Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday September 10.
The retail sector has been hot, and the strongest performers have a knack for style and knowing what consumers want. Cramer discussed 5 "fashionistas" of retail:
1. Michael Kors (KORS) is up to $53 from its IPO price of $20 last December. This luxury player focuses on accessories, and reported a 14 cent earnings beat with an amazing 70.7% increase in revenues and a 24.2% rise in same store sales. KORS raised its upside guidance. The stock is down because of a secondary offering, and Cramer urged viewers to get in on the offering or buy it after.
2. Gap (GPS) spent years in the fashion wilderness, but is finally getting its groove back, and is up 34%. Gap is getting a sense of color and fit and is ramping up its advertising budget. The company beat earnings, raised guidance and saw a 9% rise in same store sales when analysts were expecting a mere 5.4% gain.
3. Nordstrom (JWN) is a high quality retailer known for its excellent customer service and its broad selection of footwear. Same store sales grew 21%, roundly beating analyst estimates of 11%.
4. Urban Outfitters (URBN) is another comeback story, and beat earnings by 9 cents on an 11% rise in revenue. Inventory was down 5%, and gross margins improved. Cramer suggests buying URBN before its analyst day on September 21.
5. Lululemon (LULU) is a controversial stock that has rocketed up 12% on rapid growth and store expansion. LULU reported a 15% rise in same store sales, and it is not just a clothing company, but a lifestyle and a culture. While the shorts hound the stock and bring it down with rumors, Cramer would use these declines as buying opportunities.
Cramer took some calls:
Francesca's Holdings (FRAN) has a departing CEO, and Cramer wants to find out more about the reasons for the departure before opining on the stock.
Ulta (ULTA) reported a terrific quarter, but is a risky stock. Cramer would buy with deep in the money calls, because it tends to get buffeted by the shorts.
Hope versus The Facts: Goldman Sachs (GS), Morgan Stanley (MS), JPMorgan (JPM), Freeport McMoRan (FCX), Caterpillar (CAT), Cummins (CMI), 3M (MMM), FedEx (FDX), AT&T (T), Verizon (VZ), Coca-Cola (KO), Costco (COST), Wal-Mart (WMT), VFCorp (VFC), Toll Brothers (TOL), Lennar (LEN), Sherwin Williams (SHW), Owens Corning (OC), Stanley Black & Decker (SWK), Intel (INTC), Hewlett-Packard (HPQ), Google (GOOG), Apple (AAPL), Amazon (AMZN), Green Mountain Coffee Roasters (GMCR), Kraft (KFT)
After lackluster news from China, stocks fell toward the end of Monday, but not as dramatically as expected. Bears are saying that the stocks that rallied went up on hope only. Goldman Sachs (GS) and Morgan Stanley (MS) rose on optimism for a solution in Europe. While Cramer conceded this point for these two stocks, he thinks the rally in JPMorgan (JPM) has legs because of the underlying fundamentals of the company. Bad news might be good news for stocks related to China; the negative economic data might be seen as a sign that the Chinese government will take action on the economy, which explained Freeport McMoRan's (FCX) rally up 8 points. Industrials like Caterpillar (CAT), Cummins (CMI) and 3M (MMM) are also "hope" trades.
Some believe that natural gas prices might have bottomed, and although there is little evidence for this, this hope has helped natural gas stocks. Transports were slowing, but FedEx (FDX) is back up to where it was before it pre-announced negative earnings last week.
However, not all stocks that are rising are propelled only by hope, but some are moving up on cold hard facts. High dividend stocks like AT&T (T), Verizon (VZ) and Coca-Cola (KO) are solid go-to names on fear of volatility. Retail, led by Costco (COST), Wal-Mart (WMT) and VFCorp (VFC), is seeing strength on increases in sales and earnings. Housing-related stocks have been on the move with rising house prices; Toll Brothers (TOL), Lennar (LEN) and housing-related stocks such as Sherwin Williams (SHW), Owens Corning (OC) and Stanley Black & Decker (SWK) have made substantial moves.
Tech bears point to weakness in PC-related stocks such as Hewlett-Packard (HPQ) and Intel's (INTC) dismal pre-announcement to suggest selling stocks in the sector. However, the negativity is trumped by the continued strength in Apple (AAPL), Google (GOOG) and Amazon (AMZN). Cramer noted that these three should be bought on declines as long-term investments.
Cramer took some calls:
Cramer defers to Herb Greenberg's case that Green Mountain Coffee Roasters (GMCR) has too many red flags to be considered a safe investment.
Kraft (KFT) is a solid company that is practicing UPOD: Under Promise Over Deliver.
Many companies can unlock value most effectively by splitting or spinning off businesses; Marathon (MRO) and Conoco-Phillips (COP) sold of their refining businesses, and now the stocks are sitting at 52 week highs. Hess (HES) has been a laggard lately, and is seen as poorly-managed. However, recent sales of assets to fund drilling show that the company's management is willing to make radical moves to improve the business. Cramer pointed out the value of Hess' oil and gas assets worldwide would bring the stock to $61 per share, a 14% premium over the current stock price. This doesn't even take into consideration Hess's refining business at all. Cramer predicts the sale of Hess's refining segment could mean an 11% gain for the stock, and that would be just the first phase. In the case of Hess, breaking up would be good to do.
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