Cramer's Mad Money - One Of The Highest Quality Companies In The World (8/14/14)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday August 14.

UPS (NYSE:UPS) Is One of the Highest Quality Companies In The World. Other stock mentioned: American Airlines (NASDAQ:AAL)

UPS (UPS) is nearly 10 points off its high because of selling following the last quarter. Cramer thinks it has a great long-term story and has been excessively punished because of geopolitical concerns and investor dissatisfaction with management's investing in the company. When management lowered guidance, the stock sold off.

However, the reasons why guidance was slashed were positive. It plans to spend more money in growing its business. It has an unexpected increase in demand, and so more spending is required. Cramer's charitable trust has been buying UPS. When management spends to improve, that is a sign of confidence in the business. It sells at a multiple of just 17 with a 2.8% dividend. Its historic multiple has been around 22. Its domestic package revenue increased by 5% and consumer shipments were the strongest in years. UPS has less overseas exposure, with the U.S. making up 62%, but its overseas segments were strong. UPS is "one of the highest quality companies in the world." The company has an analyst meeting in November, and Cramer would buy the stock prior to that; now is a good time, while the stock has declined.

Cramer took some calls:

American Airlines (AAL) is still pausing, but with oil going down, it might not be paused for long. AAL is still affected by global crises, but when these mitigate, the stock should rise.

A Kinder, Gentler Bull Market: OmniVision (NASDAQ:OVTI), Trulia (TRLA), Zillow (NASDAQ:Z), OpenTable (NASDAQ:OPEN), Priceline (NASDAQ:PCLN), Monster (NASDAQ:MNST), Coca-Cola (NYSE:KO). Other stocks discussed: Six Flags (NYSE:SIX), Cedar Fair (NYSE:FUN), SeaWorld (NYSE:SEAS), Achillion Pharmaceuticals (NASDAQ:ACHN), Ford (NYSE:F).

The Dow gained 62 points Thursday. Cramer thinks the market is being relatively merciful, given the number of things going wrong in the world. OmniVision (OVTI) has some of the best technology in its industry, but the stock is volatile. The company caught a bid, and the stock rose 15%. The company beat its quarter in May, and the stock rose, but Cramer was worried about recommending it. The bid seemed to come out of nowhere.

Trulia (TRLA) is being bought by Zillow (Z). OpenTable (OPEN) was also a stock Cramer was concerned about recommending. Priceline (PCLN) bid for OpenTable and the latter stock rose significantly. Family Dollar (NYSE:FDO) was a dicey retailer, but is being bought by Dollar Tree (NASDAQ:DLTR) and the news of the Kinder Morgan (NYSE:KMI) consolidation has helped the market. Cramer recommended Monster Beverage (MNST), because he thought it would be taken over by Coca-Cola (KO). Monster was downgraded, but on Thursday, Coca-Cola announced it was buying a 16% stake in the company.

Oil is having one of the worst runs; geopolitical turmoil usually sends oil up, but recently, it has been going down. Small biotechs, which the Fed chair Janet Yellen warned against, are doing well, and food companies being bought even if they report bad earnings, because of the desire for dividend protection.

Cramer took some calls:

Six Flags (SIX) is good, but Cramer prefers Cedar Fair (FUN), although it didn't report a strong quarter. It has a good dividend. Cramer would not buy SeaWorld (SEAS) on weakness; it is tanking.

Ford (F) is stalled on the geopolitical worries. Cramer would stay long.

Achillion Pharmaceuticals (ACHN): Cramer would take some profits, let the rest run and stay in it because of the number of takeovers in biotech.

4 Hot Latin-Themed Restaurant Stocks: Chipotle Mexican Grill (NYSE:CMG), Jack In The Box (NASDAQ:JACK), Fiesta Restaurant Group (NASDAQ:FRGI), El Pollo Loco (NASDAQ:LOCO). Other stocks mentioned: Noodles (NASDAQ:NDLS), Red Robin (NASDAQ:RRGB)

Restaurant stocks have had a bad day; Noodles (NDLS) fell 16% after a bad quarter and Red Robin (RRGB) dropped 18.5%. However, there is no need to make sweeping negative conclusions; Latin food is hot. Many Latin concepts are performing well; one reason might be the perception that the food is healthier than many other types of food.

Chipotle Mexican Grill (CMG) is the strongest player in the space, and while many thought it couldn't go higher, it reported its best quarter in years with an astounding 17.3% same store sales increase. Cramer would not chase the stock, but would wait for a pullback. The second best is Qdoba which is a Jack in the Box concept. Qdoba is considered a "poor cousin" to Chipotle, but has been doing well, with a 7.5% increase in same store sales growth. JACK rose 11% recently, and the company is testing new menu offerings and restaurant design options. Is JACK worth buying mainly for Qdoba? JACK is a good company that has an aggressive buyback with 15% of the share count bought back in the last 3 quarters.

Fiesta Restaurant Group (FRGI), has given an 11% gain since Cramer recommended it a month ago. It also has a Caribbean concept, Pollo Tropical, which is faster growing than its Taco Cabana concept. The stock is down 6% for the year, but Cramer thinks it has upside.

El Pollo Loco (LOCO) offers high a quality, authentic and healthy alternative to fast food, but the stock has gone very far, very fast. It is worthwhile to see if management can deliver, and its balance sheet is not pretty. Cramer would wait to see how it performs on its first quarter before buying.

Cramer took some calls:

GNC Holdings (NYSE:GNC) has been up big this week, but Vitamin Shoppe (NYSE:VSI) is better. Consolidation could happen. Cramer would buy VSI.

Kinder Morgan (KMI) Is an Ideal Core Holding

The new, improved, consolidated Kinder Morgan (KMI) may be a core holding for many money managers, Cramer predicted. The reorganized company is likely to combine growth and income and will be a "coveted" stock. Cramer avoided the stock the past few days because of arbitrage pressure after the announcement of the consolidation, but it might be a buy now. It has a 5% yield. CEO Rich Kinder said KMI will be one of only 10 companies in the S&P 500 with a market cap above $75 billion, a yield above 3% and dividend growth over 5% per year (KMI's dividend growth rate is 10%). The combined KMI is now the 3rd biggest oil and gas company in the U.S. The company can transport condensate for export, and can transport liquefied natural gas to export stations. Cramer thinks the stock is a buy around $40.

What do King Digital (BATS:KING) and Deere (NYSE:DE) have in common? Other stock mentioned: Ensco (NYSE:ESV)

King Digital (KING) showed a uniformity of negative thought going into the quarter, but the numbers really were awful, and the outlook was worse. The stock is 40 points below its IPO level. Deere (DE) also faced negative sentiment, down 7% year to date. Some people thought sentiment was too negative, but it reported terrible earnings. Longer term, Deere may be a good stock, but the misery might not be over for Deere.

Ensco (ESV) is sinking and has been downgraded with only a single buy rating. It is best-of-breed among oil rig companies and has a good yield, but Cramer says he is worried, until the lone JPMorgan analyst downgrades it. Cramer wants this analyst to finally throw in towel so the stock will bottom. ESV is suffering because of a fear of too many ships, a slowdown in drilling in Latin America and low oil prices. At least Ensco has a yield that pays investors to wait for a turn.


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