Cramer's Mad Money: Buffett's Good Housekeeping Seal of Approval (2/26/10)

by: Miriam Metzinger

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

CEO Interview: Michael Ward CSX (NYSE:CSX)

CSX (CSX) seems to be sending mixed signals. On the one hand, weakness in coal caused the company to announce a worse-than-expected quarter in January with the lowest price increases in two years. On the other hand, CSX increased its dividend by 9%. So how is business at CSX?

Michael Ward said the story at CSX changed suddenly with a 5 million ton coal order from China. While China was once a major exporter of coal, it is now a hungry importer with a strong need for metallurgical coal used for steel production. Ward says CSX is also benefiting from strong movement in steel, fertilizer and ethanol (which is a "great business for us".) He is not seeing much improvement in lumber yet, because housebuilding is still in decline.

Ward called Buffett's purchase of Burlington Northern (BNI) a "good housekeeping seal of approval" for rail stocks and the economy in general. The acquisition was the "biggest ever bet on the railroad industry" which has "great solutions for the economy" such as energy independence and a cure for traffic congestion. Ward complained that government regulations are costing the rail industry dearly and are providing little benefit to society; "there is a tendency to want to regulate the industry more than there was a few years ago." Ward said it is unfair that rails should be penalized since they are a fuel efficient and environmentally friendly form of transportation.

JP Morgan (NYSE:JPM), Google (NASDAQ:GOOG), Apple (NASDAQ:AAPL), Wellpoint (WLP), United Health (NYSE:UNH)

Cramer wondered why the stocks that were "the most picked on this week" were performing so well on Friday. In spite of the "endless attacks on financials" JP Morgan (JPM) was up $1. Wellpoint (WLP) ramped 4 points the past week and United Health (UNH) performed well in spite of the President's "healthcare telethon" which will probably not have tangible results.

The upturn in two crucial sectors, tech and financials, and the rally of three "generals," Apple (AAPL), JP Morgan and Google (GOOG) indicate a trend Cramer noted in his years as a hedge fund manager - the end-of-the-month mark up. As one month ends and the new month begins, money managers are desperate to perk up their portfolios by driving up chief stocks. As the "crummy housing number" brought down stocks, they were driven up again by money managers wanting a strong February finish, according to Cramer's theory.

Deckers (NASDAQ:DECK), Gap (NYSE:GPS), TJX (NYSE:TJX), Home Depot (NYSE:HD), Sears (NASDAQ:SHLD), Macy's (NYSE:M), Saks (NYSE:SKS), True Religion (NASDAQ:TRLG)

Notwithstanding the dire predictions for 2009's holiday retail season, the retailers reporting are telling the same story: "The fourth quarter was magnificent for retailers." Many of these companies were prepared for the worst and experienced the best. Deckers (DECK) with its highly successful Ugg boots brand, saw a $0.94 earnings beat, and the the Gap's (GPS) positive outlook was accompanied by a dividend increase (Cramer's one beef with the Gap is that it should keep focusing on the dividend rather than stock buybacks). Success in Home Depot (HD), Macy's (M) and Sears Holdings (SHLD) signal a potential turnaround in housing, while sales were strong in apparel stores Saks (SAKS) and True Religion (TRLG).

Cramer thinks the bearish journalists should apologize for keeping so many investors on the sidelines with their scary headlines about retail. “I think they owe us an explanation,” he said.

Google (GOOG), First Solar (NASDAQ:FSLR), Joy Global (JOYG), Biogen Idec (NASDAQ:BIIB), Celgene (NASDAQ:CELG), Gilead Sciences (NASDAQ:GILD), Charles Schwab (NYSEARCA:SCHB)

While Google (GOOG) is "showing strength" Cramer thinks this performance might be somewhat artificial, since money managers have a vested interest in moving up the stock to improve their funds' performance. Concerning First Solar (FSLR), Cramer said, "It's been a miserable week, don't you think it deserves a $1 bounce?" Joy Global (JOYG) has been rallying because things in China are turning out to be not as bad as they seemed initially. Cramer prefers Celgene (CELG) and Gilead Sciences (GILD) to Biogen Idec (BIIB). Concerning Charles Schwab (NYSE:SCHW), Cramer noted "retail brokers can't get any traction because interest rates are so low. That's where they make their real money."

In general, Cramer said the market is "thin" and "there is nothing really going on."


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