Sept. 25, 26: Guest Scott Reamer

Participants on Sept. 25 included host Brenda Buttner, Jim Cramer, Herb Greenberg, Dave Kansas and guest Scott Reamer. The transcript is unedited and phonetic spellings are indicated with a (ph).

BRENDA BUTTNER, HOST, THESTREET.COM: Hi everyone, I'm Brenda Buttner, and you are connected to "TheStreet.com." We're here to help you take control of your investment decisions. Let's get things going with this week's Stock Drill.

Our guest stock picker today is Scott Reamer. He's the director of Internet research at SG Cowen. Scott has positions on all the stocks he says are good buys -- Amazon.com (AMZN:Nasdaq), DoubleClick (DCLK:Nasdaq) and HotJobs.com (HOTJ:Nasdaq).

And joining us to ask the tough questions, so you can decide for yourself, from TheStreet.com, Jim Cramer, who also runs a hedge fund, and TheStreet's senior columnist, Herb Greenberg. Herb doesn't own any of the stocks we are talking about, and Jim, you just have a long position in DoubleClick, right?

JIM CRAMER, THESTREET.COM: Yes.

BUTTNER: OK, thanks so much for joining us, Scott. So, your first pick is online retailer Amazon.com. Of course, you're going to raise a few eyebrows with that...

SCOTT REAMER, DIRECTOR, INTERNET RESEARCH, SG COWEN: Sure.

BUTTNER: ... because the cost of getting customers is going up and the revenue from customers is going down.

REAMER: Well, it is and it isn't. That figure is a little misleading, because it's based on cumulative customers. So it's a little misleading. At the end of the day, all retailing, at some point, at some level, will go through Amazon.com to a degree.

These guys -- forget about losing money on books or CDs. That's not the way they make or break their business, effectively.

HERB GREENBERG, SENIOR COLUMNIST, THESTREET.COM: Scott, we can discuss that. I've got to ask you something here.

REAMER: Sure.

GREENBERG: You've heard of something called Internet time?

REAMER: Yes.

GREENBERG: Well, that's when everything compresses real fast.

REAMER: Sure.

GREENBERG: And this is a company, that a year ago was turning in gains -- sequential gains of 33%, 33%, 32%. This year, 16%, 7%. Sears, 15%. This thing's below Sears! How can you defend this kind of a company? It seems like its growth has just hit the wall.

REAMER: Well, it hasn't frankly. At the end of the day, these guys -- and make no mistake about it, they are controlling their growth. They understand that the worse thing you can do, effectively, is get customers in, pay a lot for them, and then lose them because you're not servicing them properly, they're not getting the book or the CD.

So, in reality, think of them as growing a business the way they want to, at a pace that they want to grow at.

CRAMER: If that's the case, Scott...

REAMER: Sure.

CRAMER: ... why does profitability keep getting pushed out? Why does this man, Bezos have such contempt for the profitability system that works for every other company that I've ever made money in?

REAMER: Sure. It's a good point, and it's one I constantly am responding to. Frankly, it has everything to do with this concept of increasing returns. They understand that a dollar's worth of brand or marketing today is going to be worth five dollars' worth of brand or marketing a year from now -- maybe even six months from now.

So, at the end of the day, what they're doing is spending money today, where they're going to get more efficiency from that dollar, than in spending it six or nine or 12 months from then.

GREENBERG: And they've expanded though. You know, I have to tell you. It's one thing when they were all books...

REAMER: Sure.

GREENBERG: ... and you could get anything you wanted from them. But if you're going on their -- you look for some electronics product, they have one or two. It's very limited. It's not the same thing. And, you know, I think this is a factor that will affect their growth in the future.

REAMER: Agreed. I mean, I don't disagree. But at the end of the day, you know, no one else does it better, effectively. And that's what we're trying to identify here -- the best Internet retailing companies out there. And they're it.

BUTTNER: Closed 65 on Friday. Target?

REAMER: Target is 98 to be precise.

BUTTNER: OK. Big e-marketer, DoubleClick -- what do you like?

REAMER: I like DoubleClick a lot. The advertisers that I'm talking to -- Procter & Gamble (PG:NYSE), Unilever (UN:NYSE), Coca-Cola (KO:NYSE) -- these guys want targeted advertising. Forget Yahoo! (YHOO:Nasdaq) buys and AOL (AOL:NYSE) buys. They're spending money there, but that's brand advertising.

