Segment 1: Do it Yourself Investing
Cramer explained that people who stayed in index funds during the entire bear market and current rally are still not back to even yet, while people who got out of the market when Cramer recommended selling last year and then got back in when he called a bottom at Dow 6500 are up big. He showed that this is proof that people can manage their own money, and individual investors are continuing to show their intelligence by taking profits now that the market is up significantly from its lows, but reminded everyone that there are great opportunities like the mobile internet tsunami and homeland security plays.
Segment 2: Sell Block
Cramer looked at some earnings beats that were reported this week to see which ones were good news, and which ones were bad news. He said that Yum! Brands (YUM) and Johnson & Johnson (JNJ) fooled him with their positive reports, and that they belong in the Sell Block. Cramer said that JNJ reported strong earnings per share and guided up earnings estimates, but the higher earnings were due to lower R&D spending and tax benefits, not higher sales, and management had some very negative things to say after the beginning of the conference call that calls their stable secular growth into question and they didn’t even talk about their problems in the drug business. Cramer recommended owning Abbott Labs (ABT) instead if you want a drug stock. Yum! Brands initially looked like they beat earnings with higher sales, but it turned out that it was due to lower taxes and cuts in administrative costs. They had lower sales in the U.S., flat sales in China, and poor same store sales. YUM’s management also thinks that the 4th quarter will be the worst part of the year for the company. Cramer said to get out of this stock and buy McDonald’s (MCD) instead.
Segment 3: Homeland Security Week, Part 4
Cramer’s homeland security play for today is FLIR Systems (FLIR), which is a maker of night vision and other surveillance products. They get 53% of their sales from the government, 17% from commercial applications, 38% from international sources, and their thermal imaging business is growing at a 50% rate. Their thermal imaging products can be used for infrastructure monitoring as well as by the military, so it will benefit from the increased infrastructure spending that is expected to occur over the next few years. Cramer said that the stock has been held back by concerns about a lawsuit filed against the company by Raytheon (RTN) about some intellectual property issues, but some of Raytheon’s claims were dismissed in September, and it looks like the case will turn out well for FLIR. He said that you should look to buy on any pullbacks, and that the stock is fairly priced with a growth rate of 19% and a P/E ratio of 18.8.
Cramer took phone calls on the following stocks:
General Dynamics (GD): Cramer is bullish because he thinks it is a well run company and he thinks they will win some new contracts soon, even though he stock isn’t cheap.
Segment 4: Lightning Round!
Hatteras Financial (HFS): Cramer said he has to pass on this one for now because he doesn’t know about this bank’s balance sheet, and he will come back to it.
Pre-Paid Legal Services (PPD): Cramer said “Don’t buy” because he doesn’t see why this company would have any growth.
International Bancshares (IBOC): Cramer said to stay away from this one because it up big from when he first recommended it, and he only likes it at that lower level.
Warner Chilcott (WCRX): Cramer is bullish on this stock.
Suntech Power (STP): Cramer is bearish on this stock because it needs subsidies and $90 oil to make any money.
Wendy’s Arby’s Group (WEN): Cramer said this is a good speculative play and recommendeding sticking with it.
Segment 5: Interview with Xilinx (XLNX) CEO Moshe Gavrielov
Cramer said that they reported better than expected earnings today and increased their dividend, and that management was very bullish during their conference call. Cramer is concerned about a potential slowdown in wireless orders from China, and wanted to find out why they raised the dividend instead of investing more money in the business.
1. Cramer asked if wireless growth is slowing down, and the CEO said that is not true, and they expect to see continued demand from China next year as they improve and expand their wireless network.
2. Cramer asked if their lower lead times are showing a reduction in demand, and the CEO said that they are building up inventories from a very low level, and this is good news because they will be able to respond to customer’s requests more quickly.
3. Cramer asked about their upcoming business cycles, and the CEO said that they are seeing strong demand for their current line of products, but they are rolling out their next generation of products that will continue to drive growth.
Cramer thanked the CEO for coming on the show and said that he is bullish.
