Government's War On Business - Cramer's Mad Money (4/7/16)

by: SA Editor Mohit Manghnani


People still go to stores to purchase jewelry - Signet CEO.

Bed Bath & Beyond has wasted money on buying back its stock.

Buy Verizon and AT&T for income and T-Mobile for growth.

Stocks discussed on the in-depth session of Jim Cramer's Mad Money Program, Thursday, April 7.

Cramer thinks there is a war being launched on business. "I think the rhetoric against business is insane. In my view, business, the creation of capital through hiring and building something, is worth celebrating. I look at business as way to put food on the table. We lavish praise on sports figures, but it is not like they create any jobs," said Cramer.

He thinks people who create jobs are heroes. However, the government is clearly not looking at them in a similar manner. The war is aimed at business and investing, which can be damaging. First, the rules were changed to block the Allergan (NYSE:AGN)-Pfizer (NYSE:PFE) deal. Then, it blocked the Halliburton (NYSE:HAL)-Baker Hughes (BHI) deal without explaining how the two companies could comply with anti-trust laws.

Another issue worrying Cramer is the rising popularity of Bernie Sanders. He has put up a good challenge to Hillary Clinton's nomination. "Sanders has launched an attack on business that is unprecedented in modern presidential politics - it is like the guy is a second coming of Eugene V. Debs," said Cramer. He plans to break up the big banks, while the government not only allowed the likes of Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC) and JPMorgan (NYSE:JPM) to buy failing banks, but it pleaded with them to do so, as Cramer remembers.

He was also surprised at Sanders' comment on General Electric (NYSE:GE), saying "destroying the moral fabric of America because it has become skilled at avoiding taxes." Cramer said, "No company is perfect, and GE has had its share of faux pas, but it is hardly an example of corporate greed at its worst."

Cramer is not against the government. He appreciates the government raising tariffs on foreign aluminum and also changed rules that require financial advisors to put their clients' needs first. He just wants to government to be rational and predictable. It was unfair that the Treasury changed inversion rules without warning, as Allergan was playing by the rules. The administration should not wait until companies go wrong and then attack, as owning stocks with personal money would be terrible.

"I say stop the war and declare a truce, so companies can do what they do best: hire, create, serve customers and generate wealth for shareholders of all shapes, sizes, colors and creeds," concluded Cramer.

CEO interview - Signet Jewelers (NYSE:SIG)

Like many stocks, Signet Jewelers has also struggled in 2016. It is down more than 23% from its highs in October. It is the no. 1 specialty jewelry play in North America, with brands such as Kay Jewelers, Jared and Zales. The company reported a good quarter earnings-wise, but weaker-than-expected revenue. However, its same-stores sales figure of 4.9% was healthy. Cramer interviewed CEO Mark Light to know what lies ahead for the company.

"We have been pretty consistent. If you look at Signet over the last 20 years, we have been consistently up 5% and outpacing the jewelry market," said Light. More than half of its business comes from gift giving and the other half from bridal purchase. It is a very stable business, and the company is the largest jeweler in the mid-market segment.

Signet has also been offering credit for the last 30 years, and that portfolio is very good. On the same-store sales, Light said that people still go to the mall, since jewelry is a personal purchase. The company's portfolio of mall properties helps its same-store sales.

Bed Bath & Beyond (NASDAQ:BBBY)

Bed Bath & Beyond was a great retailer at one point, and a cash cow. After the company's report last quarter, it is too late for a comeback. "While Bed Bath now has 500 IT professionals, and it has welcomed the new digital world, I think it might be too late for them," said Cramer.

BBBY has huge number of stores across the country, run by people who know what customers want. It generated lot of cash, which was used to shrink its share count from 243M to 158M. This company's buyback is a typical case of buyback waste, in Cramer's opinion. Its market cap in the last four years has shrunk to $7B from $14B four years ago. In the years that the company bought back 35% of its stock, its market cap shrunk in half.

Amazon (NASDAQ:AMZN) has gained a lot of popularity as people have shifted from brick-and-mortar retailers to online shopping. This has hurt Bed Bath & Beyond. Company management admitted that they have fallen short on technology on their conference call. "Bed Bath was a dinosaur living in the ice age of the web and failed to keep up with Amazon's algorithmic ability to figure out what shoppers wanted faster than any flesh-and-blood merchant," said Cramer.

Bed Bath & Beyond's same-store sales have stagnated over time. Customers have started avoiding cumbersome trips to stores. On the conference call, the CEO said that they have started to prioritize mobile search, user interface navigational improvement and digital offerings.

Cramer thinks it could be too late for the company to come back, since it has spent all its money on buying back stock.

Cramer's homework

Cramer came back with the homework on stocks he couldn't opine on earlier.

NovoCure (NASDAQ:NVCR) is a biotech company which has developed a potentially revolutionary way to fight cancer with a proprietary technology known as Tumor Treating Fields. It uses low-intensity electrical fields to disrupt key molecules within cancer cells. In Cramer's opinion, this may be the least invasive way of cancer treatments. The company has clinical data and regulatory approvals for the technology to work. It came out with an IPO last October, which was bad timing. Healthcare is back in favor with M&A activity in sight. Cramer thinks this stock is worth speculating.

Ollie's Bargain Outlet (NASDAQ:OLLI) is a bargain retailer that sells branded merchandise at huge discounts. Customers come here to pay less than what they would pay at a store. It has 187 locations across 16 states. The company reported a good last quarter, and its stock went up by 10%. It makes sense for Ollie's Bargain Outlet to open more stores in the coming months. "This could be the kind of regional and national growth story that money managers get very excited about," said Cramer. The company came public last July with the help of PE-backed IPO. The firm behind the company was CCMP Capital Advisors, which still owns 59% in Ollie's, which means that its interests will come before those of the shareholders. The stock is expensive compared to traditional stores, and Cramer advised waiting for a pullback before buying.

The next stock is NeoPhotonics (NYSE:NPTN), which is a supplier of fiber-optic components for high-speed communications networks. The stock has bottomed in August 2014, and since then, has been on fire. NPTN is up 30% in 2016. There is no doubt that the area it operates in is red hot. The demand for optical components is picking up in China, and the stock trades at 16 times next year's earnings. "If you want to speculate on optical equipment, then NeoPhotonics might be the way to go, but please, I'm begging you, wait for the stock to get hit before you consider doing any buying," said Cramer.

The last stock is Celator Pharmaceuticals (NASDAQ:CPXX), which is a small biotech working on cancer treatments that help patients take their drugs in the right ratio. It has a proprietary platform that measures the compounds of dosage that a patient takes. The company got positive trial data, after which CPXX shot up. Cramer thinks the stock is too risky. Those who own the stock should ring the register.

Viewer calls taken by Cramer

Sprint (NYSE:S): Cramer fears Sprint common stock will not go up much, as the company has too much debt. He likes AT&T (NYSE:T) and Verizon (NYSE:VZ) for income and T-Mobile (NASDAQ:TMUS) for growth.

Bristol-Myers (NYSE:BMY): Bristol-Myers has a great portfolio of anti-cancer treatments. It's a good company.

Southwest (NYSE:LUV): Cramer thinks no one can go wrong buying Southwest.

L Brands (NYSE:LB): The stock yields 2.8%. Company management is good, and the fall in the stock is a buying opportunity. Buy more when it starts yielding 3%.

American Electric Power (NYSE:AEP): It's a good company. For people in their 20s, go for it for diversified growth.


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