Cramer's Mad Money - The Homer Simpson Portfolio (7/17/12)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday July 17.

The Homer Simpson Portfolio: Dunkin' Brands (NASDAQ:DNKN), McDonald's (NYSE:MCD), Domino's Pizza (NYSE:DPZ). Other stocks mentioned: Papa John's International (NASDAQ:PZZA), Brinker (NYSE:EAT), Cracker Barrel Old Country Store (NASDAQ:CBRL)

Restaurant stocks have been a hot sector, with new highs from Papa John's International (PZZA), Brinker (EAT) and Cracker Barrel Old Country Store (CBRL). Ed Ponsi, head manager of Barchetta Capital Management and Cramer's partner at, thinks all of these stocks are buys, but would look at some food stocks that have seen declines, but may roar ahead. Ed Ponsi's three food stocks comprise what he calls "The Homer Simpson portfolio" with burgers, pizza and donuts represented by McDonald's (MCD), Dunkin' Brands (DNKN) and Domino's Pizza (DPZ).

McDonald's has been out of favor for the past few months, but Ponsi thinks the latest pullback is buyable. MCD is showing a reverse head and shoulders pattern, a reliable bullish indicator of a bottom in a stock. MCD is likely to break out to the upside to $97-98, which means a 6.6% gain from its current levels.

Despite a downgrade from JPMorgan, Dunkin Brands has significant upside. It has pulled back to its 52 day moving average. Ponsi notes that whenever DNKN has declined to this floor, it tends to roar back. If DNKN drops another $1, he recommends buying it hand over fist.

Domino's has shed 20% so far this year, but is clawing its way back up. The stock is forming a cup and handle pattern, and may start picking up steam. Concerning the fundamentals, Cramer would not worry about commodity costs with this stock, because it has a franchise model.

Cramer agrees with Ponsi's analysis, and both recommend buying MCD and DPZ now, and picking up DNKN on a pullback.

Apple (NASDAQ:AAPL), Gap (NYSE:GPS), Wal-Mart (NYSE:WMT), Target (NYSE:TGT), Verizon (NYSE:VZ), AT&T (NYSE:T), Anheuser-Busch Inbev (NYSE:BUD), Beam (NYSE:BEAM), Diageo (NYSE:DEO), Wells Fargo (NYSE:WFC), Research in Motion (RIMM), Nokia (NYSE:NOK), Zynga (NASDAQ:ZNGA), Facebook (NASDAQ:FB), Hasbro (NASDAQ:HAS), Mattel (NASDAQ:MAT), Potash (POT), Mosaic (NYSE:MOS)

Stocks seem to be the most hated asset class, as scandals arise, showing wrongdoing and alleged market manipulation. However, it is not useful to ignore the fact that many stocks are winning. Apple (AAPL) is up 50% year to date, Gap (GPS), 53%, Wal-Mart (WMT), 22%, Verizon 14% and AT&T is up 18%, 9 times greater than the return on Treasurys. Perhaps people are drowning their sorrows, since Anheuser Busch Inbev (BUD) has seen a 27% gain so far this year, Beam (BEAM) is up 22%, and Diageo (DEO) has climbed 20%. There are even bright spots in financials, with Wells Fargo (WFC) taking 30% market share in mortgages and seeing a 24% rise this year. One problem is that too many investors are bottom fishing in poorly performing stocks like Research in Motion (RIMM), down 55%, Nokia (NOK), 49%, Zynga (ZNGA), 51%, and Facebook (FB) down ten points from where it came public. Cramer thinks investors should not give up on stocks, as long as they invest wisely.

Cramer took some calls:

Hasbro (HAS) might seem to be a "buy" off of Mattel's (MAT) strong quarter, but Cramer would wait for Mattel to come down first, since the company will have more strong quarters ahead, and Hasbro has disappointed in the past.

Potash (POT) is going to benefit from the drought and the rise in corn demand, because farmers may stop buying equipment, but they will not stop buying fertilizer; "Fertilizer is going to be king ... Potash is going higher." Cramer noted that he prefers Potash to another fertilizer play, Mosaic (MOS).

CEO Interview: Matt Ouimet, Cedar Fair (NYSE:FUN)

Cedar Fair (FUN) is a "fun" stock, with its revenue up 5% from last year and a raised dividend that now stands at 6%. The stock has gained 99% since Cramer got behind it last August. FUN is a "stealth winner" which is attracting more visitors, given that uncertainty is causing consumers to opt for "Staycations" not far from home. CEO Matt Ouimet commented, "Staycations are here to stay," and lower gas prices mean that parents can spend more at FUN's parks. The company has its "eyes always open" to acquisitions, but will only buy a park if it can be accretive to value. Cramer is bullish on FUN.

The Implied New York Times Headline: "Buy Alkermes," (NASDAQ:ALKS). Bristol Myers (NYSE:BMY), Amylin Pharmaceuticals (AMLN), Vivus (NASDAQ:VVUS), Orexigen (NASDAQ:OREX)

Instead of just looking at the Business section of the newspaper, investors hunting for new ideas should read the entire paper. An article in The New York Times discussed the problem of prescription drug abuse. A full 54% of deaths from overdoses are caused by prescription drugs, usually painkillers. This is more than the deaths from all illicit drugs combined. Cramer thinks the headline might as well have read "Buy Alkermes (ALKS)." This company makes a drug, Vivitrol, which is effective in treating addiction to opioids. When taken as in injection once a month, Vivitrol blocks receptors in the brain that enable the patient to get high, so there is no reason for them to relapse and abuse opioids.

Vivitrol has been shown to be an effective and inexpensive way to treat opioid addiction, and is often given in prisons and in mental institutions. Alkermes is working on both sides of the issue, since it recently submitted an application to the FDA to develop a new painkiller which is highly effective, but is feared to be highly addictive. The company has a successful once a week injection for diabetes, and anti-psychotic drugs, also administered through injection. This method of treatment ensures patients stay on their medications; often patients of anti-psychotic or anti-opioid addiction drugs either forget to take their meds or mistakenly feel that they don't need them anymore. Alkermes has a multiple of 17 with a 25% growth rate, and the stock should be higher, not lower.

Cramer took some calls:

Bristol Myers (BMY) is intending to acquire Amylin Pharmaceuticals (AMLN). Cramer thinks this is a "brilliant" acquisition and added that BMY is "one of the greatest companies in the world."

Vivus (VVUS) and Orexigen (OREX) have become battleground stocks. Cramer thinks these could be considered as speculative stocks as long as investors are prepared for volatility and take profits on gains to avoid being greedy.

Will Marissa Mayer save Yahoo (YHOO)? Other stock mentioned: Google (NASDAQ:GOOG)

Cramer thought Marissa Mayer was a surprise choice as the new Chief Executive of Yahoo (YHOO), but on further examination, she is the logical choice to turn the company around. Marissa Mayer was the architect of much of what is working at Google (GOOG), including GoogleMaps. What she needs to do as CEO of Yahoo is to unlock value from the company's assets and develop social media, cloud and mobile strategies. Right now, Yahoo has a lot of catching up to do, and Mayer seems to be the right person for the job. In any case, Yahoo needs a CEO who will stay at the helm for more than a couple of years.


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