Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday March 25.
The "What, Me Worry?" HMOs: WellPoint (WLP), UnitedHealth (NYSE:UNH), Humana (NYSE:HUM), Aetna (NYSE:AET), Cigna (NYSE:CI). Other stocks mentioned: GlaxoSmithKline (NYSE:GSK), Ariad Pharmaceuticals (NASDAQ:ARIA)
There was plenty of nail biting over how the HMOs would cope with Obamacare, but in fact, the sector is red hot, and the stocks have seen impressive gains. There were worries about reimbursements, coverage for new patients, especially those with pre-existing conditions and taxes. Reimbursements from the government are not as low as feared, the number of healthy patients signing on makes up for those with pre-existing conditions and tax expenses are successfully being passed on to the customers. Cramer would consider buying UnitedHealth (UNH) or WellPoint (WLP), but only on a pullback, likes Aetna (AET) at its current level, thinks Humana (HUM) has run too much and has less upside than the others and believes Cigna (CI) is the laggard in the group, but even it has climbed 30% so far this year.
Cramer took some calls:
GlaxoSmithKline (GSK) is an interesting proposition for a diversified portfolio.
Ariad Pharmaceuticals (ARIA):"The market is starting to recognize that companies that never make money are not good ones" Cramer said. ARIA is a "bit dicey," when there are plenty of healthcare companies making money.
Value Matters: Caterpillar (NYSE:CAT), United Rentals (NYSE:URI), Joy Global (NYSE:JOY), Johnson & Johnson (NYSE:JNJ), IBM (NYSE:IBM), Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), Schlumberger (NYSE:SLB), Celgene (NASDAQ:CELG). Others stocks mentioned: Best Buy (NYSE:BBY), Alcoa (NYSE:AA)
In this market, value actually matters again. Momentum stocks have been selling off, and value stocks are being bought aggressively. Caterpillar (CAT) is up 8.5% so far this year. CAT has been an underperformer and has disappointed the last two quarters. The turn in non-residential construction may be a boon for Caterpillar, as United Rentals (URI), which has Caterpillar as a major client, is seeing orders increase dramatically. Joy Global (JOY) has had a 3% gain, which validates news that coal is bottoming. Growth in the trucking industry will also help CAT.
Johnson & Johnson (JNJ) has the cleanest balance sheet and the highest growth rate of all of the pharmas, but it had not moved since its successful earnings until recently. IBM (IBM) saw a 3.64% gain, even without any love from Wall Street analysts. IBM trades at a multiple of only 10 and is transitioning to the cloud. Microsoft has a multiple of 14 and a yield of 3% and is a value play to watch along with Apple (AAPL) which is having a stealth rally. Celgene (CELG) seems to have bottomed and is a biotech that is cheaper than the major pharmas. Schlumberger (SLB) is among the finest oil companies and is offering a rare discount, since the stock does not often see dramatic declines.
Cramer took some calls:
Best Buy (BBY): The expectations are so low that it can go higher.
Alcoa (AA) has a pattern; it reports, gets hit and rebounds. Cramer would sell some and buy it back when it declines. This sector is coming back.
Phillips-Van Heusen (PVH) is down 14% for the year, thanks in part to the harsh winter. PVH beat earnings estimates by 1 cent, revenue came in a bit light, with a 25% increase yoy, but guidance seemed positive. While Calvin Klein jeans had been a drag on the stock in the past, CEO Emmanuel Chirico said "We will see a big turnaround in Calvin Klein the second half of the year." One indication that this will happen is that the order books are strong in Europe and the North America. The Tommy Hilfiger brand is particularly strong in Europe, while Calvin Klein is selling well in Asia. While the spring has been soft so far, Chirico expects to see some pent-up demand from the bitter winter and thinks a upside for PVH will be "second half driven." Business is better at J.C. Penney (JCP) which translates into more sales for PVH, since Chirico says his company has "big initiatives" with JCP. Cramer thinks PVH is a buy.
With news of the economy picking up, investors moved out of biotech stocks and into cyclicals. Cramer consulted the technical analyst Bob Lang of explosiveoptions.net and TheStreet.com to try to find a bottom for biotech.
The daily and the weekly charts of the IBB seem to show contradictory pictures. The daily chart shows a huge drop which placed the IBB into oversold territory. IBB has gone too far, too fast as it sank beneath the 50 day and 100 day moving averages; Lang thinks the IBB could be headed for a dead cat bounce of 10-14% upside before declining again. However, if the IBB holds at that level, it might go higher.
The weekly chart shows the decline as a temporary dip in a long-term uptrend. The decline seems so dramatic because the IBB had, up until recently, been in overbought territory. The other times the IBB sank quickly from overbought to oversold, it provided a buying opportunity. While there is no telling how long this rotation out of biotech will last, Cramer would buy Celgene (CELG) (after adding a position for his charitable trust on Tuesday), Gilead (GILD), Regeneron (REGN) and Biogen Idec (BIIB) on the way down.
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