Bullish
Investors Bancorp Inc. (ISBC)
Palm Inc (PALM)
Transocean Inc (RIG)
Tenaris (TS)
Nabors Industries Ltd (NBR)
GOL Linhas Aereas Inteligentes (GOL)
Weight Watcher's International (WTW)
Cisco Systems (CSCO)
IndyMac Bancorp Inc (NDE)
Caterpillar Inc (CAT)
Sotheby's (BID)
Bearish
Eagle Materials Inc (EXP)
Rambus Inc (RMBS)
Rsearch In Motion (RIMM)
Weatherford International Ltd (WFT)
OMI Corporation (OMM)
Flextronics (FLEX)
Solectron Corp (SLR)
FoxHollow Technologies Inc (FOXH)
Time Warner Inc (TWX)
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Jim
Cramer's
Opening Discussion
4/07/06
FLWS
(1-800 FLOWERS.COM, INC. )
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'Flower Power'
"Hey,
you want to impress your portfolio? Buy it some
flowers! 1-800
flowers that is.
I know what you're thinking - 1800flowers - sounds like that bad kind
of
dot-com. You're thinking that, in the middle of the 2nd
Internet boom,
this is the kind of co. that you don't want to own.
You're thinking is wrong!
I think 1800flowers (FLWS) is ready to break out; this stock is for you!
It's the anti-Amazon.com (AMZN). What's that mean? It means,
unlike
Amazon (sell, sell, sell!), this co. makes massive amounts of money on
the web!
Let me tell you why I think you should buy yourself some
FLWS. Because
this is a multi-part story:
it helps to have a reason, but it's even more helpful to have multiple
reasons
for owning a stock.
FLWS has a smart model. It just had a big court decision go
its way and,
best of all, it's cheap! How often do you find a cheap
dot-com
stock? One with 18.8% earnings growth? Let's just
say not
frequently.
First, this co. has a great premise. FLWS is a one-stop
online shop for
all of your gifts, candy and floral needs.
Half of their orders originate on the web, and they've got a database
of 20
million customers!
If you want to understand how brilliant their strategy is, we're going
to need
to use some traditional gender stereotypes to explain their success.
Guys
we're clueless about what kind we should get or how. So, we
go to
1800flowers.com, and we buy all of our apology goods on the website!
They've
been able to set this business up by making a series of smart
acquisitions, that just add onto the business - bolt on acquisitions.
For example, they just bought Fanny Mae, the confectionary co. - the
candy co.
- for $80 million. And, now, they can sell these candies on
the website -
that's brilliant.
Remember guys, if she's mad at you, go on the website and get here some
candy!
Or, if you really want to get forgiven, buy her some wine on the
website, along
with the chocolate and some flowers.
Up until recently, a lot of states had ridiculous and illegal
regulations about
importing wine from other states. But now, the Supreme Court
has said
that you can't bar shipments of wine anymore from another
state. And you
can't charge special fees for it either!
Now FLWRs will be able to sell a lot more wine, and they'll still have
a lot
more growth. And that is not only not in the estimates; it's
certainly
not being factored in by any analyst.
The kicker is that this stock is cheap - really cheap!
'Mon-back as in
'mon-back the truck cheap!
It's been depressed for a couple of years. I think that's
going to
change... Buy, buy, buy!
FLWS trades - get this - at 20x 2007 earnings on 18.8%
growth? That's
scratch-head valuation. That's barely more than 1x growth for
a co. That
should be able to fatten up its margins - that's right, I see expanding
gross
margins here - and should even see the holy grail: accelerated
revenue
growth!
A 20 multiple on almost 19% growth? That's way too
cheap. You
rarely have a chance to get into a stock like this, where the business
is great
and the market doesn't care!
Best of all, FLWS is hated - totally despised by the
analysts! (The house
of pain). I think the people that are covering the stock are
going to
have to eat some crow, if not some lime, when they upgrade the
stock.
Because it is going higher.
