Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday July 26.
Why Didn't We Crash? SPDR Gold Trust (NYSEARCA:GLD), Schlumberger (NYSE:SLB), Exxon (NYSE:XOM), Chevron (NYSE:CVX), Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), Buffalo Wild Wings (BWLD), Wal-Mart (NYSE:WMT), Pepsi (NYSE:PEP), HCA Holdings (NYSE:HCA)
After President Obama discussed the dire situation with the debt ceiling and the fact that the U.S. could lose its AAA credit rating, why didn't stocks get hammered? True, the Dow was down, but only 92 points, and the S&P 500 dropped only half of a percent. Cramer thinks that the American public does take the financial threat seriously, but deep down, the consensus is that the government will find a solution, therefore, a huge sell-off was averted. Cramer thinks gold is a buy in this environment, particularly bullion and SPDR Gold Trust (GLD). Schlumberger (SLB), Exxon (XOM) and Chevron (CVX) represent value at a time when treasuries and the dollar are dropping, but oil should remain strong. There is no reason to sell Apple (AAPL) or Google (GOOG) on bad macro news. Cramer took some calls:
Buffalo Wild Wings (BWLD) has excellent cost control and has yet to expand in many major college towns in the U.S. "I am committed to BWLD," Cramer said.
Wal-Mart (WMT) has a great balance sheet, but Cramer told a caller who was holding too many WMT shares that he should not bet more than 20% of his portfolio on any one stock.
Pepsi (PEP) management made cautious remarks, but Cramer would not dump Pepsi at its current level. While inflation is a concern the stock is worth buying at $62-63.
HCA Holdings (HCA) has seen a sell-off that is overdone. Cramer thinks the stock is a buy.
CEO Interview: Kevin Burke, Con Edison (NYSE:ED)
Con Edison (ED) is a steady, conservative utility serving the New York area. ED is a stock that is "as secure as it can get" with no power assets, which means it is not affected by EPA regulations. ED has a 4.5% yield, which it has raised for 30 consecutive years. The stock has seen a 28% gain since Cramer recommended it last year.
CEO Kevin Burke explained that as electricity bills get bigger, ED returns money to its customers by lowering rates. This breeds customer loyalty and shows ED's stability. The company has been making significant investments in security, especially cyber security and has passed every test performed with test "hackers." ED encourages energy efficiency, and most of its trucks run on biodiesel fuel. Burke says he feels good about New York's economy, with unemployment going down, rents rising and a healthy tourist trade. Cramer is bullish on Con Edison.
CEO Interview: Patrick Doyle, Domino's Pizza (NYSE:DPZ)
Stocks that defy the gravitational pull of the debt problem are those that are reporting strong earnings. Domino's Pizza (DPZ) has been the top restaurant stock of 2011, with the stock rising 71% year to date. The company is a global pizza powerhouse, with half of its stores abroad. The stock was up 4.3%, even on a down day, on a 4 cent earnings beat, stronger than expected sales at 6.2%, a domestic same store sales increase of 4.8% and international same store sales rising 7.4%. Domino's improved its pizza recipe and developed a website that allows customers to design their own pizza; a full 25% of sales come from the site. The stock is up 165% since last year and 35% since Cramer last spoke with the CEO, Patrick Doyle, in May. While it would be "nuts not to take some off the table" after a spectacular run, Cramer would keep the core position, since he thinks this stock is headed higher.
Doyle explained the crucial metric for his company is retention, since it is better to have return business than to generate new customers. Concerning cost cuts, Doyle said "We've got the pizza nailed. We'll leave that alone," adding that it is better to create savings in other areas like labor and efficiency rather than doing anything that might alter the taste of the pizza. The company has enjoyed increased business because of its television ads and its website, and has a special iPhone App to generate more business. Cramer wondered how Domino's market cap is only $1.7 billion, while smaller and less successful restaurant stocks have larger market caps. Doyle agreed that the number of stores and the amount of cash flow indicate the company should be worth more. Domino's is not as affected by commodity costs as its competitors, since most of its stores are franchises, and higher raw costs are absorbed at individual locations.
"This stock is way too cheap for the return the company is giving you," said Cramer.
Core Labs (NYSE:CLB)
Look to patterns when choosing stocks, Cramer advised, and when a stock has the same pattern of behavior, pay attention. Core Labs (CLB) fell 4% after its quarter when it reported a 2 cent earnings beat, and better than expected revenue of 13.5%. The sell-off was not surprising, since Core Labs' stock has dropped after 4 out of 5 of its most recent earnings reports. Every single one of these declines has shown Core Labs to be a stock worth buying on a sell-off, since the stock rebounded sharply each time. The stock has risen 82% since Cramer got behind it in February 2010. Cramer would buy Core Labs on its current decline, since most stocks in the space are at or flirting with their 52-week highs and CLB is down 10 points. The company is levered to the red hot oil exploration and production space, which is strong at home and abroad. A full 60% of the company's revenues are generated overseas, and CLB also benefits from increased oil exploration and production in the U.S. The stock has a multiple of 23 and a 21% growth rate. "When an opportunity like this comes along, you have to take it," Cramer said.
Netflix (NASDAQ:NFLX), LinkedIn (LNKD)
Netflix is fast becoming a battleground stock which seems on the verge of being dismissed as a joke or poised to take over the world. The bears think Netflix's best days are behind it because it is raising prices. Cramer pointed out these price hikes are only for subscribers who order DVDs by mail, and its regular streaming service is unaffected. The company has only just begun to expand overseas, already has 25 million subscribers and has a market cap of $10 billion, which is modest compared to LInkedIn (LNKD) at $13 billion and rumors about what Groupon will be worth.
"When the smoke clears, it's the track record that matters, and Hastings (the CEO) has the best track record in the business," said Cramer.
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