Cramer's 'Mad Money' Recap: I Like Tech
01/14/08 - 07:44 PM EST
TheStreet.com Staff
Click here for an archive of Cramer's "Mad Money" recaps.
"Today's tech rally is long overdue," Jim Cramer told viewers of his "Mad Money" TV show Monday. Last week's selloff in technology was just not justified, Cramer said, adding, "There's nothing really wrong with most of these tech stocks." To emphasize his point, he'll be featuring tech stocks this week on "Mad Money." Cramer remains a fan of Corning (GLW Quote - Cramer on GLW - Stock Picks) and Hewlett-Packard (HPQ Quote - Cramer on HPQ - Stock Picks), the latter of which he owns for his charitable trust, Action Alerts PLUS.
Outsourcing R&D
Cramer's been a long-term fan of cutting health care and drug costs. He's featured companies like Medco Health (MHS Quote - Cramer on MHS - Stock Picks) and other health care cost-containment companies in the past. But tonight he focused on contract research organizations, or CROs. These companies allow big pharmaceuticals to outsource their clinical trial work to cut costs. Cramer's favorite in this space is Covance (CVD Quote - Cramer on CVD - Stock Picks). Covance, Cramer said, handles early and late stage testing and has a solid customer base. The company also has an immaculate balance sheet, according to Cramer. Covance has $250 million in cash, no debt and $300 million in expected free cash flow over the next two years. Cramer sees the potential for Covance to trade at 37 times this year's earnings, which translates to a target price of $115, or a 33% upside. Despite being just $1 off its 52-week high, Cramer said Covance "must be bought on any weakness." Cramer also recommended Charles River Labs (CRL Quote - Cramer on CRL - Stock Picks) as an early stage CRO play and Parexel (PRXL Quote - Cramer on PRXL - Stock Picks) as a pure-play late stage CRO. He also still likes drugmaker Novartis (NVS Quote - Cramer on NVS - Stock Picks) and retailer CVS Caremark (CVS Quote - Cramer on CVS - Stock Picks). CVS is a stock that he also owns for his Action Alerts PLUS portfolio.Behind Chattem's Success
Cramer welcomed Zan Guerry, CEO of Chattem (CHTT Quote - Cramer on CHTT - Stock Picks) to the show for an update on the company's continued success. Chattem has risen 107% since Cramer recommended it in April 2006. Guerry credited some of the company's success to its recent acquisition of five brands from Johnson & Johnson (JNJ Quote - Cramer on JNJ - Stock Picks) earlier this month that gave it Cortizone-10, Unisom, Balmex and ACT mouthwash. He said the the company will continue growing through both acquisitions and extensions of its many current brands. Cramer said, "This stock's been a winner and will stay a winner."
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