Wednesday, 05/07/08
Posted 05/07/08,  11:57 pm ET

(Scroll down to see Jim's comments below)

 
 
Today's date:  Wednesday, 05/07/08

  Dow Jones: 12,814  -  206
  NASDAQ:   2,438   -  44
  S&P 500:   1,392   -  25
 
 
 
 
 
First Segment
 
 
Opening Segment 1 Title: 'Power Forward?'

CEO Interview:
Ray Milchovich, CEO

.  .  .  .  .

Featured Stock(s): Foster Wheeler (FWLT*)

See FWLT*'s official website here.

See the Yahoo! Finance profile for FWLT* here.




See Opening Segment 2, below...

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

        
Jim's Comments BEFORE the interview:         This morning, Foster Wheeler (FWLT*), a longtime Cramer-fave infrastructure play, and a stock I own for my charitable trust... has given us nearly a double since I recommended it on April 16th of 2007...  It reported a great quarter...  Earnings per share came in at 85 cents...  12 cents above the Street's consensus estimate... what the Street was looking for...  Revenues (sales) came in at $1.8 billion, compared to $1.48 billion the Street was expecting...  The stock soared!  It was up huge before the market opened...

Then came the conference call...

And you know what happened on the conference call...  candidly... I thought the company shot itself in the foot!  They spent far too much time talking about the one bad thing from the quarter... weak trends in its North American power business... something that's really only a small part of the company...  Frankly, I will tell you... I was confused myself...  which worries me, because I know the company pretty well...

This one item - solid fuels in America, boilers to be specific - was almost all that was talked about in this very long conference call...  All the positives... orders, cash generation, cash on the balance sheet, new projects, petroleum, engineering and construction... a bigger part of the business... were totally obscured...  Frankly, I thought it was management that did the obscuring, albeit helped by a Lehman Brothers' analyst, who relentlessly drilled down the softness...

The stock that was up as much as 3 points before the call, promptly gave up all of its gains and then some... and closed down... down badly.  The reversal was stunning...

We've got to clear this up...  I know it concerned me.  After the call, and the relentless drilling, I said, well, I've got to sell a thousand shares myself, for my charitable trust... bringing my position down to 2500 shares...  I was thinking, oh now... have we lost something here?  Is something in the North American power business a red flag, after a great run?  I was spooked, literally, by management...   They were much less bullish than I was going in.  Remember what happened with Diana Shipping (DSX).  When I was bullish, and they told me not to be bullish, I got out...  I took something off the table... I told you to.

Now, we don't want to be greedy, but also there's a big problem here...  We don't want to miss out on one of the greatest long-term trends ever... infrastructure.

I'm confused.  What do you do when you get confused... You speak to the CEO.  You talk to Ray Milchovich, the CEO for FWLT*...  The man's been money for us.  We'll try to find out if the future's still bright, or if there are some worries on the horizon that makes us want to sidestep, or take some more profits, until FWLT* maybe goes lower and gives us a better entry point...

Mr. Milchovich, welcome back to Mad Money...
 

.  .  .  .  .


Jim's Comments AFTER the interview:
     He's the chairman and CEO of FWLT... He has never steered us wrong. I feel better. I must admit, the analysts were acting as if this thing was just going to fall apart... It isn't. Did I freak out? Nothing wrong with taking a little profit... Bulls make money, bears make money, hogs get slaughtered... but I'm felling pretty darn good after that about FWLT...

 

.  .  .  .  .

 

   
 

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)


FWLT*

65.16

na

Foster Wheeler (FWLT*)

         
 

 

 



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Second Segment
 
 
Opening Segment 2 Title: 'A Swing And A Miss'

.  .  .  .  .

Featured Stock(s): Schering-Plough (SGP*)

See SGP*'s official website here.

See the Yahoo! Finance profile for SGP* here.

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

        
JJC:    Yeah... It's Whiff Week here on Mad Money.  Everyday, I'm featuring one big call that I completely and utterly blew... one stock where I stepped up to the plate, and then totally whiffed!...

We're doing this... focusing on my big mistakes... because, without accountability, I might as well stop doing the show...

Tonight, the whiff I want to tell you about is... Schering-Plough (SGP*)...  How I missed the top of SGP*...

.  .  .  .  .


About a year ago, May 14th, to be specific... after SGP*'s CEO had given us close to a double since taking over, I had recommended the stock all the way up...  There is was at $31.95...  The greatness of CEO, Fred Hassen... the ability to transform the company...  I reiterated my buy...

At $31, I had to come out here and reiterate my buy, and that was pretty much the top for SGP*...

Since then, as you probably know, this stock has been hammered, and hammered mercilessly...  It has been just annihilated bad...   There was a study showing that Vytorin and Zetia, cholesterol drugs that SGP* markets jointly with Merck (MRK)... the company's top two drugs... were no more effective than previous generations of drugs...

