Cramer's Mad Money - Stability Is Not Enough (10/26/09)

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Includes: AAPL, AMZN, CHK, EQT, GOOG, INTC, LMT, MNRO, MRVL, NOC, RRC, XTO
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday October 26.

Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), Amazon (NASDAQ:AMZN), Marvel (NASDAQ:MRVL), Intel (NASDAQ:INTC)

"Our business is stabilizing, albeit at lower levels."

That has been the catchphrase of this earning season, and contains within it good news and the bad news. While this may have been music to the ears of investors when the Dow was at 8,000, at 10,000, a "stabilizing" business is not enough, and the "lower levels" comment may indicate a coming decline. Cramer thinks the Dow's current level of 10,000 is unsustainable unless companies indicate that business is accelerating; Apple, Google, Amazon, Marvel and Intel have been discussing concrete improvement. Tech is out in front, but other sectors are going to be left behind if they don't report growth; "I fear the market will soon stabilize, too,” Cramer said, “albeit at lower levels than where we are at this very moment.”

CEO Interview: Rob Gross: Munro Mufflers (NASDAQ:MNRO)

Cramer said Munro's (MNRO) earnings were a "genuine beat and raise" and was pleased to see the stock up 18% after he recommended it in May as a play on closing auto dealerships. The stock rose to $34, but fell back to $31, and Cramer would set a price target for the $32-$34 range, or even higher. Rob Gross says as smaller competitors are stalled, Munro has tremendous growth potential. Cash for Clunkers did not adversely affect Munro's business, and the company's tire sales continue to increase.

The Battle between Northrop Grumman (NYSE:NOC) and Lockheed Martin (NYSE:LMT)

While many sectors are stumbling, defense is standing firm, but not all defense stocks are created equal. Cramer compared Northrop Grumman (NOC) to Lockheed Martin (LMT). Lockheed beat estimates by 22 cents per share, but revenues were off by 3%, its backlog declined 3.5% and outlook was less optimistic than analysts expected. Lockeed Martin's pensions are costing the company dearly and Cramer doesn't see the problem ending anytime soon. The government is shifting away from heavy war machinery and towards electronics and intelligence technology, which is Northrop Grumman's specialty. NOC was awarded $10 billion in contracts and an increase in orders which brought its backlog up to $71.5 billion. All of NOC's divisions saw growth, and Nothrop Grumman's multiple is at 8 while its growth rate is 12%.

Cramer is bullish on NOC; “Northrop Grumman is the better stock and the better company. Hands down."

Pennsylvania Governor Ed Rendell: Chesapeake Energy (NYSE:CHK), XTO Energy (XTO), Range Resources (NYSE:RRC), EQT (NYSE:EQT)

Governor Ed Rendell explained in one word the reason for his decision not to tax natural gas: jobs. It's surprising that natural gas has been such a hard sell in Washington, given the fuel's potential to revolutionize the domestic economy; the state of Pennsylvania alone has enough natural gas reserves to rival an OPEC nation. If all federal vehicles used only natural gas, dependence on foreign oil would be reduced substantially, and the employment situation would be dramatically improved. The main obstacle is the coal lobby which pushes "clean coal" in spite of doubts about the efficacy of the technology. Natural gas produces 50% fewer emissions than coal and 30% fewer emissions than oil.

Cramer thinks the issue of natural gas touches on "the biggest themes we've got going right now" (unemployment and alternatives to foreign fuel) and his picks in the space include Chesapeake Energy (CHK), XTO Energy (XTO), Range Resources (RRC) and EQT (EQT).

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