Remember, we don't listen to analysts. We try to anticipate,
anticipate
their every move and, sometimes, we try to break them on mad money.
And hey, if FLWS stays this cheap, I think there's a chance they get
themselves
a bid. I think the Amazon (AMZN), or the IAC interactive -
both of which
have no pin action - I think they might take a run at FLWS.
The bottom line! it's time for you to stop and smell the darn
flowers. It's time for you to buy FLWS!
Would I like it as a pullback to 6.50? Most
certain. But I’d buy a
little bit here and then wait for a pullback. FLWS - for some
flower
power!"
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Jim
Cramer's
Mid-Show Mention
4/07/06
CRYP
(CRYPTOLOGIC, INC. )
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'Pin Action'
"We're going bowling tonight
for some pin action!
Right now,
Internet gaming plays are absolutely en fuego, in an extraordinary
way.
I'm talking about
the British and the offshore plays.
Take a look at
the three biggest British online gaming companies:
888 holdings (888)
party gaming
(PRTY), and
sportingbet.com
(SPBTF.PK)
Holy
cow! These are just on fire! I mean, unbelievable.
These guys all
moved. Now, it time to find the pin action. That's
right. Who else benefits from their strength?
When you've got
three co.s all gunning for customers, all flush with cash,
because their stocks are at a 52-week high, what do you do?
You go with the
arms merchants! The co.s that supply product.
And that means
you go with Cryptologic (CRYP)!
These guys make
the Internet gaming software for security that all these
British gaming co.s use. Safety of design matters when you're
doing
online gambling.
CRYP designs
these games, and the gaming co.s operate them, and designs the
security software. That makes it that the financial
transactions are
secure; that's their big business.
They've got
everything from your typical casino fare, to the whole slate of
Marvel Comics games.
The operators are
having just a huge year. But, all they really do is run
the proprietary games and software of CRYP!
Back in February,
these guys just beat the stuffing out of their
estimates. And they've been buying back the stock like
crazy. How
much do we love that on mad money?
Now, CRYP isn't
just worth buying because they make the weapons of the online
gaming co.s. It’s not just a great buy
because online gambling has
become a serious business, and it's only getting bigger...
CRYP is a great
buy - buy, buy, buy! - Because they may have perfected,
absolutely perfected, my favorite Wall St. Game: UPOD! (Under
Promise
Over Deliver).
The street loves
co.s that give conservative guidance and then dramatically
exceed it! And you know if you buy a co. that's good at UPOD,
when they
announce a qtr.,
they'll usually
make you money. The stock pops, the stock spikes because
the co. has made it pretty clear that they're committed to beating the
estimates
and they've delivered in the past.
Get
this: for the past 10 qtr.s - a lot of qtr.s - CRYP has
beaten the
midpoint of their guidance by an average of 20.8%! Can you
say 'upside
surprise’?
The bottom
line! online gaming is en fuego, especially in England, where
there's about to be an arms race among the big three co.s, and they
purchase
their weapons from our call on mad money. They purchase them
from a stock
down 10 points, really in a fabulous sweet spot. They
purchase them from
CRYP!"
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Jim
Cramer's
Closing Discussion
4/07/06
CHTT
(CHATTEM, INC. )
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'Ugly
Duckling'
One of the
greatest ways to make money is by picking out the good stocks that
have become scorned! Because somehow they're out of style for
the season
that we're in. They're out of the rotation. They don't fit
into the
sexiness of today's market!
If you want to score at the dance, you go find that girl standing in
the
corner, with no one paying any attention to her; that's what you should
look
for: the flat liner.
If you want to score with a stock, you've got to use the same
strategy.
That's why Cramer thinks you should start courting CHTT!
Do they come any duller than CHTT? Do they have any duller
than 'Gold
Bond' and 'Dexatrim' and 'Selsun Blue'? 'Icy Hot'?
Right now though, we're at the part of the cycle where the defensive
stocks,
with good growth, have gone completely and utterly out of style.
When I say defensive, I mean good performers regardless of the economy.
These high-quality, defensive stocks just aren't sexy enough right now.
