Cramer's 'Mad Money' Recap: Staying Cautious for Coming Week's Earnings
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NEW YORK (TheStreet) -- We don't know where the market will be when the fiscal crisis comes to an end, Jim Cramer told his "Mad Money" TV show viewers Friday, which is why his game plan for next week's trading included a lot of listening and not a lot of action. Cramer said he's skeptical of positive comments coming from the White House, as he's had his hopes dashed plenty of times before.
Del Frisco'sInvestors looking to speculate on a fresh-faced restaurant stock may have a lot to choose from, Cramer said, but when it comes down to Ignite Restaurant (IRG), Chuy's Holdings (CHUY), Del Frisco's Restaurants (DFRG) and Bloomin' Brands (BLMN), there can be only one winner. Cramer said Ignite Restaurant came public in May and is down 29% since it's IPO. He said the company, which owns Joe's Crab Shack, among others, was forced to restate their earnings, which is never a good sign. Cramer said this stock must be sold. Cramer said he'd also take profits in Chuy and Bloomin' Brands. Chuy came public in July and is up 38% since its IPO, but only delivered a mere 1.5% increase in same store sales. Bloomin' came public in August, and what stock is up 17%, but Cramer noted that the purveyor of Outback Steakhouse and Carrabba's Grill is too risky at these levels. That leaves Del Frisco's, the only one among the group Cramer said can be bought. Del Frisco's owns 32 high-end steakhouses, but unlike the failed attempts of other steakhouse stocks, this one has a clean balance sheet, room to grow and is delivering same-store sales growth between 3.5% and 4%. Trading at just 13.4 times earnings with a 16% growth rate, Cramer said this stock is far too cheap.
Car vs. CarThe auto business is booming again in North America, Cramer told viewers, but forget about investing in Ford (F) or General Motors (GM), they have too much international exposure. Cramer said when it comes to domestic autos, the only game in town is AutoNation (AN) for new cars and CarMax (KMX) for used ones. But which one should investors add to their portfolios? When the company's last reported, AutoNation reported an earnings beat, only to see its shares sell off, meanwhile CarMax missed on its earnings and saw its shares rally. Cramer said that's because the tides are changing and used cars are once again expected to outsell new ones going forward, especially with some 200,000 cars damaged by Hurricane Sandy in the northeast. Cramer said the new car market is getting more cutthroat and competitive now that dealership closings are behind the industry. Meanwhile the supply of used cars, once constrained by the recession, is finally returning to normal levels. That leaves more opportunities for CarMax, said Cramer, and potentially tougher times for AutoNation. Then there's the growth aspect. CarMax has 110 locations but ultimately plans for 300, expanding its footprint by 10% a year. AutoNation, on the other hand, has new car franchises, which can't be built without approvals from the manufacturers. Cramer said shares of AutoNation are also closely held, making them not trade as well as Carmax, meanwhile CarMax just announced its first share repurchase program. So when it comes to domestic autos, Cramer said that CarMax is the way to go.
Lightning RoundIn the "Lightning Round," Cramer was bullish on Chipotle Mexican Grill (CMG), Alexion Pharmaceuticals (ALXN), American International Group (AIG) and Union Pacific (UNP). Cramer was bearish on Palo Alto Networks (PANW), Zipcar (ZIP) and Trinity Industries (TRN).
HomeworkIn his "Homework" segment, Cramer tied up a few loose ends. He said Omega Healthcare (OHI) may have an 8% yield but investors need to wait for more clarity on the company's reimbursement rates. Cramer said InvenSense (INVN) has seen its stock slide in recent months so he's not a fan. Cramer was also not a fan Greenway Medical (GWAY), with that stock trading at 37 times earnings. Finally, Cramer issued a mea culpa for Dynavax Technologies (DVAX), a speculative biotech that was cut in half, down 47%, after the FDA asked for more safety information on its latest offering. Cramer said Dynavax shows the downside of speculating in biotech and he got this one wrong. Since the FDA did not reject Dynavax's drug, Cramer said he wouldn't be a seller down here, as the company has plenty of cash to survive and lots of promising prospects.
No Huddle OffenseIn his "No Huddle Offense" segment, Cramer educated investors on what the term "oversold" really means. Using Apple (AAPL), a stock which he owns for his charitable trust, Action Alerts PLUS, as his example, Cramer explained why the stock fell sharply to just $504 a share, only to snap back sharply to $529 a share later in the day. Cramer said often times large sellers of a stock will simply overwhelm the buyers, as they have been in Apple. As the sell orders from big shareholders start to flow, others investors will follow suit and short the stock, betting that the flow will continue to be negative. Eventually the big guys run out of stock to sell, forcing the shorts to buy back their shorts, sending shares higher. That, said Cramer, is how a stock can fall to $504 only to recover over $25 as the shorts decide the big boys are done with their selling. Cramer said that Apple remains insanely cheap and despite all the worries, not a single analyst has dared to downgrade the stock. To sign up for Jim Cramer's free Booyah! newsletter with all of his latest articles and videos please click here. To watch replays of Cramer's video segments, visit the Mad Money page on CNBC. -- Written by Scott Rutt in Washington, D.C. To email Scott about this article, click here: Scott Rutt Follow Scott on Twitter @ScottRutt or get updates on Facebook, ScottRuttDC
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