Segment 1: The Return of Luxury
Cramer said that the announcement that sales prices a Sotheby’s auction exceeded estimates made him take a look at the recent results of some luxury brands. He said that it looks like the rich are spending again, and positive reports from Whole Foods (WFMI), Williams-Sonoma (WSM), Tiffany (TIF), Coach (COH), Saks (SKS), Nordstrom (JWN), Starbucks (SBUX), Deckers Outdoor (DECK), and Polo Ralph Lauren (RL). Cramer believes that increased spending by the wealthy is a sign that overall consumer spending will increase, so a stock like Darden Restaurants (DRI) could benefit, but the best play on luxury spending right now is American Express (AXP) because it is the preferred card of the wealthy. The company said that the spending levels of their customers have stabilized, and they could see a return to spending growth in this quarter. Cramer said that the stock is at its 52 week high right now, but these highs are still 75% below the highs from 2007, so he thinks it has more room to go higher. Also, the analysts are still negative on the stock, so if they begin to issue upgrades, the stock will go higher.
Segment 2: Interview with Allos Therapeutics (ALTH) CEO Paul Berns
Cramer recommended another speculative cancer research stock today, after originally recommended this stock on February 27, 2009 at $5.64, and since then it went up to $8.68 and has come back down to its current price of $5.89. He said that Folotyn, the company’s orphan refractory peripheral T-cell lymphoma cancer drug, was approved by the FDA on September 24, so it is planning to promote the drug at a conference in December and begin selling it in January. He thinks that the stock is cheap given the opportunity that this drug represents because a secondary stock offering that was priced at $7.10 hurt the stock price, but Cramer doesn’t think they will need to do another offering because the company has $84 million in cash. Because this stock is speculative, he wanted to talk to the CEO to get more information. Here is a summary of the interview:
1. Cramer asked about what the company expects to happen at the American Society of Hematology conference coming up in December, and the CEO said that it is an important meeting because it is the biggest medical conference for hematologists and oncologists in the world, and the presentations there are peer-reviewed, so they are seen as high quality reports.
2. Cramer asked if their plan to sell Folotyn without a bigger partner was risky, and the CEO said that they have an experienced group of leaders and have done this before without a partner.
3. Cramer asked if people should be concerned that the company only has one product, and the CEO said that they have a pipeline of drugs in development to go along with this one that has been approved.
4. Cramer asked if there are tests of this drug going on right now, and the CEO said that they are promoting Folotyn within traditional commercial channels and testing it for new uses.
5. Cramer asked how fast they are burning cash and if they will need to do another secondary offering, and the CEO said that they have $177 million in cash and will have revenues coming in from Folotyn, so he thinks that they will be in a strong cash position.
Cramer ended the segment by saying again that he thinks the stock is too cheap.
Segment 3: Sell Block
Cramer put Kraft Foods (KFT) in the Sell Block today because of the bogus upside surprise the company reported today. The company beat earnings estimates by $0.07, but revenue was down 6%, and then raised its full year guidance by $0.04. Given that they just beat estimates in the current quarter by $0.07, this small rise in guidance is actually a decrease in guidance for the fourth quarter. He said that the company is a mess, it botched its offer for Cadbury, and it is losing shelf space in supermarkets. He would rather own General Mills (GIS) or Kellogg (K) than KFT. Cramer ended the segment by putting Kraft CEO Irene Rosenfeld on the CEO Wall of Shame because the stock is down 13% over her 3 year tenure, and shows no signs of improving any time soon.
Segment 4: Lightning Round!
Inergy (NRGY): Cramer is bullish on this propane stock because of the high yield, and said he likes Suburban Propane Partners (SPH) as well.
Bank of America (BAC): Cramer is bullish on this stock.
A123 Systems (AONE): Cramer is bearish on this stock because he was only interested in it as an IPO trade.
First Niagara Financial Group (FNFG): Cramer is bullish on this bank because it is solvent and in position to make acquisitions.
CROCS (CROX): Cramer said “Don’t buy” on this stock and recommended Deckers Outdoor (DECK) instead.
Segment 5: Cancer Research Week, Part 4
Cramer recommended two cancer research plays that are takeover candidates, Dendreon (DNDN) and Onyx Pharmaceuticals (ONXX). He said that DNDN has a prostate cancer drug called Provenge that could be commercialized by mid 2010 if it gets FDA approval, and could do $730 million in sales in 2011, with peak sales of $4 billion in 2020. He said this stock is very risky because Provenge still needs FDA approval and it is up over 500% in the last year, but it has other drugs in the pipeline, but it has positive clinical trial data, and the stock could go even higher if this drug is approved. ONXX has a liver and kidney cancer drug called Nexavar in a partnership with Bayer with very strong sales, and it is being tested on other types of cancer as well. The company reported better than expected earnings for the last quarter, but the market didn’t seem to care. He said that the fact that ONXX is actually making money and has a drug on the market makes it less speculative than DNDN, but the company announced that it is buying another drug company, which upset some investors who believe that the acquisition hurts its chances of receiving a takeover offer. Cramer thinks that the stock is cheap, and it is near its 52 week low.