We're in a commodity blow-off where everybody and his mother wants to
own some
steel stocks!
Let me give you the flipside. My charitable trust owns
Procter &
Gamble (PG). But
that's part of a
balanced portfolio of stocks.
I don't own PG now for the charitable trust because I think it's about
to take
off. No. I own it because, if everything else falls
apart, PG
should still make money!
I guess I should say I like PG because it's cheap. Everyone's
given up on
it. No one wants that, they want coal.
You pick up the steady growers when everyone rotates out of them, and
into the
aggressive smokestack plays. When investors rotate out of a
stock, the
stock gets cheaper for no reason involving its fundamentals!
Then, when the aggressive plays eventually fall apart, because the fed
tightens
too much; china slows down; we lose our patience with them; everybody
rotates
right back into the secular growth stories like PG!
And then you
can make mad money if you own it.
You don't know when the rotation is going to end! So you've got to sock
'em in
when everybody's bearish on them because, when they're bullish on them,
it's
too late.
On mad money, we're on the lookout for cheap, steady growers when we
can find
them.
I think I found one. I think I found one in CHITT!
Right now, in terms of pricing, I think the stock's actually better
than PG.
PG
is the
better co., no question. But, oh man, but PG is
big. CHITT is the
junk man's PG!
It's worth only $700 million; it could easily get bought. And
nobody is
going to be making a takeover bid anytime soon for PG*.
Because chat’s so small, the stock can actually move when you
get a big
sectoral rotation.
Now, let's do some homework, because it's never enough to buy an
out-of-favor
stock. Sometimes they'll never come back if the business is
bad.
CHITT is one of the most profitable plays on the old brands.
Remember,
these brands are tried and true; you don't have to put that much money
behind
them anymore.
The story right now, though, is that they've got a ton of new products
on the
market that are already doing well this year.
The only dead weight, frankly, is 'Selsun Blue', which I consider a
legacy
brand, now that they've got a new dandruff control shampoo on the
market -
'Selsun Salon'!
You can't go into a physical therapist's office that doesn't have 'icy
hot'.
New products mean better pricing and more growth for CHITT.
Oh, and don't forget. Pfizer's having a big auction of its
dull, boring
consumer product lines. The rumor has it that
Colgate’s (CP) got the
inside track there. But, you know what, I think it's going to
be a horse
race, and CHITT could get some.
That'd be a great deal, because then they'd be able to introduce a new
product,
without spending a dime on research and development.
Let's go to the numbers, because that's where the real proof is.
They're generating about $50 million in cash flow, and they've got
about $50
million in cash in the balance sheet - a $700 million co., you're
talking okay
here.
I can see them paying down a big chunk of their $180 million in
debt. They
bring down the debt - it should boost the earnings - lead to a higher
multiple. This is the virtuous cycle because, remember,
indebted co.s get
marked down.
The numbers they reported on Wednesday - which brought my attention to
the
stock - they were solid, but they're not the real story.
The story will be how these new products hit the market in the next 12
months,
with more advertising than CHITT's ever used before. That's
going to put
this thing on the radar screen!
So we need to look at the future. The street's numbers are
conservative. The consensus is that they earn $2.50 a share
in
2007. Holy cow, is that stock cheap! I mean, it's
at $37 for
heaven's sake!
And CHTT should hit that number easily with their own products -
without even
the new brands from Pfizer - I’m keeping my fingers crossed
though.
The street's being too cautious. That could mean upside for
you when the
rotation ends. What's left?
Let's value the sucker. CHTT trades at just 16.5x
earnings. All
right. Fancy, showboat brand L’Oreal: 25x
earnings. Big
powerhouses, Colgate (CL) and PG*: 20x earnings.
These co.s are indeed better co.s than CHTT. But are they
that much
better?
You're getting a real bargain here, but I don't think it'll last long.
The bottom line! CHTT may not be the sexiest stock around
right now, but
it's too cheap. And you should be able to pick it up before
the next
rotation!
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