They want targeted buys. DoubleClick provides both the technology and the data about consumers that allow a Procter & Gamble or a Unilever to get to the right person at the right time.

CRAMER: Well I've got to -- I'm long in this stock. As I mentioned, I own the stock. And I hear you. There was an acquisition last week, an ad for CMGI (CMGI:Nasdaq). I mean, it seems like another guerrilla has gotten in this.

I got worried, I was thinking of selling some of the stock, when I saw it. I held on to it -- why? I don't know, because the Net was hot this week.

REAMER: Sure.

CRAMER: Tell me why I should stay long, despite the competition.

REAMER: It's a huge market. I mean, think of all the billions of dollars. Literally, in direct marketing alone, it's $300 billion offline. In brand advertising, what, $275 billion offline. It's an enormous market.

CMGI will do quite well in picking off these one or two properties here and there, trying to stitch them together as one operating entity. But at the end of the day, they're not an operating entity. They're a mutual fund holding company.

GREENBERG: Well, I have to tell you something. I admit to having knocked this company when it got started. And I knocked it for the reason that would be the same reason I would think of knocking it today. And that's that one customer -- AltaVista -- still represents 44% of revenue.

REAMER: Sure. And thank God they've made some acquisitions. Because, at the end of the day, pro forma for the two acquisitions they've got, they're now 30% of systems revenue and 20% of gross profit dollars. And ultimately, these guys, down the road, will be thought of as a gross profit dollars kind of story. So, increasingly it's becoming less and less a part of the business.

BUTTNER: Sorry, we've got to move on to your last pick, which is online job site, HotJobs.com. Quickly.

REAMER: Absolutely. These guys -- a direct exchange model. Think of them as the Nasdaq for employers and employees. No other competitor does precisely what they do. And they do it uniquely.

Look at their customer base. It's fantastic. You know, Microsoft (MSFT:Nasdaq), Amazon, DoubleClick a customer of there's. Four major...

CRAMER: Woah! Hold it! All right, I hear everybody's in. Why can't I be in this business? Why can't anybody be in this business? Why can't we all be in this business?

GREENBERG: A lot of people are in this business already.

BUTTNER: And not all of them charge either.

REAMER: Absolutely.

CRAMER: What's the big barrier to entry? Why can't I be a HotterJobs.com?

REAMER: Huge barriers to entry. The technology alone has taken them two and a half years to develop and scale. Don't think for a minute that matching employers and employees is a simple process. It's not. Think about the resume database alone is huge and complex. And indeed, these systems that employers are using, they're enterprise-class software systems. That's what HotJobs is replacing on a Web-site basis.

BUTTNER: OK, gentlemen, times up. Scott Reamer, director of Internet research with SG Cowen. Thanks so much for doing the Drill this week. And of course, we'll keep an eye on your stock picks to see if you made the right calls.

Herb and Jim, thank you as well. And we'll see you a little bit later in the show.

But up next, accountability. That's right. We keep tabs on ourselves. Back in July, Chartman and his counterpart disagreed about AOL. Who was right, and who was dead wrong? We'll find out when we return.

BUTTNER: Welcome back. Well, you know by now, that when it comes to stocks, the chart doesn't always tell you the same thing as the fundamentals. In fact, the two often disagree. Well, on this show, at least, we keep tabs on which calls were right and which were wrong. Yep, everybody has to face the music. Even the Chartman.

Also known as Gary B. Smith, he trades for a living from his home, using the charting method. Gary joins us from Washington, D.C. With us as well, in San Francisco, our Silicon Valley columnist, Adam Lashinsky, who reports on companies on a more fundamental level.

Adam and Gary do not own any of the stocks in this segment.

All right, first up fellas, Bank One (ONE:NYSE). You looked at it three weeks ago. Gary, I know you won't mind telling us what's happened since.

GARY B. SMITH, CHARTMAN, THESTREET.COM: I will not. This was one of Adam's favorites. But breaking news on this one, Brenda. They've sat around and they thought about the symbol "One." And they've decided that they were too aggressive. So instead, they're thinking of changing it to "Zero."

Adam liked it a couple of weeks ago, as you mentioned. He should love it right now. It is on super-duper sale. Filene's Basement (BSMTQ:Nasdaq) -- when they were still in business -- didn't have sales like this. Look, bottom line on charts like this -- let me leave you with one thing, don't ever, ever, ever buy a stock the day after it gaps down. You're just asking for trouble.

