Smith & Nephew (SNN)
If the market is nothing more than a fashion show, the sector in style is healthcare, which is insulated from rising oil and prohibitive raw costs. Although Smith & Nephew has had a rough first half of the year, and has recently fallen 11%, Cramer sees a substantial upside. The company gets 37% of its revenue from orthopedic reconstruction and also has an endoscopy and wound care business. Smith & Nephew’s only competitor is Kinetic Concepts, and both companies form a happy duopoly. Cramer says SNN has been unfairly beaten because of the cost of its recent acquisitions: a Swiss orthopedic company called PLUS and BlueSky. Cramer thinks these acquisitions will pay off in the second half of the year.
While noise and rumor move other sectors, financials are dropping on the sounds of silence. Cramer says he is worried about the fundamentals of Citi, WB, WM and BAC, but none of these banks are making a peep. He would like to hear more from MER, FNM and FRE, but there isn‘t a word. The most deafening and dangerous silence of all, says Cramer, comes from the government, and he would at least like to hear a whisper of a policy concerning what may be done in the event of the next major bank failure, which he thinks is “around the corner.”
CEO Interview: Dan Dienst, CEO of Sims Metal Management (SMS)
Cramer was bullish on steel, which has been a strong sector until now when fears of falling demand due to higher prices are bringing down steel stocks. Cramer asked Dienst if the steel story is over, and the CEO replied he doesn’t sense the decline in his business, since the demand for steel continues to be “voracious.” The failing auto industry in the U.S shouldn’t hurt the company too much, Dienst added, because of overseas growth. Cramer recommends buying a steel stock, including Sims.
Cramer told one viewer that he is not willing to put GM CEO Rick Wagner on the Hall of Shame because Wagner could not have foreseen skyrocketing oil prices. He told another viewer that he is not worried that Obama will cut defense and would buy LLL.
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