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"Wall Street is a fashion show, and not every stock has what it takes to make it on the runway," said Jim Cramer on his "Mad Money" TV show Wednesday.
However, some designers are worth buying, especially if the
cuts interest rates further.
The first stock Cramer discussed was
. Although a longstanding brand, the company has not had a recent stock buyback and has no dividend.
Though the fundamentals are sound and the company had an upside surprise of 16 cents a share, Cramer said that the tragically unhip company is "not for me." Cramer is looking for higher-end best of breed if the economy gets stronger.
A safer pick in the fashion field is
, which Cramer owns for his charitable trust,
Action Alerts PLUS, likes the stock and
recently put Ralph Lauren on its list of the top 100 brands.
The company also had some small insider buying, in addition to an augmented stock buyback of $250 million in August.
But Cramer does not believe this is enough to give the stock good fashion sense. Ralph Lauren missed its earnings estimates in the last quarter, "lowered guidance, and the stock blew up," he said.
Also, Ralph Lauren blamed the miss on higher tax rates, something Cramer said companies never do.
He told viewers that there's no reason to own the company and that "when you blow a quarter, you wait a quarter."
Instead, Cramer told viewers to wait for better news from Ralph Lauren, a company he said did "too little too late."
PVH Is Right, Said Fred
Leaving Perry Ellis and Ralph Lauren on the rack, a fashion stock that Cramer believes in is
The licenser of 16 brands that "people actually want to wear," such as Calvin Klein, Kenneth Cole, DKNY and Michael Kors, is a more diversified designer than most of its competitors and shouldn't get hurt if one of those brands falters.
A "rest of world" stock, Phillips-Van Heusen does close to half of its business overseas. But domestically, it will be expanding retail operations, with "full-price Calvin Klein stores" in the works for this and next year. Also, Calvin Klein is seeing double-digit growth.
Cramer said that "sometimes the
business model trumps the fashion," and Phillips-Van Heusen "shouldn't miss its numbers." It trades at only 14.5 times forward earnings and has a 17% long-term growth rate.
He called it a cheap stock that is "a steal, not a discount."
While Cramer insisted that "this stock must be bought," he cautioned viewers to do their homework and wait at least five days before buying.
Cramer doesn't get why so few people are onto
, a stock with 80% gross margins and $3 billion in retail sales in 2006.
Additionally, Herbalife has more than 20% earnings growth, a 1.9% yield, one of the best buybacks and enormous cash flow, Cramer said.
Cramer welcomed the company's Chairman and CEO Michael Johnson onto the show and asked why people don't seem to be behind his company. Johnson said that some people have issues with the brand, assuming it to be a "pyramid scheme." That is instead of realizing the "amazing culture" behind the brand, which is "focused on retailing," he said.
Johnson said that Herbalife, one of the largest network marketing companies in the world, is guided on three principles: product, business opportunity and brand. And it's especially proud of its tie-in with David Beckham and the L.A. Galaxy soccer team, he said.
Recently, the company reported its 14th consecutive quarter of double-digit year-over-year revenue growth, and $530.1 million in sales, Cramer said.
Cramer told viewers to keep watching the company, which he liked at $39, and believes will go higher.
Am I Diversified?
During the "Am I Diversified?" game, Cramer's first player called out the following five names:
Research In Motion
Cramer told the player that his four techs and would be in trouble if the tech sector went down. He suggested that he get rid of Apple, RIM and even BIDU to further diversify.
Cramer's next player called out the following five names:
Cramer, calling the player not diversified enough with Corning, which he owns for his charitable trust,
Action Alerts PLUS, and Nokia, said to lose Nokia get into a defensive stock like
During the "Sudden Death" round, Cramer was bullish on
Bank of America
Cramer was bullish on
Molson Coors Brewing
Service Corporation International
Bank of America
Cramer was bearish on
Harmony Gold Mining
Silicon Motion Technology
Melco PBL Entertainment
For more of Cramer's insights during the Lightning Round, click here
Want more Cramer? Check out Jim's rules and commandments for investing from his popular book by
At the time of publication, Cramer was long Citigroup and Corning.
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