BUTTNER: Adam, you strike me as a man who can admit when he's wrong. Were you?

ADAM LASHINSKY, SILICON VALLEY COLUMNIST, THESTREET.COM: Actually, I have some very sophisticated analysis for this, Gary. Oops.

(LAUGHTER)

No, seriously, actually common sense dictates something, which the charts also do, which is that when a company disappoints, there's also another disappointment lurking. And also, investors will not give a company like this the benefit of the doubt.

But remember, Gary, I said this would take about two months before we'd see any turnaround. I didn't think it would go down, but I didn't think it would go up either in that time. It was time to invest in a good company.

Last point, Gary, you sang last time we did Bank One.

SMITH: Please don't sing, Adam.

LASHINSKY: It is my turn to sing, Gary.

SMITH: Oh, no.

LASHINSKY: This stock is cheap, cheap, cheap.

BUTTNER: Guys.

LASHINSKY: Jim Cramer wrote in TheStreet.com after we did the segment, that if the stock dividend yield got to 5%, he'd consider buying. It's getting awfully close.

BUTTNER: Do not give up your day jobs, guys.

All right. Adam, your turn. You both looked at AOL in July. A lot has happened since.

LASHINSKY: Yeah, as a matter of fact, Gary liked AOL back in mid-July. Let's have a look.

SMITH: Elvis has returned to the building. The king is back. I think, in a short amount of time, AOL is going to get back to its old highs. I like the stock.

LASHINSKY: Gary...

BUTTNER: It hurts, it hurts. Tape can hurt.

LASHINSKY: It does.

SMITH: It pains me.

LASHINSKY: And even after the run-up last week, AOL is still about 20 points below where you liked it in the segment that got pre-empted -- the show that we never saw.

Gary, the king, is losing its grip on the throne. AOL is still the king; there's no doubt about that. But there's just too many companies giving away free Internet service right now. They're never going to make any money, but that's beside the point. They're going to take customers away from AOL.

The stock ran up last week because Microsoft said it was going to raise, not lower, its charges on Internet service. But I think people are forgetting that Microsoft is still going to be a fierce competitor for AOL, and that's not a good thing for the king.

Lastly, AOL still is making murmurs about making big investments in cable. That's going to cause some confusion. We still don't know about its broadband strategy. The king is still looking a little shaky, Gary.

BUTTNER: Gary, do you own up to this one?

SMITH: Well, I -- you know, Brenda, a little clarification here. I'm thinking back -- I'm not sure I actually said "buy." In fact, what I think I said was "take a bye" on AOL. I think there must have been a technical glitch.

BUTTNER: Good try.

SMITH: I can't believe I'd ever say "buy" AOL right there.

AOL -- I'll tell you what, it has dropped now. I clearly, I clearly was right by saying "take a bye." But now I'm really -- I'm with Adam, and I say buy it right here. I do like it right here. Adam has worn me down, and I surrender.

BUTTNER: OK, thanks guys, we'll see you again next week.

LASHINSKY: Thank you, Brenda.

SMITH: Thank you, Brenda.

BUTTNER: But after this, a bloodbath. That's certainly one way to describe what probably happened to your investments last week. Time to cut the losses, sit tight or buy more? We'll give you the word on the Street when we return.

BUTTNER: And that big drop of 9% in the Dow all happened in the last month, much of it during this past week. Things went from bad to worse on Thursday when Microsoft's number two person said that tech stocks were way overpriced, including his own.

Whether that was the reason for the selloff, or just an excuse, the real question for you is, what happens next? Here to give us the "Word on TheStreet" are three writers from our financial Web site who have their ears to the ground -- Jim Cramer, Herb Greenberg and Editor-in-Chief Dave Kansas.

Dave, carnage this week. What's happening next.

DAVE KANSAS, EDITOR IN CHIEF, THESTREET.COM: I think we've got more difficulty ahead, frankly. I think there are concerns about the currency, there are concerns about earnings. And I think the tech thing -- a lot of people are nervous right now. I don't think we'll just bounce right back up. I think there's going to be a lot more trouble ahead.

BUTTNER: Jim, chips were hit very hard this week. You said, a few weeks ago, that Intel (INTC: Nasdaq) was going up to 100. It's about what, 75 now? Do you still believe in it?

CRAMER: Well you know, I knew there was going to be an earthquake in Taiwan. I just didn't ...

