Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Monday, August 11.
When the Price is Right - Jones Apparel (NYSE:JNY), Wal-Mart (NYSE:WMT), Martha Stewart Living Omnimedia (NYSE:MSO)
A new idea for purchasing stocks - It pays to buy stock in companies that recently reported better-than-expected earnings. The catch here, though, is that the strategy only works if you get in at the right price. So while earnings season has just passed and we know who the big earners were, most of these names are all up big, meaning they can’t be bought right now. Cramer will be sharing his picks all this week on Mad Money, and providing the right entry point. Tonight he put a spotlight on Jones Apparel. Jones reported 20 cents per share for the second quarter, beating Wall Street expectations by 8 cents. However the stock is up 2% to $18.74 just today, so Cramer recommended waiting for a dip to $17. Why does he like Jones so much? First, the company left the department store business at the top, selling Barney’s NY for $840 million. Jones also made a great deal with country music star Taylor Swift to sell her branded clothing and merchandise in Wal-Mart starting next spring. Jones will have its own products in Wal-Mart, too, and the two companies are in talks to bring the merchandise to Canada. Those who doubt the potential a deal with Wal-Mart need only look as far as Martha Stewart Living Omnimedia whose stock is starting to move because of the deal, Cramer said. This stock type is a Cramer call: a great buyback (worth 20% of market cap) and a 3.1% yield. Plus a great management team in CEO Wes Card and Chief Financial Officer John McClain. Jones is a buy if the stock drops to $17.
CEO and President Fred Fowler - Spectra Energy (NYSE:SE)
As natural gas prices have come down, any stock with even the slightest exposure seems to have fallen out of favor with Wall Street. But a company like Spectra Energy which makes most of its money pipelining natural gas to market, isn’t as levered to the commodity price as you’d think. That’s what CEO and President Fred Fowler told Cramer Monday. Sure, a higher price entices explorers to dig more and Spectra wouldn’t want natural gas to drop too low because it could hurt demand, but beyond that the company is, for the most part, unaffected, Fowler said. Fowler conceded to Cramer that their natural gas exposure is probably enough to prevent any kind of earnings upside surprise next quarter. But natural gas has a bright future, Fowler said. Since it has the cleanest carbon footprint of any fossil fuel, natural gas should come into its own soon enough. “When climate really becomes an issue and gets on the table, which it will after the election,” Fowler said, “it has to play in the hands of natural gas.” Fowler hasn’t yet figured what the retail model will be if natural gas becomes the go-to fuel for automobiles, but Spectra will be there to make sure fueling stations can get it. “That’s exactly what we do,” he said. Cramer said he’s bullish on Spectra Energy, especially for the dividend yield and the company’s ability to generate cash.
Biotech is a Theme for the Week – Onyx (NASDAQ:ONXX), Genentech (DNA), ImClone (IMCL), Amgen (NASDAQ:AMGN), Eli Lilly (NYSE:LLY), SGX Pharma (SGXP), ViroPharma (VPHM), Sanofi-Adventis (NYSE:SNY), Bristol-Myers (NYSE:BMY), Teva Pharma (NYSE:TEVA), Barr (BRL)
Cramer’s first pick is Onyx Pharmaceuticals. This $2.2 billion firm and its great cancer franchise might make a ripe takeover target for Roche-Genentech, where a euro-backed company picks up one backed by the weaker American dollar. Biotech has been the best performer in the market so far this year with Genentech up 45%, ImClone up 50% and Amgen up 37%. Cramer believes the trend will continue. Biotech did well the last time banks were in crisis. Low inflation makes these companies future earnings more valuable. Democrats love biotechs. People are willing to pay up for expensive drugs. There are six potential takeovers in the works Eli Lilly is buying SGX Pharma. ViroPharma is going after LevPharma. Sanofi-Adventis bidding for Acambis. Bristol-Myers making a move on ImClone. Roche wants the part of Genentech it doesn’t already own. Teva is looking to acquire Barr. And lastly, the fall season is usually filled with medical conferences and drug approvals, both great catalysts for biotech stocks.
“We should still want biotech,” Cramer said, “and I think Onyx fits the profile of what we’re looking for exactly.”
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