Friday, 03/28/08
Posted 03/28/08,  11:52 pm ET

(Scroll down to see Jim's comments below)

 
 
Today's date:  Friday, 03/28/08

  Dow Jones: 12,216    - 86
  NASDAQ:   2,261    - 19
  S&P 500:   1,315    - 10
 
 
 
 
 
First Segment
 
 
Opening Segment 1 Title: 'Cramer's Game Plan
  For Next Week'

.  .  .  .  .

Featured Stock(s): Target (TGT)
Wal-Mart (WMT)
Chesapeake Energy Corp. (CHK)
Schering-Plough (SGP*)
Kellogg Co. (K)
Pepsico, Inc. (PEP)
Coca-Cola (KO)
United States Steel Corp. (X)
Potash (POT)
Textron Inc. (TXT)


See Opening Segment 2, below...
 
After this segment, you can see Jim's Lightning Round picks here...



JJC:    Earnings season is unfortunately upon us! I say, "unfortunately" because, for five weeks a quarter, the information comes so fast... the conference calls at such breakneck speed... that all I can give you for a Game Plan is this... where the odds do not favor you at the gaming tables... The most important edge you can have, when owning a stock, is if the company underneath the stock will beat the earnings estimates set by Wall Street...

If there is one iron law out there... it's not the iron law of wages... It's that stocks that beat the estimates tend to go higher!

How can you find them?...

You have to look for trends that might have occurred intra-quarter, because earnings estimates are set when a company reports previously... and that means we're looking for changes between now and the month of January... the last reporting period.

In preparation for this show, I have looked at sector after sector in the S&P 500, to try to find you an earnings edge and, frankly, I am not encouraged!...

I sincerely doubt, because of the mortgage crisis, that any of the major financials... of there, I'm speaking of the banks and the brokers... will be able to report numbers that cause the estimates to be raised...

Consider the best financial that recently reported... Goldman Sachs (GS*)... The company stayed up for a nanosecond... and then suffered a beatdown that still seems to be going on... That's because GS* is a nice house in a neighborhood that needs to be redlined...

Tech is similar! People are kidding themselves about tech. I was on (CNBC) this morning and analyst after analyst came on and told us not to worry...the outlook for tech is great... What are they smoking? What are they drinking?

Other than Apple (AAPL), which has an event... a new phone... a 3G (i.e., third generation) smartphone that comes out at the end of the quarter... I'm talking July... I think we'll be hard-pressed to see any estimate bumps.

Estimate cuts will become a regularity in the next four weeks.

We may have cases like Research In Motion (RIMM) next week, where they can take up guidance, but that could be a time to ring the register, not buy...

Certainly, Intel (INTC) can tell a good story about next quarter, but that's because of problems with Advanced Micro Devices Inc. (AMD)... its principle and zero-sum competitor...

But I have no conviction that any other company can beat numbers... My conviction... my bet... is number cuts across the board.

Machinery... too tied to the endless collapse of the motor stocks... The desire to build cars elsewhere is hurting the machinery stocks.

How about telecommunications?... I love a good yield, but these companies are cutting their rates this quarter, and accelerating their spending, because of their desire to wipe out Sprint Nextel Corp. (S)... and I think AT&T (T) and
Verizon (VZ*) could do that... Or they want to blunt VZ* on the cable side... which Comcast (CMCSA) has to do. I own VZ* for my charitable trust... which I'm proud to say, I've been able to donate $470,000 from last year's winnings. I take nothing...

When in doubt, you go with yield support...



Retail?... An unmitigated disaster. When they're bad, like J. C. Penney (JCP) today... they go down huge. When they're good, like Costco (COST), they don't budge.

I'm flirting with Target (TGT), at $49, because it would be low... Wal-Mart (WMT), on any pullback, is great, because that's where you shop, when you like that hospital emergency room environment... No conviction away from these though...

Restaurants?... Low expectations, but I don't know if those can be beaten... Gasoline is too high.

I'm worried about the minerals. I feel that the group is so hostage to the vicissitudes of China, that I cannot recommend any of them right now... Plus, Alcoa, Inc. (AA)... (bear sound)... should kick off earnings season with a weak number and a guide down, given its heavy use of energy to smelt the metal... Sell, sell, sell...

Even the oil patch may be difficult. Most of the integrateds (i.e., integrated oil stocks) have refinery exposure, and that business has been a nightmare!

The natural gas companies have higher price realizations, but most of them have raised numbers already. I trust only Chesapeake Energy Corp. (CHK) to move up, and that's because of the secondary price yesterday that is giving you a chance to get in at a good price...

Now... Let's get to the good ones. There are only a couple...

Foods and drugs, for instance...

The drug companies have legal experience and a couple of bumps, but they'll all be weak-dollar related, and not earnings related... not product related...

