Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Friday, July 11.
CR Bard (NYSE:BCR)
" In a time of sky high oil prices and high food prices, the only group that's semi-immunized is health care," Jim Cramer told viewers of his "Mad Money" TV show Friday.
Healthcare companies are the boring, safe, consistent companies no one cares about in a bull market, but when the tape runs red, their reliability become a whole lot more intriguing to the Street. "Big money managers can't hide in cash; they need to invest. The healthcare group is where they're headed," Cramer said. Cramer recommended CR Bard as the last in his series this week of favorite healthcare names. CR Bard is a medical equipment company, specializing in catheters for various uses, stents, guidewires and devices that help prevent the spread of hospital-associated infections. The stock has fallen from a high of $100 to $88 since last March, giving it huge potential upside. According to Cramer, CR Bard has many new products coming which will help propel its growth. The company also has got great businesses in devices that help prevent the contraction of certain healthcare, hospital-associated infections. Cramer noted that Bard now derives 10% to 15% of its sales from these new, "sexier" medical devices. With a 14% long-term growth rate, Cramer said big money managers will be lining up to invest their cash in CR Bard, and he told investors to get in now ahead of the trade.
For "Speculation Friday," Cramer reflected on the acquisition announced earlier this week of Rohm & Haas (ROH) by Dow Chemical (DOW). He said PPG Industries (PPG) could be the next possible takeover target. With a 3.8% dividend yield, Cramer said PPG is the safest way to speculate on a takeover. PPG shares are down 13% since just May 30, making it the perfect entry point, he said. Cramer praised the company's strong management and said they are committed to increasing shareholder value. With 53% of its sales overseas, Cramer said PPG is a safer stock than investors might think since it had only 25% of its sales overseas just two years ago. The company also has only 5% exposure to housing and only 15% exposure to the automotive industry. Cramer, a fan of PPG's aerospace and specialty products divisions, is also bullish on its recent acquisition to get into the alternative energy space. The company now derives 5% of its sales from coatings for solar cells and windmill blades. Cramer said PPG and its peers are incredibly cheap. If the company were given a more realistic multiple, Cramer said the stock should be worth $81 a share. "Even without a takeover, PPG is cheap," he said.
Freddie Mac (FRE), Fannie Mae (FNM)
"The speed in which Freddie Mac (FRE) and Fannie Mae (FNM) evaporated was just frightening," said Cramer. Cramer rolled out his own game plan to deal with the crisis. He said the administration should guarantee all debt from both companies and take 20% of the companies in warrants. By doing this, mortgages would become the new treasuries, and investors would scramble to buy mortgages and sell treasuries. He predicted the mortgage market would rally under this plan, which he said is not a bailout, with liquidity flowing back into the system. Furthermore, his plan could lower mortgage rates, stop the decline in housing and send bank stocks from bear to bull. Lehman would rally 15% and Wachovia and Bank of America would go up also.
Genentech (DNA), Eaton (NYSE:ETN), Johnson & Johnson (NYSE:JNJ), Intel (NASDAQ:INTC), VF Corp (NYSE:VFC), YUM Brands (NYSE:YUM), Coca-Cola (NYSE:KO), JP Morgan (NYSE:JPM), AMD (NASDAQ:AMD), IBM (NYSE:IBM), Microsoft (NASDAQ:MSFT), Merrill Lynch (MER)
Cramer recommended buying half a position in Genentech before the company reports on Monday and the other half after.
Cramer is bullish on Eaton which reports on Tuesday and says Johnson & Johnson is "probably the best story of the week." Cramer is no fan of Intel which also reports Tuesday, but would consider VF Corp, which has already indicated better-than-expected earnings.
Cramer said he'd be a buyer of YUM Brands ahead of the Olympics, but would wait until after its earnings are announced on Wednesday.
For Thursday, Cramer said he's bullish on Coca-Cola and might consider JP Morgan ahead of its earnings, but only if the markets get hit earlier in the week. He's bearish on AMD, IBM, Microsoft and Merrill Lynch, all of which also report on Thursday.
Katie McGinty, Pennsylvania's Secretary of Environmental Protection
Cramer welcomed Katie McGinty, Pennsylvania's secretary of environmental protection, to the show to discuss the state of oil and natural gas drilling, particularly in her state's oil shale regions.
McGinty said oil and natural gas are a huge natural resource that's a great economic opportunity for Pennsylvania. She said the state has plenty of water to support drilling, but her agency wants a better set of rules for drilling companies to follow. McGinty said that there are adequate water treatment facilities in place to handle the waste needs of increased drilling. In the past three years, her state issued approximately 25,000 oil and natural gas permits, and the Marcellus shale region has been granted 130 permits so far this year. Asked about the recent decline in coal output, McGinty said the shortfall has nothing to do with a shortage of coal, but rather with supply and demand pricing. Cramer continued to support the oil and natural gas drillers.
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