Cramer's Mad Money - Disney Is a Marvel (12/8/09)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday December 8.

Disney (NYSE:DIS), Marvel Entertainment (MVL)

Cramer continued his "Invest in America" series with the Disney (DIS), a business icon and a symbol of American entertainment. CEO Bob Iger says the most important reform the government should undertake to create jobs is to lower the corporate tax rate. While Disney strives to keep most of its operations domestic, there is a great incentive to outsource, given the low tax rates abroad. Since America has among the highest corporate tax rates in the world, Iger thinks lowering corporate taxes is a very basic step towards reversing the trend of double-digit unemployment.

Concerning Disney itself, Iger says business is improving over last year; sales are not declining and advertising is looking stronger. Since Disney is a company that depends more on creative ingenuity than commodity prices, it is less vulnerable to certain types of market volatility. Intellectual property piracy and some decline in tourism in the current economic climate also pose challenges for the company.

Bob Iger was upbeat about Disney's recent acquisition of Marvel Entertainment (MVL); Disney can now benefit from a larger variety of fictional characters as well as living, breathing talent that can create new ways to entertain the public. Since the acquisition, Disney currently owns 18 brands worth more than $1 billion. Movies have been quite profitable, but Iger confesses that there is some risk involved with films, given the intense competition for the consumer's attention.

The mobile revolution will benefit Disney, and Iger noted promising growth in this area. He discussed the company's iPhone application for ESPN, and expressed his confidence that Disney will continue to amuse and entertain on screens of every size.

The Best Strategy: Macy's (NYSE:M)

Cramer dismissed the doom and gloom over the rising dollar and falling oil and gold prices as just another opportunity to buy good stocks at bargain basement prices. The best strategy in the current market is to buy great American companies, like Macy's (M) and Disney on declines. CEOs like Terry Lundgren and Bob Iger don't point fingers at the economy when there are problems, but roll up their sleeves and see what they need to do to ensure their companies stay competitive.

How Transports Move with the Market: UPS (NYSE:UPS), FedEx (NYSE:FDX), CSX (NYSE:CSX), Norfolk Southern (NYSE:NSC), JetBlue (NASDAQ:JBLU), Continental (NYSE:CAL)

Transports are usually a very efficient tell on the market, so it is no wonder that when FedEx (FDX) CEO Fred Smith said in March "We've seen the worst," his company and the rest of the market headed up a long march higher. Cramer also suggested investors heed Smith's prediction that FedEx will beat next quarter's estimates by 25 cents a share

Cramer said that while transports and related stocks such as FedEx, UPS (UPS), Norfolk Southern (NSC), JetBlue (JBLU) and Contintental (CAL) usually move in lockstep with the rest of the market, there are key divergent points. These stocks usually top first and then dip before other sectors. However, they tend to bottom at the same time as the rest of the market, as they did in March, before outperforming other stocks; transports have risen 59% since March while the S&P 500 has gained 36%. However, transports don't predict the trend, rather, they confirm it; “When you don’t know where you are, but you think you’re going higher,” Cramer said, “the transports tell you if you are on the right track.”

So if FedEx has so much upside, is it a buy? Cramer's pick is its competitor UPS (UPS) which has risen only 5% year-over-year compared to FedEx's 40% rise. Cramer also favors UPS's superior dividend yield of 3.1% compared to 0.5% and its more efficient cost structure.

Mad Mail: Costco (NASDAQ:COST), Wal-Mart (NYSE:WMT)

Cramer says he prefers Costco (COST) to Wal-Mart (WMT) because he thinks the former is going to increase membership at its stores and will see a dramatic increase in sales; "I bought my first chunk at $59 and change, and I hope it goes to $55, where I will buy more. Costco is the cheapest high-growth retailer, cheaper than Wal-Mart."


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