Misunderstood by Market
In the "Executive Decision" segment, Cramer sat down with Bill Marth, North American President and CEO of
, a stock which Cramer owns for his charitable trust,
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, and one which he said is misunderstood by the markets.
Marth joked with Cramer that the stock market is indeed difficult to understand, which is why Teva sticks with pharmaceuticals. He said that Teva is a solid company with solid gross margins and $100 billion worth of innovator value. The company plans to launch 25 new drugs in 2011, which will add an additional $12 to $13 billion in innovator value.
Marth explained that Copaxone, one of the company's flagship drugs, is in the middle of a patent lawsuit, but even if the company loses that suit, Copaxone is a difficult product to replicate without a new set of clinical trials which would greatly delay the launch of any competing products. He said that many investors also think of Copaxone as a one product venture, but that's not the case.
Marth also discounted any impact of competing oral therapy drugs to Copaxone by saying that Teva is working on their own oral therapies which will be available shortly.
Cramer continued his support for Teva, saying that the company has a consistent record of delivering on its promises.
Cramer reminded viewers on the importance of following rules, including the need to sell stocks that receive takeover bids.
Cramer said that once a takeover is announced, the upside in a stock is capped and investors must sell. In the case of
, Cramer made an exception on Feb. 5 and told investors to hold on for a higher bid. In this rare case, breaking the rules worked, and the stock of Airgas climbed an additional 13%. Cramer said it's now time to sell.
Breaking the rules doesn't always work however, as Cramer noted with
, a stock he also advised holding onto after the company received a bid on Aug 17. In this case, the deal was blocked by the Canadian government, sending shares lower.
Cramer said discipline always trumps conviction when it comes to takeovers. He then recommended selling
, a stock he recommended on Jan. 29 and
, a stock he recommended on June 22. Both stocks have received takeover bids and are up handedly.
Cramer concluded by illustrating his point with
, a stock that recently rallied 145% on the rumor of a takeover from
. When Fortinet denied the rumor, the stock plummeted. "Always sell on a takeover, even if it's a rumor," said Cramer.