Cramer's Mad Money - Dell Is Out Of The Doghouse (2/13/11)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday February 13.

Dell (DELL) Is Out Of the Doghouse

Dell (DELL), not too long ago, was thought to be finished as a company, but in the last 18 months, it has been one of the hottest turnaround stories in tech. The company has figured out how to diversify away from the PC business and has cut costs dramatically for producing PCs; these costs were slashed by 30% and gross margins expanded 400 basis points. Dell is now moving into the enterprise space and is producing its own network and storage solutions instead of relying on other companies. Dell had to make many acquisitions for this transformation, and there were skeptics, but the investment paid off. The company reported a 7 cents earnings beat with an 8% improvement in enterprise. Its multiple is 8.7 with a 5% growth rate, $7 billion in a cash and a substantial buyback of 22% of its own shares. Cramer would buy Dell right here.

AT&T (NYSE:T), Verizon (NYSE:VZ), Cummins (NYSE:CMI), Caterpillar (NYSE:CAT), Wells Fargo (NYSE:WFC), Bristol Myers (NYSE:BMY), Capital One Financial (NYSE:COF), ING (NYSE:ING)

There is a lot of worrying news of late: Obama's budget which might increase taxes for the wealthy, as well as taxes on dividends, the possible fall of Greece, Obamacare and its costs to employers and possible war between Iran and Israel. While the concern is how these events will affect stocks, in reality, stocks like AT&T (T), Verizon (VZ), Cummins (CMI), Caterpillar (CAT), Wells Fargo (WFC) and Bristol Myers (BMY), the latter with a 4.2% yield, should not be affected by the headlines. Cramer urged investors not to think about stocks as a unified asset class, but to look to the health of individual companies.

Capital One Financial (COF) is already a good financial, but should be even better if its deal with ING (ING) goes through. The latter has a fabulous online direct business.

PetSmart (NASDAQ:PETM), Merck (NYSE:MRK), Johnson & Johnson (NYSE:JNJ), Intel (NASDAQ:INTC)

With 62% of American households owning pets, there is a bull market in pet care, a potential $48 billion industry, of which PetSmart (PETM) has 15% market share. This company is a high-end pet care store that provides proprietary items like natural pet food to customers who want to give their pet five-star care. Its food margins are three times the size of ordinary pet food, and only 10% of its products are available elsewhere. PETM has pet hotels, which are very successful and are seeing same store sales growth in the double digits. The stock jumped up 2.8% on Monday, and has given a 77% gain since Cramer got behind it in 2010. It trades at a multiple of 18 with a 16% growth rate, and Cramer would wait for a pullback before buying the stock.

AT&T is a bit cheaper than Verizon, but Cramer likes both companies.

Merck (MRK) gave a generous dividend boost, but investors seem to have given up on it. While Johnson & Johnson (JNJ) is good, it yields 3.5% compared to Merck's 4.1% yield.

Intel (INTC) is one of the most undervalued tech stocks, and is getting no credit for its initiatives in wireless.

CEO Interview: Gary Evans, Magnum Hunter Resources (MHR)

Magnum Hunter Resources is a $6 stock with an $820 million market cap, and outproduces many of its larger peers. It has assets in the Marcellus Shale, the Bakken and the Eagle Ford, but the company is becoming more oily and delivered an impressive 455% increase in production, with proven reserves up 44% in just 6 months. The stock has run up 18% since the beginning of the year, but Cramer thinks it has more upside, since its assets are located in the most productive part of the Eagle Ford. When asked if the company may be taken over, CEO Gary Evans replied, "We have positioned the company to be very attractive for a takeover," but he expects to have at least a couple of years to continue building out the company. Cramer considers MHR a speculative stock and would wait for the next dip in oil to buy.

Apple (NASDAQ:AAPL) Did Not Move Enough

Apple (AAPL) is considered by some to be its own personal bubble, but the stock has not behaved like other stocks that deliver similar earnings beats. The stock should have surged to $550 but hasn't yet. Cramer thinks it is not too late to buy Apple, since it is not raging up, but rather, is slow to react.


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