Cramer's 'Mad Money' Recap: Market Dichotomy (Final)
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NEW YORK (
) -- "There's a dichotomy in the market of 2012," Jim Cramer told his
TV show viewers Tuesday.
He told investors to forget about the predictions that January's trading action determines how the markets will perform for the year and instead focus on what today's earnings releases told us.
Cramer explained that today's earnings were a perfect dichotomy of what's working and what's not. On the good side, there was
Mattel
(MAT) - Get Report
, which reported revenues up 16% with good margins and boosted its dividend by 35%. Cramer said its no wonder this great company hit a new 52-week high and rallied 5% on this great news.
Also on the plus side,
Limited Brands
(LTD)
, whose brands like Victoria's Secret and Bath & Body Works helped this retailer raise its dividend by 25%.
Then there was the bad, said Cramer, and that came in the form of
Exxon-Mobil
(XOM) - Get Report
. Even with impossibly high oil prices, this pitiful giant saw production fall by 8% and refining profits nose-dive by 63%. Cramer said Exxon did also boost its dividend, but with almost no growth and falling profits, the company offered little to impress investors.
Finally, Cramer said there was the ugly, with was undeniably
Radio Shack
(RSH)
. Cramer could hardly contain himself when conveying that Radio Shack management actually blamed a key supplier,
Sprint
(S) - Get Report
, for what was a massive earnings shortfall that sent shares plummeting down 33%. Cramer called Radio Shack pathetic and said its shares deserved the beating it received.
In closing, Cramer said that these earnings show the dichotomy of the markets. He said great companies that reward shareholders are being rewarded by the markets, while those that cannot deliver growth, earnings, or even a valid reason for not hitting their targets are seeing their stock prices crushed.
Weighing the Value of Crosses
In the "Off The Charts" segment, Cramer went head to head with his technical colleagues to discuss the much talked about "golden cross" pattern that the markets displayed earlier today and what it means for the rest of the year.
Cramer said that a cross is nothing more than the 50-day moving average crossing over a 200-day moving average. If the 50-day is on an upward trajectory, it's called a golden cross, and if it's heading downward, it's called a death cross. The
S&P 500
has seen five such crosses since 2007, he explained.
In December 2007, there was a death cross, which foreshadowed a horrible decline. In June 2009, a golden cross told of the coming rally. The death cross in July 2010 was incorrect however, and did not predict a coming rally. The subsequent golden cross in Oct 2010 was correct, as was the death cross in Aug 2010.
According to Carolyn Boroden, golden crosses are indeed bullish signals that should get investors' attention. Ed Ponsi, however, is more cautious, and notes that historically, especially earlier than 1960, crosses were only right 50% of the time. Dan Fitzpatrick also said that golden crosses, while bullish, aren't tradable events in and of themselves.
After weighing all of the evidence, Cramer said he agreed with his colleagues that crosses, by themselves, cannot be taken too seriously. He said what matters are individual companies' performance and not arbitrary indicators. Golden and death crosses, he said, are lagging indicators of what the market has done in the past, and aren't necessarily a good predictor of the future.
On a Roll
For the next installment of his "Show-Off Stocks," Cramer turned the spotlight onto
Polaris Industries
(PII) - Get Report
, makers of snowmobiles and off-road vehicles. Polaris recently reported a two-cent-a-share earnings beat, sending shares just 2% off their all-time highs despite a down-beat guidance.
Cramer said the price action in Polaris says that investors don't believe management's conservative outlook, and for good reason. For the past four quarters, Polaris has under-promised and over-delivered, he said, causing investors to naturally view any estimates from the company as simply too low.
Polaris was able to deliver growth in every segment of its business, said Cramer, including snowmobiles, on-road vehicles, off-road vehicles and even apparel and accessories. The company's gross margins also improved.
Cramer said that Polaris has a lot going for it, including a five-year partnership with Bobcat, makers of light construction equipment, and its growing international business. Europe only accounts for 10% of Polaris' sales, and much of that weakness was offset by price increases, which resulted in no loss of market share.
Even with shares up big so far this year, Cramer said that Polaris is still a cheap stock. It trades at just 13 times earnings despite a 17% growth rate. Cramer said he wouldn't chase the stock higher, but would be a buyer on the next market dip.
Utility Favorite
In the "Executive Decision" segment, Cramer once again spoke with Tom Farrell, chairman, president and CEO of
Dominion Resources
(D) - Get Report
, a defensive utility stock with a hefty 4.2% dividend yield.
Farrell confirmed that officers and directors of Dominion have been "putting their money where their mouth is" and buying shares of the company, despite a recent analyst downgrade of the stock. Farrell said he's been with the company for a long time and can't think of a better place to put his money.
When asked about the $2.5 billion of debt coming due this year, Farrell noted that as a utility, it needs need to build a lot things. He said Dominion has an excellent credit rating and great access to the debt markets, so he expects no problems in servicing their debt going forward.
Farrell also talked about other issues facing the company. When it comes to increased regulations regarding coal-fried power plant, he said that Dominion has already cleaned up many of its plants and it's in a "good position" regarding the new regulations. Turning to our country's abundance of natural gas, Farrell said that Dominion is working towards being able to export the fuel by 2016, adding that his company will do very well in that business if done correctly.
Finally, when asked about business here at home, Farrell noted that while the brains of the Internet is in Silicon Valley, the backbone is in northern Virginia, where 50% of U.S. Internet traffic flows. He said a typical data center uses the same amount of power as 9,000 homes and Dominion currently services over 40 of them with more on the way.
Cramer said that Dominion remains one of his favorite utility stocks and should be a core holding of any portfolio.
Lightning Round
Cramer was bullish on
B&G Foods
(BGS) - Get Report
,
JC Penney
(JCP) - Get Report
and
TransCanada
(TRP) - Get Report
.
Cramer was bearish on
YPF
(YPF) - Get Report
and
Tyson Foods
(TSN) - Get Report
.
No Longer Hostage
In his "No Huddle Offense" segment, Cramer defended his position that Europe is no longer holding the U.S. markets hostage as it did throughout 2011. He said while the bears are warning that a default by Portugal would be a disaster, Cramer said simply "no way."
Cramer said when the European markets were in free fall, it made sense to bet against everything, but once the bond market evolved into a two-way market, with buyers and sellers, the smart money started buying and being opportunistic. He said the European banks have been smart, using their new credit lines to their advantage and thus the tide is now turning.
Cramer said the European markets can no longer hold the U.S. hostage as long as there are buyers and sellers both actively trading in Europe. A default in Portugal will be bad for Portugal, he said, but it won't have any effect here in the U.S.
--Written by Scott Rutt in Washington, D.C.
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Scott Rutt
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At the time of publication, Cramer was not long any equities mentioned.
Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money."
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