Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday December 9.
GameStop (GME) should be performing well because of the new game cycle. However, the company disappointed on earnings, and management gave lackluster guidance. The stock sold down, but that is surprising, since GME should be doing well. The company has been eviscerated by online competition and new digital downloads. Software sales have been cut in half and the company's margins on hardware are "razor thin." Activision (NASDAQ:ATVI) gets 60% of its sales from direct digital downloads. Cramer doesn't think it can compete with online peers or with Wal-Mart (NYSE:WMT) for used games.
Best Buy (BBY) told a completely different story, and is doing well for a bricks and mortar store. The company is cutting costs and increasing online traffic
Cramer took some calls:
Electronic Arts (EA) has moved up, but it is worth trimming part of the position and buy it back lower.
CEO Interview: David Crane, NRG Energy (NYSE:NRG)
NRG is the owner of the largest fleet of power plants, but it hasn't moved because of the underperformance of the energy sector in general. Cramer thinks it could be a buy on its analyst day, since it is undertaking a restructuring. CEO David Crane explained that the company is making a transition from a fossil-fuel centered entity to one that incorporates alternative energy. Crane spoke about the potential of solar and the increase in demand; "This is a trend like with cell phones. It is not going to be stopped." The natural gas revolution has been "astonishing," but this doesn't nudge out coal. NRG is exploring technologies to remove carbon from coal and make it cleaner.
Cramer says activists nowadays go after companies that are already well run, because they don't want to take the risk. However, two poor players seem to be begging for activist involvement. United Technologies (UTX) dominated its sector for a long time, but lately the stock has been listless. The CEO has been spending more time with his boats than his business. McDonald's (MCD) seems hopeless, but it has a strong balance sheet. However, Cramer doesn't think activists will buy a stake in these companies because they perhaps do not want to take the risk.
Cramer took some calls:
Lockheed Martin (LMT) is terrific and has a good yield. It is a winner stock.
The Sell-Off Was Justified: Verizon (NYSE:VZ), Merck (NYSE:MRK), Spirit Airlines (NASDAQ:SAVE), Conn's (NASDAQ:CONN), Cubist Pharmaceuticals (CBST), Netflix (NASDAQ:NFLX), Nucor (NYSE:NUE), Schlumberger (NYSE:SLB)
Cramer thinks the drop on Tuesday was justified, given weakness in China and Greece. Individual players also were not performing well and brought back the averages. Verizon (VZ) tends to be a stable stock with a good dividend. The stock dropped 2 points, and Cramer admitted that he should have seen the poor quarter coming. Verizon might face more downgrades; Cramer would wait until its yield gets to 5%. Merck (MRK) made a stunning decision to buy Cubist (CBST), but the latter lost a patent lawsuit. Many didn't expect this patent issue would arise; however, Merck should have seen it coming.
The fourth quarter isn't looking that hot for the banking sector, but many banks rallied into the close. McDonald's (MCD) is putting up horrendous numbers. Spirit Airlines (SAVE) is seeing an increase in traffic, but still saw a shortfall and was downgraded. The stock is down over 12%. Conn's (CONN) missed on earnings, withdrew guidance and announced the departure of its CFO and fell 40%.
The good news is that Nasdaq rallied late in the day, which was a bullish indication of another leg up in the bull market.
Cramer took some calls:
Netflix (NFLX) is in a bit of an upswing, but it is a cult stock. Cramer is a seller of NFLX on the way up.
Nucor (NUE) is a great idea. Management is great, and Cramer called it the best steel company in America.
Schlumberger (SLB) is down substantially from its highs, and is a good stock in the sector. Cramer said a position could be started in this stock, but it could drop in the short term.
CEO Interview: Ron Wainshal, Aircastle (NYSE:AYR)
Airlines are strong, and that is good news for airplane leasing companies like Aircastle (AYR). The stock has rallied 20% in the last 6 months. CEO Ron Wainshal says the company does business with a diverse number of companies and is on the lookout for value. The low fuel bill has been good for business. Europe is a "mixed story," with some strength and some weakness. Aircastle has had close to 100% of its planes leased. "This is a very stable company with good cash flows," said Cramer.
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