Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday October 16.
CEO Interview: Patrick Doyle, Domino's Pizza (DPZ)
Domino's Pizza (DPZ) has had a shaky year, but is headed back. The stock fell after issuing a special dividend in March, but bottomed in June and has come right back up. In September, the company launched a deep dish pizza. CEO Patrick Doyle says this is significant, because 20% of pizza sales in the U.S. are deep dish, so the market is huge. DPZ has 10,000 stores in 60 countries. Although the growth in store count domestically was slow, it is still ramping up overseas, with around 500 locations opening this year. The company has revolutionized online pizza ordering, and now 40% of its sales are through the internet. However, there is also an increase of people actually visiting DPZ's stores, 30% of customers, so the company is giving many of its locations a facelift. DPZ reported a strong quarter, with a 2 cents earnings beat, a 3.3% increase in same store sales in the U.S. and a 5% rise in same store sales overseas. The stock has risen 300% since Cramer got behind it in 2010 and 38% since he last had the CEO on Mad Money in June. When asked about dividends, Doyle says DPZ has been giving a 30% return to shareholders, and will continue to raise the dividend.
Since the stock has risen significantly, by 7.6% after its earnings, Cramer would not chase DPZ, but would look for a decline to buy, since he is bullish on the stock.
Although there was plenty of pessimism going into earnings season, the Dow rose 128 points on Tuesday. Cramer thinks that while it is important to take into account negativity, like lackluster employment and slowing down in Europe and Asia, investors should not ignore positive data. Retail numbers were strong, manufacturing data improved slightly after months of declines. Apple (AAPL), which had been heading down, seems to be rebounding, as sales are growing for the iPhone 5. While auto sales are slow in Europe, they are roaring in the U.S. Construction and infrastructure demand is rising at home, if not overseas. Cramer says it is not a good idea to look to employment alone and buy or sell based on the macro numbers, but to concentrate on companies that are doing well and will continue to grow.
Cramer took a call:
Johnson Controls (JCI) has a new acquisition, but Cramer would take advantage of the uptick in the stock to sell, because he thinks the company will report poor earnings.
Cramer has long been a fan of Linn Energy (LINE), which yields 7.1% and has given investors a 218% gain since he got behind it in 2009. The company has sizable assets, aggressively makes acquisitions and has tremendous cash flow. LINE is 100% hedged until 2016, which means that investors don't need to worry about natural gas prices or the price differential between Brent and WTI. However, Linn has one problem; since it is an MLP, those investors who have Linn as part of an IRA face higher taxes, because for IRAs, the distributions of MLPs are taxed differently than dividends, and often at a higher rate. To solve this problem, Linn Energy created LinnCo (LNCO) a regular corporation that has units of Linn Assets. LNCO issues a regular dividend, which is taxed like any other dividend for an IRA. While there are tax advantages to owning an MLP, this advantage does not extend to MLPs owned for IRAs. Cramer recommends buying LNCO, which yields 7.2% as an ideal dividend stock for an IRA.
Cramer took a call:
First Solar (FSLR) was a stock Cramer was bearish on, before it bottomed in the low teens. However, the stock has run up again, and "its future seems cloudy." Cramer is still bearish on FSLR.
Where Is The S&P 500 Heading?
When it comes to the chart of the S&P 500, Cramer listens to Carolyn Boroden, of fibonaccciqueen.com. She has the "hot hand" in predicting the path of the S&P 500, and was right in her former prognostications. Boroden called the bottom in the S&P 500 at 1324 in June, and since then, the index headed up to 1464. She rightly said that the S&P 500 would pull back, and it did, but she felt it was a buyable pullback. The average has been range-bound, but Boroden thinks that the S&P 500 will run up, based on Fibonacci ratios of time cycles and measured moves. She sees a floor between 1419 and 1427, and predicts it could ultimately go to 1519. However, if the S&P 500 falls below 1396, all bets are off.
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