Cramer's Mad Money - It's Not A Sin To Sell (10/25/11)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday October 25.

Cummins (NYSE:CMI), Netflix (NASDAQ:NFLX), First Solar (NASDAQ:FSLR), Sandridge (NYSE:SD), Conoco-Phillips (NYSE:COP), Amazon (NASDAQ:AMZN), Under Armour (NYSE:UA), Apple (NASDAQ:AAPL)

It is not a shame to sell stocks or take profits, even though it might seem like surrender or might be a concession to the taxman. With the Dow down 207, Cramer reminded viewers of what happens when stocks get overextended, especially after a stellar October for the market. Cummins (CMI) rallied ahead of its quarter, but the new CEO warned of slowness in emerging markets, and the stock got hit after its earnings report. Investors who were paying attention would have known to take profits from the pre-earnings rally.

Cramer was early with his recommendation to take profits in First Solar (FSLR), especially since the Europeans would cut down on buying solar panels. The stock was down 25%, which was bad news for investors who did not take some off the top. Netflix (NFLX) did poorly this summer after fault decisions by management, but even on the initial decline, it wasn't too late to sell; the stock declined a further 35% on Tuesday after a dismal quarter. Even as Cramer is bullish on Apple (AAPL) and gold, it doesn't hurt to take profits. Investors who let Amazon (AMZN) run are hurting after yesterday's decline in the stock. It might pay to reduce a position in Under Armour (UA) because it has no dividend protection, is facing challenges from competition and might have issues with its inventory. "It is natural and logical" to take profits sometimes, even in good stocks.

Cramer took a call:

Sandridge Energy (SD) isn't as good a choice as Conoco-Phillips (COP) which has declined and has a strong yield.

CEO Interview: Kelcy Warren, Energy Transfer Partners (NYSE:ETP)

Energy Transfer Partners (ETP) is an MLP that has a huge network of pipelines, treating and processing centers for natural gas and storage facilities and offers an 8% dividend. While Cramer was not fond of the company's propane business, since the industry is very seasonal and highly competitive, the company announced it is selling its propane assets for $2.9 billion, eliminating the need to raise further capital in the near term. Kelcy Warren says the move will make the stock much less volatile than it has been. The company is making some smart acquisitions and has not been adversely affected by the drop in natural gas prices. Warren says demand has never been stronger, with more volumes added every day.

"The big negative was propane and now it is gone," Cramer said. "The fundamentals are very good for ETP."

Charts Bode Well for Banks and Retail: U.S. Bancorp (NYSE:USB), Retail HOLDRS (NYSEARCA:RTH), VFCorp (NYSE:VFC), Deckers (NASDAQ:DECK)

After a "hideous day" the charts are showing some good news, at least for retail and banks. Although the drop in the Dow was huge, the S&P 500 is still above the levels where it sat at the beginning of October. The chart of the BKX, an index for the banks, shows an inverse head and shoulders pattern, which signals a bottom is forming. If the BKX breaks above $40, it could power 10% higher. Cramer is still not bullish on the banks, but ahead of this rally, he would consider buying U.S. Bancorp (USB), since it reported the strongest quarter of any other financial and has no overseas exposure. Retail HOLDRS (RTH) is showing a golden cross formation, with the 50 day moving average crossing the 200 day moving average. This indicates a stronger short-term move higher. However, the daily chart shows that retail is overbought, so Cramer would wait for a pullback before buying VFCorp (VFC) or would consider picking up Deckers (DECK) after it reports earnings on Thursday.

CEO Interview: Warren East, Arm Holdings (NASDAQ:ARMH). Other stock mentioned: Intel (NASDAQ:INTC)

Arm Holdings (ARMH) licenses its design technology for the chips used in 95% of mobile phones and MP3 players and charges royalties from customers. This is a steady source of revenue and has helped drive the stock higher; ARMH has gained 277% since Cramer got behind it in 2009. ARMH reported an in-line quarter, and with a multiple of 46 compared to a growth rate of 14%, this hot momentum stock really needed to beat earnings soundly to impress. The fact that the quarter was just alright disappointed The Street, although Arm Holdings was up on a down day. One issue that held the company back was the temporary rise in royalty price, but the backlog and the future looks strong. Warren East says he is not worried about competition from Intel (INTC), because ARMH has the most energy efficient technology in the business. With 100 semiconductor companies as clients, the customer base is diverse enough to provide stability.


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