Schering-Plough (SGP*)... a charitable trust name... seems worth trading now... It's under $20, it has the most overseas exposure, weak dollar...

The foods should take their cue from GIS, which reported great numbers this week.

Kellogg Co. (K), Pepsi (PEP) and Coca-Cola (KO) should follow suit, and all of them should either be hedged against higher grain costs, or make it up in solid overseas sales and weak dollar translations... I like all three... three of a kind.

Which leads us to the two groups with the greatest ability to produce earnings surprises... and that's steels and agriculture.

It's supply shortages and no dumping in the U.S.... Our favorite is United States Steel Corp. (X)... We suggest buying weakness, like we had yesterday... and then selling strength, like we had today... But you want to be in there, ahead of the numbers, because they'll trash the estimates...

Agriculture?... We saw Monsanto (MON) up this week. That was a big estimate beat... a pre-announcement. Frankly, the group still reacts to numbers when they're surprising... We're going to get a crop report Monday from the government. I think it will cause momentary weakness... smaller corn plantings. My takeaway is, if that happens, you buy Potash (POT)... the fertilizer company that has the lowest estimates relative to what I think the Street is looking for, and will beat them... Fertilizers, like steels, put through big price increases this quarter. They're determinant of upside surprises.

Pullback? Here's one... Defense contractors... We talked about it earlier this week... The cheapest?
Textron Inc. (TXT). I expect imminently the V-22 to be approved... That will be a great catalyst. It could happen in a fortnight (i.e., within two weeks)...

.  .  .  .  .

The Bottom Line!:      There are only two groups set to beat estimates. We can't be too optimistic about this earnings season. Be careful. Defense - and not just in stocks - is the watchword.


[See Jim's 2nd Opening Segment stock picks below... ]

 

 

 



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Stock Snapshots - Includes all stocks mentioned above

 

 

 

Jim
Cramer's
rating on
this stock

STOCK
SYMBOL

Closing
price
that
day

Opening
price
next
day

Full Company Name/Comments
(see comments above for each)

TGT

49.69

na

Target (TGT)

WMT

52.12

na

Wal-Mart (WMT)

CHK

45.50

na

Chesapeake Energy Corp. (CHK)

SGP*

19.47

na

Schering-Plough (SGP*)

K

52.48

na

Kellogg Co. (K)

PEP

71.56

na

Pepsico, Inc. (PEP)

KO

60.94

na

Coca-Cola (KO)

X

125.69

na

United States Steel Corp. (X)

POT

160.57

na

Potash (POT)

TXT

54.62

na

Textron Inc. (TXT)

 


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Second Segment
 
 
Opening Segment 2 Title: 'Iron Age'

.  .  .  .  .

Featured Stock(s): AMAG Pharmaceuticals, Inc. (AMAG)

See AMAG's official website here.

See the Yahoo! Finance profile for AMAG here.

 
After this segment, you can see Jim's Lightning Round picks here...



JJC:   For Speculation Friday, I've got a biotech stock that I think has huge potential, and the stock is.... AMAG Pharmaceuticals, Inc. (AMAG)... and it deals in iron... unlike Alliant Techsystems Inc. (ATK), which deals in lead, and we talked about yesterday.

AMAG is one of those little biotech stocks that makes a great speculative play, especially if you think about 1990, our last real credit crisis, where the biotech stocks were among the strongest performers... Take a look at the Amgen Inc. (AMGN) chart during that period, if you get a chance this weekend [Note: We've done this for you, highlighting the 1990 chart for AMGN here.]

AMAG is developing a drug called Ferumoxytol. And, according to them, this drug could completely change - if not revolutionize - the way we deliver iron to dialysis patients, as well as people with anemia...

This drug has been through Phase III testing, and AMAG submitted their new drug application to the FDA in December, so it's just waiting for approval, and I think the stock jumps nicely, if the expected approval comes... the house of pleasure...

Why?... First of all, the stock has already been much higher. The stock soared in September and October, after AMAG released the positive Phase III study data on this iron drug, which is what happens before approval...
 

And it only came down to $39.34, where it is now, after doing two secondary offerings. In other words, big chunks of stock, where they use to finance (their operations)...

I think this is a case where you buy after the secondary... because the company now has about $17 in net cash per share, and they'll be able to market their new drug effectively... They've already got a top-notch salesforce, but the extra dough makes this a relatively safer stock, with more flexibility...
How about that out of a speculation, right? We've got some cash in the bank... we've got a drug about to be approved... I say this is my kind of thing...


But... what about the drug?... Getting iron into patients is tricky...

Right now, it takes a very long time-consuming way... a current method much less safe... A longer infusion time than AMAG...

In fact, currently, doctors are more likely to use a drug called EPO, than to actually administer iron. EPO's got its drawbacks... Ferumoxytol could change that.