(LAUGHTER)

... I mean a natural disaster occurred. And it set a lot of companies back. And you know, I'd like to be able to say that if Intel hadn't happened, it would go to 100. I'm still a buyer. I bought some on Friday. But I have a little pain that's stemmed from the fact that this earthquake did shake up the chip business.

GREENBERG: But that's a temporary situation, theoretically.

CRAMER: You've got to make your quarter in this business. These companies will not blow away numbers because of this quake.

BUTTNER: But the long-term investor doesn't need to, though.

GREENBERG: That's right.

CRAMER: The long-term investor...

BUTTNER: So, should they be buying...

CRAMER: God bless them, it is no problem at all. But I'm the short-term guy, and I'm wearing the tire tracks of the earthquake right on my back.

KANSAS: How long, Jim, is it going to take to resolve this whole earthquake thing? I mean, it's like everyone's hung by chip shortage.

CRAMER: But that's the problem, it should have happened already. There's just too much. There's such a void. And in a void people sell. And that's exactly what happened this week. We still don't know the extent of the damage.

GREENBERG: You know what I wonder. You know, I have to ask you a question. No one likes to talk about this. You're talking about one little earthquake in Taiwan -- a big earthquake in Taiwan. Don't forget, Silicon Valley sits between two very big fault lines. No one ever wants to ever hear me talk about this.

CRAMER: Every morning when I get up, I worry about this.

GREENBERG: You don't worry about it, but hey -- Jim, it could happen. And if it happened, it would have an impact like this, or greater. I wonder. You don't talk about it.

CRAMER: You know, I often think of thermonuclear war. It's a hazard of the business.

BUTTNER: What good news is going to come out? We've had a lot of bad news. What good news is going to support this market?

CRAMER: Well, first of all, can we go back to this Ballmer thing -- this Microsoft...?

BUTTNER: Yes.

CRAMER: All right, I played poker with this guy extensively when I was in college. He used to bring a shoe box -- Shoe-Box Steve is what we called him -- full of dimes and nickels. You never knew what he really had in there. The guy was the king of the bluff. You didn't know if he had two bucks, four bucks, 10 bucks...

BUTTNER: This is one...

CRAMER: The man's a bluff artist. I bought the stock, right, on his downgrade of his own -- what he is downgrading Microsoft? I bought his stock.

BUTTNER: But $1.2 billion at stake, though. Maybe it's his personal money.

CRAMER: Maybe it's in interest. Maybe they have stock options that have to be priced at a certain point. I don't know.

BUTTNER: So, what do you do when somebody says -- when somebody in Microsoft says we're overvalued. Do you just jump in?

CRAMER: They say that constantly. I use it -- I think I probably bought -- I mean, it looks like this. Every time they say undervalue, you know, it's too high, you've got to buy. And that's just what I did.

BUTTNER: Our advanced charting system here.

CRAMER: Yes. I admit it though, Gary does it -- Gary's a little more sophisticated, maybe next time.

BUTTNER: OK guys. Along with those bearish comments from Microsoft about tech stocks, how about this from our very own Jim Cramer, a notorious bull. Jim, you were in London this week, speaking to Goldman Sachs (GS:NYSE). And we're quoting you here. You said, "Investment in the Internet has become a joke. The Net is the most overhyped investment story in history."

You went on to basically say that many Internet companies are doomed to failure. So, are you telling the investor to pull the rip cord on all the dot-coms?

CRAMER: I am saying -- Brenda, I meant what I said. The speech is in full on the site, on TheStreet.com, you can pull it up. Any company that has only one source of revenue, they think they can make it on advertising in the Net. They're history.

I listened to Scott Reamer. I hear what he says about Amazon. I think they could be history. Frankly, if you're going to give away merchandise with the hopes of capturing eyeballs, the bank doesn't take eyeballs. It just doesn't work that way. And if you're in a stock that is only going to rely on advertising revenues, sell it.

KANSAS: Well Jim, I mean, you say sell it, and you -- advertising revenue. But didn't you say earlier today that you liked DoubleClick? And isn't that right in the heart of the advertising business?

CRAMER: DoubleClick is -- and I am long DoubleClick -- DoubleClick is an infrastructure play. You need DoubleClick. These companies are giving away the advertising. That's the problem. It's good news for DoubleClick that they're giving away the advertising. They make a little bit each time. The actual revenues that are produced by give-away advertising doesn't amount to a hill of beans.

