Jim:    Last night, Hewlett-Packard (HPQ*) reported a superb quarter!  Congratulations to Mark Hurd, the excellent CEO...   It let us know that tech seems to be coming back into style!...

Don't get me wrong... we like HPQ*'s results, but the biggest beat in tech didn't come from that printer and computer and soon-to-be consultant...

It came from Amazon.com (AMZN)...

...making it, in my opinion, the name to own, if you want to play the tech comeback that I see happening after Labor Day...

Now, I know also that this shouldn't be part of the equation... I try to ban it at all times, but AMZN's one darn exciting stock to own...

Alright, last week, AMZN was trading as high as $88... It's come back down. I've been waiting and waiting and waiting. I was going to do this
piece last week, but it was too high... It's come back down to $82 and change, but I think this is a good entry point, given the quarter the company
delivered back on July 24th...

And, just as important, the strength of The Kindle... which looks like it could be delivering iPod-esque sales numbers, if not at least a Walkman...

To understand why I think AMZN - this fallen member of the Four Horsemen of Tech - is now very much back on its feet, you have to look at that beautiful quarter it reported nearly a month ago... Remember, this was a quarter when gas prices were much higher and food prices were much higher... The consumer wasn't just getting squeezed, he was getting waterboarded, and then put on the rack...

So, how did AMZN do the "happier days are here again?"...

Well, it earned 37 cents a share, while the Street was expecting 26 cents. Now, that's a 46% beat! That is one of the hugest ones I've seen... And, to me, that still matters, even if the earnings were in-line, when you exclude items and one-time gains...

But the big story of the quarter came from AMZN's sales... not its earnings! The company's revenues came in at $100 million, or about 2.5% above consensus (estimates by analysts)... giving AMZN - get this - 41% year-over-year sales growth, in an environment where retail was getting mutilated...

When things were bad, AMZN's active customers grew by 18%... its active sellers by 18%... And growth in sales per active customer came in at 19%.

These are unbelievable numbers!... We're in a recession! It's all horrible, right... isn't it all gloom and doom?...

No.

AMZN increased its margins - its profitability - in international business and, best of all, management said there were no signs of a consumer slowdown, as far as they were concerned...

Did you hear that from J. C. Penney (JCP)?... Did you hear that from Macy's (M)?... Did you hear that from Kohl's (KSS)?... Did you hear that from Target (TGT)?...

No!

Sure, you could say that higher gas prices helped AMZN, because people kept going from bricks and mortar stores at the end of the day to online... And this one's a retailer, just like everybody else. And, if consumers have less money to spend on discretionary stuff, that shouldn't hurt them. It didn't seem to last quarter and, now that more people have money in their pockets, thanks to lower prices on everything from gas to chicken, you've got to imagine things will get better at AMZN.

And, can I also say that the customer experience at AMZN is so great, that I doubt new customers who got out of their cars and didn't go to the mall, will ever go back to their old ways...

Throw in the fact that... here's a piece of information that on one's talking about, except for Cramer... Throw in the fact that every state in this country is hurting for cash right now, and it's very likely that many of them will raise sales taxes, because they have to balance their budgets, unlike the federal government... And, AMZN, which only makes you pay sales tax on your purchases, if your ordering from Kansas, Kentucky, New York, North Dakota, or Washington... five out of 50 states... will become an even more appealing place to shop...

Then there's The Kindle...

I know there's been a lot of mixed opinion about this, and the company's been doing its best to keep Kindle sales under wraps... But a pretty credible report from Citigroup estimated that Kindle's sales would be just under 400,000 by the end of the year... Those look like early iPod sales to me and, when you take into account that Kindle book sales made up more than 10% of book titles sold... up from 6% in April... not that long ago... and the fact that customer reviews have become increasingly positive... it looks like AMZN has a major gadget on its hands... in addition to being a top-notch online retailer...

Remember when Sony used to come up with them?...

To me, Kindle's a game changer, period.

