Cramer's Mad Money - Treacherous Tech (9/20/12)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday September 20.

Treacherous Tech: Microsoft (NASDAQ:MSFT), Intel (NASDAQ:INTC), Apple (NASDAQ:AAPL), Dell (NASDAQ:DELL), Hewlett-Packard (NYSE:HPQ), Micron (NASDAQ:MU), Advanced Micro Devices (NYSE:AMD), Texas Instruments (NYSE:TXN), Nvidia (NASDAQ:NVDA), Cirrus Logic (NASDAQ:CRUS), Broadcom (BRCM), Qualcomm (NASDAQ:QCOM), EMC (EMC), VMware (NYSE:VMW), Salesforce (NYSE:CRM), Yelp (NYSE:YELP), Facebook (NASDAQ:FB), Google (NASDAQ:GOOG)

Tech is "more treacherous than I have ever seen it," said Cramer. Even though autumn is usually the prime season of the sector, the shortfall is being seen in entire segments that were once winners. The semiconductor group used to be the strongest part of tech, but there just isn't the kind of enthusiasm there used to be, especially with the decline in PCs. Hardly anyone is excited about new announcements from Microsoft (MSFT) or Intel (INTC) anymore. "Right now, it's all about Apple (AAPL)." Dell (DELL) and Hewlett-Packard (HPQ) have nothing to talk about except how many people they have to fire. Micron (MU) and Advanced Micro Devices (AMD) are value traps, Texas Instruments (TXN) is struggling to make numbers, and Nvidia (NVDA) is a battleground.

Tech companies connected with Apple, tablets and smartphones are on fire. Cirrus Logic (CRUS) has rallied 170% for the year. Broadcom (BRCM) and Qualcomm (QCOM) can be bought. Big data plays EMC (EMC) and VMware (VMW) are also good. While Salesforce (CRM) is a great company, many are worried about its "nosebleed" valuation. Google (GOOG) is not too expensive, but Yelp (YELP), on the other hand, is too highly valued. Facebook (FB), after its hiccups, is actually interesting after a strong August and after CEO Mark Zuckerberg finally addressed the issue with mobile advertising.

Norfolk Southern (NYSE:NSC), Bed Bath & Beyond (NASDAQ:BBBY), Yahoo (NASDAQ:YHOO), Ford (NYSE:F)

When a stock you own gets slammed, should you run from it or buy more? That is what investors in Norfolk Southern (NSC) and Bed Bath & Beyond (BBBY) were wondering as both stocks got hit. NSC missed its numbers in the current quarter, mainly because of the major falloff in coal shipments. BBBY slowed in same store sales comps and downshifted from 5% growth to 3.5% growth. Both companies have solid balance sheets and decent fundamentals, but BBBY's decline is a buying opportunity and NSC's is not. Those who are bullish on coal believe the decline in the industry is temporary, and coal will look better as winter approaches. However, CEOs of utilities companies who appear on Mad Money comment again and again on the ways in which the EPA under the Obama Administration wants to punish the coal industry, and it is likely that there will be no new coal plants built in the U.S. In addition, natural gas prices are low enough to cause utilities to make the switch from coal to natural gas. Cramer doesn't think the problems with the coal industry are going to go away soon, and problems for coal spell problems for NSC, which derives a good portion of its revenues from transporting coal.

Bed Bath & Beyond's issues, however, are more temporary. Margins were compressed because of an acquisition that will be valuable to the company. With housing starts strong, BBBY should see upside with the comeback in housing. While technicians worry about the double top forming in BBBY's chart, Cramer would look at BBBY as a long-term investment and would buy the decline.

Cramer took some calls:

Yahoo (YHOO) does not have substantial growth, and until then it's "Bye-Bye Yahoo," and not "Buy, Buy Yahoo."

Ford (F) is a tale of two markets. The U.S. section of Ford is performing well, but Europe and Latin American sales are slow. "You can't own it," said Cramer.

Five Below (NASDAQ:FIVE), Dollar General (NYSE:DG), Fifth & Pacific (FNP), The Jones Group (NYSE:JNY)

Five Below (FIVE) has a similar concept to dollar stores, but everything at Five Below costs $5 or less rather than a dollar or less. The company had its IPO 2 months ago; it was priced at $17, opened at $26 and is currently sitting at $34. This is a 101% increase in two months, or a 31% gain for those who bought the stock in the after market. Cramer thinks FIVE investors should take some profits, but it makes sense to hold on to FIVE as a long term investor. The company is radically expanding its locations, with a a goal of 2,000 from its current number of 230. FIVE is increasing its store count by 26% this year. Cramer believes the company can continue to perform and would buy into weakness, not at its current level. A hint to how to find a pullback in FIVE was demonstrated by its quarter. Although FIVE beat consensus estimates, it didn't beat the so-called "whisper" number, or the number analysts really expected. FIVE's guidance was conservative, and the stock stumbled from $35 before it reported to $31 and recovered to $33. Now the stock is close to $34. The story of FIVE's brief stumble demonstrates the fact that investors looking for a buyable pullback in FIVE have to be quick on the draw, since it is not a stock that stays down for long.

Cramer took some calls:

Dollar General (DG) has had shares dumped but the stock has risen 14%. Cramer thinks the main sellers are private equity investors who planned to get out of the stock anyway, regardless of fundamentals. DG has been a remarkable performer, is just now moving into California, and would be a great stock to buy on weakness.

Fifth & Pacific (FNP), formerly Liz Claiborne, has come back, but investors who want to buy it should keep in mind they missed the bottom. Cramer prefers The Jones Group (JNY)

CEO Interview: Patrick Doyle, Domino's Pizza (NYSE:DPZ)

Cramer has been a fan of Domino's Pizza (DPZ) since it revamped its recipe, ramped up its advertising and got its internet business up and running. The stock rallied 90% in 2010, doubled in 2011, but for 2012, the stock has not been so hot, falling after DPZ issued a special dividend. The stock has rallied 15% over the summer and the fundamentals are still in place. Because 95% of DPZ's business is franchise-based, the company is not affected by fluctuations in commodities. Around 50% of DPZ's sales are outside of the U.S., and CEO Patrick Doyle said he is not worried about competition on the domestic front. The company just opened its 10,000th store in Istanbul, and Doyle noted that only 8 restaurant chains have 10,000 stores or more worldwide.

Domino's is extremely popular in Turkey, one of DPZ's fastest growing markets. The company is adding 100 stores in the next year in India, and Doyle thinks the store count in India could reach 1,000. DPZ is increasing its presence in France from 208 to a planned 850 locations. Doyle says Domino's is working in Europe as a trade-down play, and the only weakness he has seen was in Southern Europe. Cramer thinks Domino's continues to be "a winner."


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