Cramer's 'Mad Money' Recap: Kinetic Diabetic Plays
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Right now the health care sector is out of favor, but investors should get into these stocks before they're back in favor and all run higher, Jim Cramer told viewers of his "Mad Money" TV show Thursday.
In this space, he said, take a closer look at diabetes drugs, given the fact that the global diabetes market is worth $17.8 billion, up from $3.8 billion in 1995.
One way to approach this market, said Cramer, is to take a look at two health management companies,
Matria Healthcare
(MATR)
and
Healthways
undefined
.
While these companies are not pure plays on diabetes, he said that these companies monitor, follow up with and manage patients with diabetes, telling them what to do to keep their conditions from worsening.
They ensure that diabetes patients and their doctors are doing things right, he said. And this saves patients and insurers money because "it's a lot cheaper to treat type II diabetes than it is to treat kidney failure."
Even though Matria just gave
downbeat earnings guidance, the company is too cheap to be ignored, said Cramer, who also pointed out that the stock was recently upgraded by analysts. He said that Matria is a potential winner, but "just not right now."
He said that Healthways is the better stock and that we should be willing to pay more for a better company. But he reminded viewers that it's not that much better than Matria.
Every now and then, said Cramer, we need to perform some regicide on "Mad Money" and he's beheading the former king of diabetes treatment drugs.
He had once crowned
Amylin Pharmaceuticals
( AMLN) for its Byetta diabetes treatment. Cramer said the stock is now up more than 150% from where it was when he started recommending it; and he said that it can't make enough Byetta to keep up with demand.
So it's off with Amylin's head, he said, adding that it's a good company, but just not the king.
The new diabetes drug king is
Nektar Therapeutics
(NKTR)
. The company's Exubera is an insulin system that people with diabetes can inhale, and most analysts believe this drug has blockbuster potential, Cramer said. People believe Exubera could see over $1 billion in sales, he said.
But, he warned, this is just a trade, not an investment. He said that there's going to be a lot of hype around Exubera that will send Nektar's stock higher but it won't last.
The drug is slated to launch this summer, so he said viewers should buy now and sell it in a month when the hype peaks, "before the drug comes out and has a chance to disappoint."
"All the hope will be in the stock, and we do not trade on hope," said Cramer.
UnitedHealth Options Heat
Before welcoming Dr. William McGuire, chief executive at
UnitedHealth Group
(UNH)
to the show, Cramer disclosed that he owns the stock for his
ActionAlerts PLUS charitable trust.
The company, the nation's second-largest health care insurer, has received a barrage of unfavorable attention for its sizable executive compensation packages, beginning with coverage in
The Wall Street Journal
that the company allegedly backdated stock options.
The
Securities and Exchange Commission
is investigating UnitedHealth and several other companies; and some of the company's largest investors are urging shareholders to
withhold votes on board members in the upcoming meeting in May.
Cramer first asked McGuire to clarify whether UnitedHealth and
WellPoint
(WLP)
were suffering from the same cost problems that
Aetna
(AET)
had mentioned when it reported its latest quarter.
McGuire said that he could only speak for his company, and that at UnitedHealth cost trends have actually improved from what had been projected.
Since McGuire was not at liberty to discuss compensation issues that are under investigation, Cramer asked him to explain the mechanics of the company's stock option program.
The executive emphasized that stock option programs at his company are driven by company performance, and Cramer said that the stock has increased in value by a whopping amount since McGuire took the helm.
Cramer used the example of the hedge fund manager as a parallel example of pay-for-performance packages in corporate America. He said that when the clients of managers make a lot of money, those money managers rake in a lot of cash, too.
He asked McGuire if this should be the same for public companies, noting again that the company created a lot of value for shareholders. McGuire would only say that executive compensation should reflect the results that have been produced at a company.
"When I look at what you said on your quarter, you talked about aggressive buybacks," Cramer said. Then he noted that major mutual funds have been dumping the stock, but that UnitedHealth hasn't bought any of those shares.
McGuire said that his company has "an ongoing share repurchase plan." He added that it will use its cash for mergers and acquisitions, as well as share buybacks, according to its needs, not necessarily according to action on the trading floor.
Finally, Cramer asked McGuire if he would be willing to give back his share options if he believed the he was hurting the company by holding on to them.
McGuire called it an "impossible" question to answer. But he added that his ultimate goal is to advance health care. If he believed that he could no longer make a difference in this sector, McGuire said that he would look into doing something else.
To view Cramer's interview with McGuire, click here.
Am I Diversified: The New Challenge
Cramer has said time and again that "diversification is the only free lunch." But he said that the game he plays, "Am I Diversified," has become too easy for viewers.
So on Thursday, he not only judged portfolios for diversification, but for the quality of the stocks as well.
The first caller, Steve, said that he owned
ABB
(ABB)
,
Starbucks
(SBUX)
,
Cameco
(CCJ)
,
Nokia
(NOK)
and
Tata Motors
(TTM)
.
"Here I am trying to change the rules so it's more a contest of wills ... and here comes Steve with this one," he said. "Starbucks is two thumbs up ... I like Nokia, the No. 1 cell-phone maker. ... So far, we're doing pretty good."
Cramer added that he likes Tata Motors, along with
Honda
(HMC)
and
Toyota
(TM)
.
But he spotted a pair with ABB, the largest maker of nuclear power plants, and Cameco, which makes the uranium for nuclear plants. While he blessed the quality of all the stocks, he said the caller would have to sell one of his nuclear plays and pick up a health care stock.
The second caller owned
Bank of America
(BAC)
,
Natural Resource Partners
(NRP)
,
Conexant
(CNXT)
,
Costco
(COST)
and
Goldcorp
(GG)
.
Cramer said that this diversified portfolio was full of high-quality stocks. He said that Conexant's stellar quarter would be overshadowed by weakness at
Microsoft
(MSFT)
, but that the stock was good.
He called Natural Resource Partners an interesting energy play, and added that Costco is pulling back because of gasoline prices. He is a longtime fan of Goldcorp, and called Bank of America "the largest, best bank I know of."
Two different viewers emailed Cramer to find out where he finds out which companies are in a certain industry.
After saying that he has used Google to find companies in a sector, he added that the S&P companies list is a useful tool, as well as Wall Street research.
Lightning Round
Cramer was bullish on
Weight Watchers
(WTW)
,
Devon Energy
(DVN)
,
Caterpillar
(CAT)
,
Nokia
(NOK)
,
Sealy
(ZZ)
and
Penn National Gaming
(PENN)
.
Cramer was bearish on
Sirius
(SIRI)
,
NutriSystem
(NTRI)
,
Xerox
(XRX)
,
Novell
( NOVL),
Suntech Power Holdings
(STP)
,
Albany International
(AIN)
,
Motorola
( MOT),
Bausch & Lomb
( BOL)and
Pinnacle Entertainment
(PNK)
.
For more of Cramer's insights during the most recent Lightning Round, click here
.
Want more Cramer? Check out Jim's rules and commandments for investing from his latest book by
.
At the time of publication, Cramer was long ABB, Bausch & Lomb, Microsoft and UnitedHealth Group.
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for
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