As for how AMZN stacks up against other online players, well, here's pretty amazing stuff... It's actually been able to outperform Cramer fave, GOOG... who's CEO, Eric Schmidt, we had on last week... in operating profit growth... It's been able to out-do EBAY in sales volume and customer acquisition...

AMZN's got lower margins than both EBAY and GOOG, but that makes it easier for AMZN to add new products and services, like The Kindle...  and its Prime program - which is really good, have you seen that one? - let's users get free shipping, in exchange for a yearly subscription fee... That could help close the margin gap.

The Amazon Prime, especially, has helped the company keep customers. Once you pay the fee, how can you not shop exclusively at Amazon for the free shipping? And they're expanding the program internationally... just like they already expanded their third-party sales program internationally... a big reason why I think international performed so well last quarter.

This company's going to be like Google one day... It's going to get 52% of its business from international...

AMZN's got a new kicker here, and this one no one is talking about... no one...

It's called "Amazon Fresh"...

This program sounds like a lot of the failed dot-com enterprises from the '90s... It's an online grocery store that Amazon's testing in Seattle... Amazon pays sales tax on all taxable items... If you order before midnight, you get the groceries before dawn... If you spend more than $25, there's no shipping fee...

AMZN has been testing this program since last August, expanding it into more neighborhoods. I think this could work all over the place, even though the idea didn't back in the dot-com era, because gas prices are so much higher... and because AMZN is already near a one-stop shop platform for nearly everything you want to buy on the web...

Why not have groceries?... And get people to buy more things on the site?...

I think this same-day innovation will be gigantic... and, don't forget, AMZN is such a big customer of FedEx (FDX), that I bet Fedex has to bend over backward, and keep delivery costs much lower than for any other client...

This is so smart!... AMZN is so smart!...

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

Jim:    You want to know how to pick stocks like a money manager?...  How about how to pick stocks like Cramer because, at my hedge fund, we managed to give investors a 24% average annual return after fees...

Tonight, I'm showing you what I picked up... how I did it... and the homework you need to try to do yourself, if you want to beat the market...

Remember, I'm not always going to be here...  I'm not even here at 6pm... although I will be (back in the 6pm slot) next week...

The best way to explain my thinking is to compare two companies in the same business, head-to-head, in order to figure out which one the market will favor... the one you should buy.

To make this easier, I've created a 10-point scale that mimics how we rated stocks at my hedge fund... 

Now, remember, we've compared McDonald's to Burger King this week...  Coach versus Tiffany...  Coke versus Pepsi...  and, today, we're moving to candy... 

.  .  .  .  .

We're going head-to-head with Hershey (HSY) versus Cadbury (CBY)...

HSY and CBY are both confectionary companies... That's a subset, a genus, of food and beverage... These are what you may want to buy when inflation has peaked, but the economy hasn't yet recovered... which is exactly where I think we are.

The market generally sees these as defensive, recession-proof stocks.

Then there's another point in favor of the candy companies... The Mars acquisition of Wrigley, financed by Warren Buffett's Berkshire Hathaway. Mars is paying a gigantic premium for Wrigley... and, with HSY and CBY the last two pure plays in the confectionary business... they could be prime takeover targets, right?... Stay tuned.

We rate sector analysis as so important that we give up to 5 points out of 10 to the strength of the sector...

Candy's a 5, the highest possible score, because people eat it no matter what... hence, what Buffett sees as iconic... as close as you come to recession-proof... Wrigley.

All right, so we're going to start with 5... Each is going to start with 5 (points)...

.  .  .  .  .

Now, only after you grade a sector do you go into the head-to-head compares...

We always start with growth. That's the most important characteristic. Who's got the most? Who's got the most consistent growth?...

The contrast here is really stark...

Only three weeks ago, HSY reiterated its outlook for 2008. Then, last Friday, incredibly, it cut its expectations... for both 2008 and 2009. It had just reiterated!...

HSY now expects to come in at the low end of its 2008 guidance. It expects earnings growth of 0-6% in 2009, versus long-term goals of 6-8%. The stock got hammered mercilessly on this news, as it should have...

