Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday November 7.
Cramer discussed what buys and sells have changed following the election. Coal stocks would have seen an upsurge had Romney won, but Cramer would sell them even after the recent decline, because, given Obama’s anti-coal stance, they will go even lower. For those who think coal should be bought because of China, a better play would be a rail; Union Pacific (UNP) is best-of-breed. Defense stocks will likely go lower, so Cramer would do some trimming of these positions. Commodities might not do as well under Obama, and while oil stocks have fallen, some of them might bottom and could be buys, like Chevron (CVX) and ConocoPhillips (COP). After an Obama victory, some are worried about HMOs, which have dropped, but Cramer thinks Wellpoint (WLP) and Humana (HUM) may be “holds.” Banks would not necessarily have done better if Romney had won; in fact, Cramer thinks Romney would have fired Fed Chairman, Ben Bernanke, and this move would have been bad for financials.
Cramer recommends MLPs like Linn Co (LNCO), packaged goods and liquors like Johnson & Johnson (JNJ), Procter & Gamble (PG) and Diageo (DEO) that have strong international business, and Cabela’s (CAB), which will do well in the cold weather.
Chicago Bridge & Iron (CBI) is not a buy, since Cramer would stay away from infrastructure stocks.
Magnum Hunter (MHR) has caught a substantial gain, and Cramer would take profits.
With the decline of the Dow by 313 points after the election, Cramer explained the selloff in terms of how easy it is for a broker to tell clients to sell stocks when the near future looks dicey. Many people thought that Romney would win, and when it became clear the President would be re-elected, there was widespread panic about tax issues and the fiscal cliff. A broker’s first priority is preserving capital, and second on the agenda is capital appreciation, so many brokers were telling clients to sell so they could re-position their holdings post-election.
Ahead of the fiscal cliff, Apple (AAPL) is a sell, according to Cramer, because investors want to take the gain before higher taxes kick in. Dividend stocks may seem less attractive, given the very real possibility that taxes on dividends might double. It is a good idea to take gains in stocks that have moved dramatically, particularly in the retail sector. Gold might be a better buy than ever. Master limited partnerships are a good addition to a non-IRA portfolio. Those who are investing as part of an IRA, however, need to worry less about taxes in the immediate term.
VirnetX (VHC) is up big on its intellectual property lawsuit with Apple, but Cramer doesn’t see the stock moving up much higher unless Apple pays VHC a royalty or if VHC issues a special dividend.
Eli Lilly (LLY), Merck (MRK) and Pfizer (PFE) all have strong pipelines and are good antidotes to the fiscal cliff. LLY often looks like it is “falling apart, but that is the time to buy it,” said Cramer.
With the $1.2 billion purchase of Safety-Kleen, a strong quarter and a huge cleanup operation after Hurricane Sandy, Clean Harbors (CLH) has plenty of potential for upside. The stock rose $1.90 following its earnings report, with a 91.3% growth in its incineration business and a 15% rise in its industrial services sector. The company was reluctant to issue guidance, because the scale of the post-Hurricane Sandy clean-up cannot yet be forecasted with any certainty. The stock has risen 76% since Cramer got behind it in 2010, and is up 10 points following its acquisition of Safety-Kleen.
CEO Alan McKim discussed the clean-up operation in areas hit by Hurricane Sandy. There are 700 Clean Harbors staff on the scene providing logistics support, generators, fuel and clean-up work. McKim says the refinery business is very strong, and many refineries are investing in making their plants larger and more complex. The rise in the landfill business is due to the boom in oil and gas drilling and the need to dispose of waste from these projects. Cramer asked McKim if he is concerned that an Obama victory might mean harsher FDA regulations against fracking and drilling, and McKim responded that if the government can come up with reasonable, moderate guidelines, business should not suffer.
Clean Harbors may be a buy on a decline since “most companies don’t have this kind of expertise or opportunity.”
CEO Interview: Dr. Phillip Frost, Opko Health (OPK)
Opko Health (OPK) is a speculative biotech that produces diagnostic tests that save money, time and lives by catching diseases early. While Opko has the “FDA Russian roulette” to deal with, it has 6 different products, each one a potential billion dollar opportunity. While its prostate and Alzheimer’s tests are in early stages of development, CEO Dr. Phillip Frost has a track record of strong performance, and has sold 2 small pharma companies at a substantial premium. The fact that he owns 40% of Opko reflects confidence in the company.
Dr. Frost discussed Opko’s Vitamin D deficiency tests, which may potentially generate $2.5 billion in sales. The company’s prostate cancer test is cheaper and more efficient than existing tests with fewer side effects. It is scheduled for potential FDA approval for 2013. Cramer likes Opko, but cautioned that it is a very long-term speculative play.
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