Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday September 12.
Invest in Stocks, Not Economies: CVS Caremark (CVS), Walgreen (WAG), Express Scripts (ESRX), Apple (AAPL), JPMorgan (JPM), Boeing (BA), Schlumberger (SLB), Electronic Arts (EA), Navistar (NAV), SPDR Gold Trust (GLD)
Cramer critiqued "top down analysis" which, while "not fatuous," places too much emphasis on macro data when investing. Cramer believes the best strategy is to find stocks, particularly those with high dividends, that are at least somewhat immune to the economic cycle: CVS Caremark's (CVS) success has nothing to do with the economy, but it is taking share from Walgreen (WAG) because of its ongoing war with Express Scripts (ESRX). Apple (AAPL) announced a new phone cycle, which will drive up earnings for the company, regardless of macro factors. JPMorgan (JPM) will likely see a brighter 2013, especially with the turn in the mortgage business. Boeing (BA) might be somewhat vulnerable to the fiscal cliff, but this problem is nearly canceled out by the strength of the Dreamliner and the aerospace cycle. Oil is in an upward trend, and no company is going to benefit from that more than Schlumberger (SLB).
Cramer took some calls:
Electronic Arts (EA) may lose some profitability in its transition to digital.
Navistar (NAV) is a battleground stock and has some red flags, including its balance sheet. Cramer would stay away.
SPDR Gold Trust (GLD) will benefit from higher costs of gold production, increasing demand and the likelihood that more euros will be printed.
The transition from desktop to mobile has huge implications for the online advertising space. The trend was to blame for the decline of Facebook's (FB) stock since its disastrous IPO, although CEO Mark Zuckerberg expressed confidence about mobile advertising in a recent statement. Millennial Media (MM) connects advertisers and publishers and takes a 40% cut of ad sales. MM is the second largest online ad player after Google (GOOG). The stock shot up from $13 to $25 on the first day of the IPO, only to fall to $9. After a strong quarter, the stock has rebounded to $13.
CEO Paul Palmieri explained that the migration to mobile is not a problem for his company, which is uniquely mobile. While huge, expensive desktop banner ads might be a thing of the past, Palmieri sees the potential for even greater clicks for mobile ads, especially since there is only one mobile ad per "page." As consumers increasingly choosing mobile, it is inevitable, suggested Palmieri, that mobile ads will become more profitable. 4G will enable more media-rich ads, and Apps rather than search, are going to be the name of the game from now on.
Cramer is bullish on Millennial Media.
Hepatitis C is a disease that affects 170 million worldwide, and given the fact that a complete cure has yet to be found, there is a kind of race to come up with the ideal Hepatitis drug. Many companies are involved in developing these treatments, and the leader seemed to be Bristol Myers (BMY), until a patient died of a heart attack during a clinical trial. Cramer's new choice is Gilead (GILD) for the Heptatits story (even though he still likes BMY, in general). Gilead has been the leader in developing HIV treatments, and since the HIV virus and the Hepatitis virus behave similarly, Gilead has used its expertise in treating HIV for Hepatitis. Its new drug, in Phase III trials, is proving to be effective and may increase life expectancy among patients, but lacks the side effects seen in other drugs.
Gilead acquired Pharmasset last year, and many believed the company overpaid for the acquisition. However, the stock is up from $36 last November to $60 currently, partly thanks to Pharmasset. Gilead's Hepatitis drug could be available by 2014, and could produce $9 billion in revenue ten years from now. GILD trades at a multiple of 13.5 with a 16.6% growth rate. Cramer would wait for a pullback before buying, and emphasized the importance of buying GILD before the Hepatitis drug data comes out.
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