I stood by SGP* and its CEO, Fred Hassen, as the stock fell to $13 and change...  It finally went back to $18.18, where it is now... 

$31 to $13...  I'm going to wear this post-it all the way home...

All right, how did I blow it so bad?  How did I blow it?...

.  .  .  .  .


My biggest mistake was in thinking that the market would be rigorous (e.g., really look hard at the numbers and understand their business)... not me, but that the market would be rigorous, when it came to discounting how much damage these two drugs would do, and the study would do, to SGP*'s earnings...

You see, when we first heard that the study was bad, SGP* fell to the low $20s...  I thought that was it...  I thought the negative news was "in" the stock, as we say on the Street...

To me, it seemed like simple math...   SGP* had lost almost half of its value, but the drug numbers hadn't been cut in half.  Prescriptions were down something like 15%.  One drug, down 15%?.. the company gets cut in half?...  The market had to be overreacting, right?...  But then it kept overreacting... it would go even lower and lower...

.  .  .  .  .

My second big mistake was to disregard The New York Times... which just kept hitting it and hitting it and hitting it...  over and over again...   I know that the New York Times could do some serious damage, but I didn't let this sway me...   On March 31st, these purportedly new results... they were same old results, just repeated and repeated and repeated... It was stuff we had known about for months in advance... The stock was at $19.47... I was reading it on Saturday... and, sure enough, I say, not good...  The stock went to $14 the next day...

It just seemed like a lot of sound and fury to signify nothing...  Of course, sound and fury can move the market, so it crushed the stock anyway, and it crushed Cramer...

.  .  .  .  .

I also put too much stock in Fred Hassen, SGP*'s terrific CEO, and his ability to create a new SGP*, by acquiring Organon, and giving his company a great portfolio of upcoming drugs, that diversified away from SGP*'s dependence on its cholesterol franchise.  This was good... 

I didn't expect no one else to see what I saw...  All they cared about was the pounding from Vytorin...  I thought that, when Fred Hassen bought $2 million of his company's stock at $18 and change, that that was the bottom...  Wrong again!  He was, in essence, was being too rational, and I followed his lead...

.  .  .  .  .

But the real mistake... let's call it...  let's talk about the real mistake, all right...

The real mistake, and the last one I'm going to talk about, was simple greed... greed.

I recommended the stock at $16 and, then again, I recommended it at $31... because of Fred Hassen... 

What should I have been telling people?...  Sell, sell, sell...  Yeah, take a profit, for heaven's sake...  Not me.  I got greedy and, lo and behold, the gains vanished...

Think of rule #1 in the hedge fund handbook, Jim Cramer's Real Money: Sane Investing In An Insane World...  Bulls make money, bears make money and pigs get slaughtered...

.  .  .  .  .

So, what do we do now with SGP*?...

Well, now, the fear of the drugs is finally in the past...  The drastic decline in prescriptions has not occurred.  And, in the meantime, SGP* actually has many new drugs in the pipeline.  I think the story's actually playing out the way it should have...

With Fred Hassen's latest turnaround plan... talking about $1 billion in cuts by 2012... in addition to $500 million in savings from the Organon acquisition...  and, given the fact that SGP* could be one of the only companies in the drug business that actually has enough new products in its pipeline to offset patent expirations...  I think this stock is a buy, buy, buy...

You know, it's almost back to where I recommended it first.   But this time, it's a much better, much more diversified story...  because of Organon...

.  .  .  .  .

The Bottom Line!:      I whiffed on Schering-Plough (SGP*)...  I whiffed...  I remained too positive, because I assumed the market would treat old news like... well... old news...  when, in fact, it took the stock down over and over and over again on the same information.  It's irrational, but the market's irrational all the time.  We can't lose sight of that going forward... And, most important, I was a pig... 

 

.  .  .  .  .

 

   
 

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)


SGP*

18.18

na

Schering-Plough (SGP*)

         

 

 

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

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

Symbol keys:

A Charitable Trust stock. - An asterisk next to a stock symbol indicates that Jim mentioned it is a stock that he manages within
his charitable trust portfolio.  You can see the complete portfolio
of stocks here >>

Thumbs up - indicates he would buy the stock or, at the very least, not sell the stock.  We do our best to interpret Jim's opinion on stocks, as we think it is indicated by his comments during the show.  Please read his comments to decide for yourself.

Thumbs down - indicates he has said not to buy or to sell the stock, based on his comments  We do our best to interpret Jim's opinion on stocks, as we think it is indicated by his comments during the show.  Please read his comments to decide for yourself.

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.
  See more "Cramerisms" & other financial phrases here >>
   
Helpful Websites:
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of stocks at:

warren-buffett-portfolio.com

 
  Stock Homework 101:   This is an excellent upcoming site that provides resources and links to help you do that homework that Jim Cramer recommends after hearing his suggestions...

StockHomework101.com

This site is coming soon.   Thank you.

 
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