The drug's by far the best of breed. It's said to be safer, more convenient, and could be much more rapidly administered than anything else out there...

So, if you can administer significantly larger doses of AMAG's iron in a jiff, you could do with a smaller dose of currently-marketed iron... in an hour or more...

Hey, that's a lot more comfortable for the patient... a lot more efficient for the doctor... saves costs. You could see, right, why this could be a real game changer, in a period where all we ever hear about is costs for healthcare must come down...

How about a ground-level picture of the way this works?...

A dialysis clinic gets a dollar amount from the government for a patient's entire drug care. When Ferumoxytol comes out, it will become both cheaper and safer to administer iron, so the total percentage of government money that the doctor spends on iron will probably increase...

This drug is creating what's essentially a brand-new market for iron... It can deliver it much more swiftly at a lower cost.

Right now, the market for intravenous iron... let's call it around $400 million. $300 to $500... I think AMAG's drug will quickly dominate, as it seems to be clearly superior to the alternatives, in speed and safety...

But what I was just talking about... the dialysis clinics spending more on iron, because of this drug... could immediately expand the entire iron market... not in the numbers... not in the numbers...

I think you're getting AMAG at a really sweet price. The stock's down on the secondary. It's also down on what seems to be some, I don't know... I don't think important stuff... that should eventually go away and let the stock go higher... For instance, the FDA rejected a potential competitor's iron drug, based on safety issues that do not apply to AMAG. I think that's good news. The market didn't see it that way.

Then there is... oh boy, I am trying to be a statesman this week, but failing miserably... There's a rookie sell-side analyst at Merrill Lynch, who downgraded it from buy to neutral. I thought the downgrade was ill-timed. The guy deserves to be... pants-ed!

The stock's also been under pressure, because one of its big analyst backers at Deutsche Bank left a few weeks ago... Another big backer at Bear Stearns...

Everytime you hear baseless rumors about some healthcare hedge fund liquidation, AMAG could be the speculative stock to buy in response, to take advantage of the false negativity spread by the bears.
 

.  .  .  .  .

The Bottom Line!:      AMAG Pharmaceuticals, Inc. (AMAG) is what we call a game changer. And, if everything works out the way I think it will, its new iron drug could send the stock... well, let's just say... maybe stratospheric.

.  .  .  .  .

 

   
 

Stock Snapshots - Includes all stocks mentioned above

 

 

Jim
Cramer's
rating on
this stock

STOCK
SYMBOL

Closing
price
that
day

Opening
price
next
day

Full Company Name/Comments
(see comments above for each)


AMAG

39.34

na

AMAG Pharmaceuticals, Inc. (AMAG)

         

 

 

Go to the LIGHTNING ROUND from tonight's show here >>

See current quotes on Yahoo! Finance from tonight's show stocks here >>

Symbol keys:

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his charitable trust portfolio.  You can see the complete portfolio
of stocks here >>

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Back up the truck - indicated by Jim, when he says the stock is so good, that he would do a 'mon-back' on the stock... In other words, this is the sound someone would say to a truck driver, "Come on back... " as he is "backing up the truck" to load up on his cargo.  Translation for buying stocks:  This recommendation by Jim indicates that, after you do your own homework on the stock, you should feel comfortable loading up on it, as it is in a good position to be bought at this point.

Stumped. - Of the 2,000+ stocks that Jim Cramer has in his head, for which he has an informed opinion, he sometimes comes across a caller with a stock he does not know well enough to opine on...  He then indicates he is stumped and will have to come back to it, after he does some homework of his own on the stock.  This usually occurs during the Lightning Round, when Jim does not know in advance who is calling, or what their stock question is about.
 

 
Definitions of key phrases used by Jim, known as "Cramerisms":

Definition:   'Pull the trigger' is Jim's phrase for making the decision at that point to trade - either to 'buy' or to 'sell' (although he usually uses the phrase for buying), as if to say you should feel comfortable enough to make the final decision without looking back...

Definition:   'Ring the Register' is Jim's phrase for selling a stock, and making it a final sale, that you should not look back on.  Put it behind you.

Definition:  'Let It Come In' indicates how you may wait for it to pull back, or have the stock price come down briefly, as your chance (after letting it come in) to buy the rest of your position (i.e., total number of shares you own in that stock).

Definition:  'backing it up' or 'doing a 'mon-back' is Jim's phrase for the metaphor of backing up a truck to load up on a stock by buying it.  'Mon-back is short for the imaginary worker saying, 'Come on back...' as the truck is backing up to receive its load... Notice that we use the little truck icon to indicate where Jim has mentioned this.  Translation for buying stocks:  This recommendation by Jim indicates that, after you do your own homework on the stock, you should feel comfortable loading up on it, as it is in a good position to be bought at this point.
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StockHomework101.com

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