The Cramer Report l A recap of 'Mad Money w/ Jim Cramer. Updated Daily, Always Free!!
Tonights Show:  
April 7, 2006  
 
"Flower Powers"
 
"Pin Action"
"Ugly Duckling!!"
and the LIGHTNING ROUND!!!


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LIGHTNING ROUND!!     [home]                            T o n i g h t ' s   D i s c u s s i o n ' s
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)






























































Jim Cramer's
Opening Discussion
4/07/06
FLWS  
(1-800 FLOWERS.COM, INC. )

'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!"




Jim Cramer's
Mid-Show Mention
4/07/06

CRYP  (CRYPTOLOGIC, INC. )

'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. )


'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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