Cramer's 'Mad Money' Recap: Higher Learning
TheStreet.com Staff
11/23/05 - 07:32 PM EST
Click here for an archive of Cramer's "Mad Money" recaps.
Professor Gadget
"It's going to be a
Best Buy (BBY Quote) Christmas," said Jim Cramer on his "Mad Money" TV show Wednesday.
Whether it's Christmas shopping, Hanukkah or Kwanzaa, kids want electronic gadgets like the iPod, Sony PSP, and
Microsoft's(MSFT Quote) Xbox 360, he said.
Adults want high-end TVs, which have come down in price to the point where they're "almost affordable for regular people," said Cramer.
Cramer said a couple things to watch out for, though, when buying the stock of Best Buy, are competition from
Wal-Mart (WMT Quote) in the form of lower-priced extended warranties, which are a big source of profit for Best Buy, and possible not-so-hot third-quarter results, scheduled to be released Dec. 13.
If the quarter isn't so hot, said Cramer, he would use that as a 'mon back* buying opportunity.
In response to a question about
GameStop (GME Quote), Cramer said the company's stock has sold off this week because it sold out of its supply of Xbox 360s on the first day the game system was released.
However, once supply catches up to demand and people start buying games, "all those video games are going to be for sale at GameStop," he said. "This is a classic 'mon back situation."
Commenting on when to sell Best Buy, Cramer said if one wants to approach Best Buy as a trade, the time to sell would be on the last day of the year. The big money will be made after Christmas but before the New Year, he said.
Honor Roll
Cramer is bullish on
ITT Educational Services (ESI Quote) because Congress may repeal a rule that requires for-profit colleges to teach 50% of their classes in buildings.
For-profit schools are growing four times faster than nonprofits, he said, and that means for-profit online schools will be eligible for more "juicy financial-aid money." If the repeal goes through, it is expected to add $3 billion to $4 billion to an $18 billion industry over the next decade, said Cramer.
Cramer likes ITT because it is best of breed. All of the four publicly traded for-profit colleges,
Apollo Group (APOL Quote),
Corinthian Colleges (COCO Quote),
Career Education (CECO Quote) and ITT have had legal woes and/or have been the subject of investigations, said Cramer.
But, ITT's lawsuits are in the past, he said, and it has the best balance sheet in the group. Furthermore, some might argue that ITT's degrees are "more legitimate" than some of the other online-based schools' "because ITT is a technical school," he said.
Of the other schools, Cramer said Apollo, though it will be a huge beneficiary if the rule is repealed, is a "tad expensive" at about 30 times earnings given that legal proceedings against it are still under way.
Career Education also has strong growth in its Internet division, but its 2003 annual report is being investigated by the
SEC, said Cramer. The company is also the subject of a lawsuit alleging sexual harassment at one of its colleges, and
60 Minutes did a story about its "incredibly aggressive salespeople," he said.
Finally, Cramer said Corinthian has "lawsuits everywhere," is restating earnings, and it's costs are spiraling out of control. "This place is a joke!"
In response to a question about
Education Management (EDMC Quote), Cramer said the company is fine, but he prefers ITT.
Sniffing Out Bankrate
Herb Greenberg, senior columnist for
MarketWatch, joined Cramer for their regular rap session. Cramer asked Greenberg about fax-to-email communications provider
J2 Global Communications (JCOM Quote).
Greenberg, who is bearish on J2, said the FCC wants to add a $1 tax to every phone line. J2 tells investors that it doesn't believe such a development would have a material impact on its business.
But, "you know what they tell the FCC?" asked Greenberg. "They say if this tax goes through...it will screw us!"
Cramer then asked Greenberg about
Bankrate (RATE Quote). "Should we get in this thing? It looks like the next financial
Google (GOOG Quote)!"
Greenberg said Bankrate's stock is up 140% this year. "If the mortgage business...goes down, this business is going to have problems. You've already seen signs of it," he said with page views coming down in the September quarter.
Couldn't Bankrate be an acquisition candidate, asked Cramer?
"If they get acquired, all bets off. Then, it's a good deal," said Greenberg. But, "the slightest whiff...of a small problem with their growth, the stock goes down."
"I like that call," said Cramer. "I think he's two for two today."
Greenberg is "right. These stocks are wrong," he said.
The Hole Gets Bigger
One stock that deserves to be in the prison "sell block," is
Krispy Kreme Doughnuts (KKD Quote), said Cramer. The company has "so many problems...I don't even know where to start."
First, Krispy Kreme is going through a restructuring of "everything they can get their hands on" because the company has "botched everything they've touched so far," he said.
Second, one of Krispy Kreme's larger franchises filed for bankruptcy last month, added Cramer. That followed a lawsuit in September by one of Krispy Kreme's franchises charging that the company had fraudulently billed it and had tried to force the franchise into bankruptcy.
"A company like this lives or dies by its relationships with franchises. When they're in trouble, the company is in trouble," he said.
And, if that wasn't enough, the U.S. Attorney's office is investigating Krispy Kreme, and the company hasn't filed financial statements since October 2004. What's more, some financial statements prior to October 2004 have to be restated, said Cramer.
Cramer is appalled that the
NYSE is letting the stock trade. Without current financials, there's no way to know anything about the company, he said.
Besides, the Krispy Kreme fad is over, said Cramer. "Who eats donuts these days?"
Lightning Round
Bullish
Cramer was bullish on
Whole Foods Market (WFMI Quote),
J.C. Penney (JCP Quote),
Weyerhaeuser (WY Quote),
NitroMed (NTMD Quote),
Lucent Technologies (LU Quote),
Syneron Medical (ELOS Quote),
IBM (IBM Quote),
Kansas City Southern (KSU Quote),
Union Pacific (UNP Quote),
Apple Computer (AAPL Quote),
Microsoft (MSFT Quote),
Taiwan Semiconductor Manufacturing (TSM Quote),
Johnson & Johnson (JNJ Quote),
General Maritime (GMR Quote),
Headwaters (HW Quote) and
TALX (TALX Quote).
Bearish
Cramer was bearish on
USG (USG Quote),
Martha Stewart Living Omnimedia (MSO Quote),
Gasco Energy (GSX Quote),
Merck (MRK Quote),
Alcon (ACL Quote),
ATP Oil & Gas (ATPG Quote),
eBay (EBAY Quote),
ServiceMaster (SVM Quote),
i2 Technologies (ITWO Quote) and
Frontline (FRO Quote).
For more of Cramer's insights during the Lightning Round, click here.
*For all you home-gamers, a 'mon-back opportunity means Cramer would back up the figurative truck and load up on a stock.
