Cramer's Mad Money - Upside Surprise Party (11/14/12)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday November 14.

Upside Surprise Party: Cisco (NASDAQ:CSCO), PetSmart (NASDAQ:PETM), Home Depot (NYSE:HD), Coca-Cola (NYSE:KO), General Mills (NYSE:GIS), ConAgra (NYSE:CAG), Verizon (NYSE:VZ), Aeropostale (NYSE:ARO), Abercrombie & Fitch (NYSE:ANF), Tesla Motors (NASDAQ:TSLA)

The time bomb is ticking for the fiscal cliff fiasco, and it seems that time is no longer on the side of those who want to compromise. The impending doom accounts for the sell-off in the averages on Wednesday. Cramer thinks this is a “No pain, no gain” market where investors should buy high-yielding and recession-proof stocks with the knowledge that they will almost certainly dip in the near term. Cramer compared the current fiscal cliff dread with the debt-ceiling issue last year; stocks tumbled 19%, but those who bought on declines saw an eventual upside in dividend and defensive stocks.

Cramer dedicated Wednesday’s Mad Money program to stocks that delivered upside surprises, but failed to rise higher and might have even fallen following successful earnings reports; Cisco (CSCO), PetSmart (PETM) and Home Depot (HD) delivered upside surprises or solid numbers but failed to rise significantly. Cramer would put Coca-Cola (KO), General Mills (GIS) and ConAgra (CAG) on the stock shopping list, since these defensive stocks will likely get snatched up and raw costs are declining. Verizon (VZ) has fallen from $47 to $42 and yields 5%. Cramer would buy some now and pick up more as the stock price drops and the yield rises.

Cramer took some calls:

Aeropostale (ARO) is not a buy on Abercrombie & Fitch’s (ANF) uptick, because the latter's success was due more to short selling and low expectations than to strength. Cramer says teen retailers are “mind-numbingly” difficult to game.

Tesla Motors (TSLA) doesn’t have solid earnings.
GNC Holdings (NYSE:GNC)

GNC Holdings (GNC) is another stock that delivered an upside surprise, but had little to show for it in terms of stock price. The company delivered a 3 cent earnings beat with revenues up 15.5% and raised guidance. However, the stock declined 10% since its earnings upside. One reason is that the stock ran up 34% ahead of the quarter. Another reason is that there is concern about the effect a change in GNC’s Loyalty Card program will have on its gross margins. GNC used to charge customers $15 for the card, and now the card is being given away for free. However, Cramer thinks these worries are unfounded, since the new card has already been launched, and GNC is seeing increased sales thanks to the new Loyalty program, and not declines. GNC derives 60% of its revenues from Loyalty cardholders, so any improvement in the program will have a positive impact on GNC’s bottom line. The other issue was that same store sales increased 9.8%, but not quite as much as The Street expected. A final “hair” on GNC’s quarter is its secondary offering, but Cramer thinks these negatives do not form a compelling argument to stay away from GNC; on its current 4% drop, it is definitely worth buying, especially since it has a multiple of 13 and a 22% growth rate.

CVS Caremark (NYSE:CVS). Other stocks mentioned: Walgreen (WAG), Express Scripts (NASDAQ:ESRX), Five Below (NASDAQ:FIVE), Michael Kors (NYSE:KORS)
CVS Caremark (CVS) delivered an upside surprise with a one cent earnings beat, revenues up an impressive 12% and raised guidance. The company’s pharmacy benefit managing division, Caremark, saw operating earnings up 19%. Same store sales rose 4.3% above expectations of a 3% increase. In spite of the strong results, the stock fell 8%. A few reasons for the decline include: Warren Buffett’s selling his stake in the company, macro economic worries affecting sales and poor data from competitors Express Scripts (ESRX) and Walgreen (WAG). However, the bitter feud between Express Scripts and Walgreen has driven CVS’s market share gains. Concerning the macro situation, the poor economy and Obamacare should not impact CVS negatively. Cramer would buy CVS before its upcoming analyst meeting.
Cramer took some calls:

Five Below (FIVE) is the kind of stock fiscal cliff worries are taking apart. The stock has doubled, and investors are likely to take gains.

Michael Kors (KORS) gave a strong conference call, but its multiple is too hefty.


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