of sales are from North America. The company beat earnings estimates, and earnings per share rose 16% year over year. The company raised guidance and has increased its dividend for 41 consecutive years. Cramer likes LEG, but would wait for a decline to buy.
Las Vegas Sands (LVS) is up 50%, but Cramer thinks there are too many casinos right now. He thinks it is okay but won't "pound the table" for the stock.
American Campus Communities (ACC) is Cramer's favorite collegiate housing REIT. While it hasn't done as well as Cramer would like, it is up 13% and is still "pretty good."
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