Plus, get this, they announced it Friday, after the bell... in the summer! Cowards!... We were already at the Hamptons, for heaven's sake!

CBY, on the other hand, beat the Street's earnings expectations by 5% when it reported. Hey, listen, they're both food companies, right?... They both use a lot of chocolate...

It reported the 2nd quarter on July 30th... It maintained its confidence about the rest of the year, and noted that sales growth was trending ahead of the company's targets...

I'm calling this a no-brainer...

1 point for CBY... and, hey, do you mind if I take off a half a point for HSY?... I mean, they guided down...

.  .  .  .  .

How about strategy and execution?...

Well CBY is a thoroughly international company with 72% of its sales coming from outside of the U.S., and it recently spun off its lower-growth North American beverage division, with Dr. Pepper and Snapple, so we have a pure play on candy...

HSY only gets 14% of its sales from overseas. It's thoroughly American... and not much international diversification. They could have moved there years ago...

But here's what I'm thinking is the most damning thing when it comes to HSY's strategy... In the wake of the Mars/Wrigley merger, the manager of the trust created by the Hershey family that has a controlling stake, 78%... he comes out, get this... and he says, "Hershey's not for sale"... Worse, he says that the trust's number one goal is to remain in control of the company... not sales... that's not the number one goal... not profits... that's not the number one goal... but independence?

One of my rules in Stay Mad For Life... says never, never, never say never when it comes to a takeover. But, you know what? In this instance, given the insistence of the Hershey trust, and HSY's bizarre ownership structure, I can safely tell you, you're not going to get a takeover here... they're not going to sell. That's ridiculous and insulting, given how poorly they're doing!

I'm doing it again... HSY is losing a point... I'm taking it to 3.5 now. CBY, well, gains one... now we've got 3.5 to 7, okay...

.  .  .  .  .

Dividends... here's one place that HSY has to lead... and wait until you hear why...

It has a 3.2% yield, compared to CBY's 2.5% yield...

I'm going to give HSY a half point, okay... because, if you got in right here, you're actually doing okay... but, remember, the yield is so high only because the stock's going down so much!

The score is now 7 to 4, with CBY now with an insurmountable lead...

.  .  .  .  .

How about management?...

CBY's CEO is real good... he's been there since 2003.

HSY just appointed a new CEO in October. I don't like first-year CEOs! They're liable to screw things up, like HSY's CEO just did last week...

Throw in the fact that The Wall Street Journal has indicated that Richard Lenny, the former CEO of HSY, was frustrated by his lack of autonomy in running the business, because of the meddling of its trust... and CBY is the clear winner.

It gets a half a point, to none for HSY...

That widens the lead... CBY's now at 7.5. HSY is at 4.

.  .  .  .  .

How about costs?...

CBY, with 10.4% global marketing share, compared to 5.1 for HSY, should be in a much better bargaining position with its suppliers. CBY has been able to pass along price increases to its customers, without losing them. HSY just announced a 10% price hike to offset commodity prices, the reason for the lower guidance... I think it will lose customers...

CBY gets a half a point... I'm not giving any to HSY...

.  .  .  .  .

So here's the final...

CBY, 8... HSY, 4...

How's this square with what the market's paying for the stocks right now?...

Well HSY has a price-to-earnings multiple of 20x on next year's estimates... 20... keep that number in mind... that's not the share price...

CBY's at 17x earnings...

Now, wait a second... that's unbelievable...

Not only is CBY clearly the better company... that 8 to 4 score... but it's cheaper than HSY... and that's without factoring in its higher growth rate. You have no idea how rare this situation is. In fact, I believe this is only possible because HSY is so bad...

CBY is a good company with a stock that's way too cheap in comparison to HSY. But, to me, it's HSY's horrible ownership structure that makes this one so easy to figure out.

If this disparity stays, I've got to tell you something... I think CBY is going to get... somebody's going to take a run at it... I'd like to own them...