Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday April 9.
The IPO Window Is Closing: La Quinta (NYSE:LQ)
"Thank Heavens, I think the IPO window is closing," said Cramer. This is indicated by the weak IPO for hotel company, La Quinta (LQ), which opened at $16 and change, lower than expected. The enormous pipeline of deals has overwhelmed the market, and it wasn't the fundamentals of this IPO that accounted for its lackluster opening. The stock managed to rise by the end of the day, and with 7% increase in revenue per room, it might be a decent buy. The market is seeing the most IPOs since 2007, and the recent IPOs, aside from a few, are the bottom of the barrel. Many of the IPOs that have had a pop have declined aggressively since. However, the end of the trend seems to be near, and this will be better for established stocks.
Cramer referred to "stock sage," Leo Tolstoy, concerning bullish and bearish markets, "All happy markets are alike. Each unhappy market is unhappy in its own way." With the Dow rising, the selloff "was stopped in its tracks," with research from "grizzled veteran" Stifel analyst, Jordan Rohan, who recommended buying Facebook (FB), with bullish comments about Yahoo (YHOO) and Netflix (NFLX). Cramer said Rohan called the bottom in growth stocks, as this group reversed, along with industrials following a bullish earnings report from Alcoa (AA). Once investors realized that much of the recent decline was caused by massive hedge fund selling, the buyers poured back in. Stocks were assisted on their march higher by Fed minutes, indicating that interest rates won't be raised dramatically in the short term.
Cramer took some calls:
BP (BP) is a buy. Management has done remarkable things with the dividend. It might be a controversial stock, but it is likely to go higher.
Spirit Airlines (SAVE) is a $4.2 billion company, trading at $57, and it is benefiting from consolidation in the airlines. Cramer refused to recommend an airline stock until the recent consolidation that has limited ruinous competition. Because of the mergers, ticket prices have gone higher, and Spirit appeals to the traveler who wants to limit travel costs. Spirit is an unusual airline, and is not like the major players. It is a small-fast growing airline that is an ultra low cost carrier while still turning a hefty profit.
It is growing its fleet aggressively, and expects to take significant market share. SAVE is a frugality play, with the average domestic ticket price at $102. SAVE has been profitable consistently, even with the economic downturn and periods of high oil prices. SAVE uses its planes more efficiently than other airlines, gets more flying time per day and offers more seats than the competition.
The company eliminates expensive "extras" for value-conscious consumers. "It is the best, most disciplined operator in the industry." SAVE beat earnings estimates and has risen 32% since November and 149% since Cramer got behind it 13 months ago. It trades at a cheap multiple of 16 with a 25% growth rate. SAVE is Cramer's top pick in the $50-$100 range, and while it is cheap, Cramer would wait for a pullback to buy.
Cramer took some calls:
American Airlines (AAL): Airlines are still a hated industry, and as long as that is true, they are still worth buying.
Advance Auto Parts (AAP): The average auto is 11.5 years old and needs maintenance. These stocks should go higher.
CEO Interview: Jim Morgan, Krispy Kreme (KKD)
Krispy Kreme (KKD) was beating numbers and was a Wall Street darling, until it reported a disappointing quarter in December and sold off 20% in one day on lackluster guidance. Some said KKD was priced to perfection going in to the quarter, but a month ago, KKD disappointed again, declining sequentially for the first time in 3 years, and management did not comment clearly on why same store sales declined. KKD is a strong brand and is expanding overseas. The stock gained 54% since Cramer recommended it for speculation last year.
CEO Jim Morgan admitted that the explanation of the same store sales issue on the call was more complicated than it should have been and added, "I've never felt better about the company." Morgan said that he is feeling better long term about the beverage side of the business, which was a concern in the past. The company has been affected by inclement weather and has challenging comparisons, but Morgan still feels KKD will have positive comps for the year. Overseas, the brand is "carrying itself magnificently... and we are picking up the pace domestically, too." Cramer said, "this sounds like an opportunity. I would stay with Krispy Kreme."
CEO Interview: Gary Evans, Magnum Hunter (MHR)
The hottest turnaround play in the natural gas and oil industry is Magnum Hunter (MHR). The company weathered its balance sheet, execution and accounting issues and has put its house in order. Management reported a 92% increase in production last year and it is forecasting a 146% increase for 2014. The stock has risen 28% since Cramer spoke to CEO Gary Evans in November. Cramer thinks Magnum Hunter is "the fastest growing small to medium independent oil company." Evans discussed the company's high quality acreage and improvement in infrastructure. Magnum Hunter is a first mover in many regions, said Evans, and the company is increasing the pipeline. The company is selling non-core assets to get "honed in on the primary acreage" to prepare for "phenomenal growth." "Magnum Hunter pulled it off," said Cramer, "and it is not done."
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