GREENBERG: Jim, listen, I think this was the best piece you've ever written.

CRAMER: Yeah, really?

GREENBERG: I really -- I thoroughly enjoyed it. However, point number nine, you just wait. The profitability is right around the corner. You know, I have to tell you something. I've heard you say that about...

CRAMER: That was a joke!

GREENBERG: That was -- profitability right around the corner. The reality is, how -- you know, you were the guy who used to say profitability would be right around the corner for these companies. What's changed between then and now? Why has your analysis changed?

CRAMER: OK, what's changed is that I had felt that there would be a sense -- and this is what we talked about with Scott -- that the companies themselves would realize that it isn't about reach, it's about profitability. But the stock market gave everybody a pass. The stock market decided, well, all other businesses have to earn a profit except for dot coms. And that let a lot of managers off the hook.

The stock market is -- the capitalist stock market has been too easy on the dot coms, and too hard on the guys that aren't on the net.

BUTTNER: OK, got to take a short break. But when we come back, you won't believe where Dave Kansas thinks the Dow is headed. Predictions are up next.

BUTTNER: You know what time it is. Predictions.

Jim, you're up first. What have you got?

CRAMER: OK, I have a piece coming out Sunday on TheStreet.com. Brokerage industry, more hard times ahead. Way too early to get in. Stay away from the brokerage stocks. Going lower.

BUTTNER: OK, Herb.

GREENBERG: Based on a column I had last week, Blockbuster Entertainment will acquire Hollywood -- Blockbuster (BBI:NYSE) will acquire Hollywood Entertainment (HLYW:Nasdaq) by the end of this year.

CRAMER: Are you telling me, if I buy this Hollywood Entertainment, I'm going to make some money on this?

GREENBERG: There could be some antitrust issues that could cause this not to happen.

CRAMER: Are you telling me...

GREENBERG: But what I'm telling you -- no, what I'm going to tell you is, these guys are in discussions.

CRAMER: All right.

GREENBERG: I can't tell you anything more than that.

CRAMER: Because I'll tell you, I'm going to buy the stock.

GREENBERG: That's your decision.

CRAMER: All right.

GREENBERG: That's a decision you have to make and live by.

BUTTNER: Dave?

CRAMER: I know where you live. Excuse me.

KANSAS: You guys want to...

(LAUGHTER)

I'm just going to say that the Dow, that had problems, is going to keep going lower. We're going to get back below 10,000 for the first time since last spring.

BUTTNER: A key support (ph). What do you think?

CRAMER: If he wasn't so right all the time, I'd love to argue with him, but I've been going over his predictions...

BUTTNER: But he is, I have to say.

CRAMER: He drives me crazy. He's playing with play money, I'm with real money. The guy's been on the money. Why, Dave?

KANSAS: No pressure on me, Jim. I think that's the key.

CRAMER: Why's it going to go down?

KANSAS: Why is it going to go down? People need a reason to buy. And they're not going to get a reason to buy until they get a better look at the earnings coming out in October.

GREENBERG: And until the Fed does its action. I know you don't want to hear about it, but until they do whatever they're going to do, that's still going to give...

BUTTNER: Well, the Fed will like what's happened this week, certainly.

GREENBERG: This week is this week.

CRAMER: I bought a lot on Friday, so now I'm nervous. But that's OK. I live nervous. It's part of the problem.

BUTTNER: We never noticed that. OK.

(LAUGHTER)

How about you guys, which of those predictions do you think is most likely to come true. You can let us know by visiting us at our Web site at "TheStreet.com" TV. You can also leave us a question or comment about the show, and tell us what else you'd like to see us do here on the program.

And while you're at the site, check out everything else at our Web address. We've got dozens of writers like Jim, Herb, Dave and myself, who are dedicated to providing the information you need to make your own investment decisions.

And Sunday, on the site, you can read Jim's "State of the Web" article. Jim tell us about that.

CRAMER: Yeah, you've got to read this. This is about -- I reveal who the two, three biggest brokerage houses are going to be, come after the millennium. It's nobody that you'd ever think of.

BUTTNER: All right, check it out.

And by the way, if you don't subscribe to TheStreet.com, you can read that article and many others by signing up for a totally free, one-month trial.

All right, that does it for this edition of "TheStreet.com." We'll see you here again at the same time next week. Until then, we hope you invest wisely.

END

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