Aug. 14, 15: Guest Robert Olstein

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Participants on Aug. 14 included host Brenda Buttner, Jim Cramer, Herb Greenberg, Dave Kansas and guest Robert Olstein. The transcript is unedited and phonetic spellings are indicated with a (ph).

BRENDA BUTTNER,

HOST: Hi everyone. I'm Brenda Buttner and you are connected to TheStreet.com.

We're here to help you make your own investing decisions. Time now for this week's stock drill.

Our guest stock picker today is Robert Olstein of the Olstein Financial Alert Fund, which so far this year easily out paces the S&P 500 with a return of almost 24 percent.

The stocks we will be talking about today: Mattel, Federated Department Stores and Anchor Gaming. Olstein owns all of them in his fund.

Also with us from TheStreet.com, Jim Cramer, who manages a hedge fund as well, and TheStreet.com's editor-in-chief, Dave Kansas. Neither Jim nor Dave owns any of those stocks.

Gentleman, thanks so much for joining us.

Well, first, the world's largest toy company -- Mattel. What do you like about it?

ROBERT OLSTEIN,

OLSTEIN FINANCIAL ALERT FUND: Mattel is down on its back. Everybody is down on Mattel. The latest quarter is down. It's missed its estimates. They have a tremendous product line and are about ready to turn. Whether it's this quarter or next quarter, there are a lot of valuable assets.

Barbie is not finished. She got into a over-inventory situation. She can grow 1 or 2 percent a year.

They bought The Learning Company. Everybody was down on that. They're interactive; there is a lot of product to become interactive with now.

JIM CRAMER,

CONTRIBUTING EDITOR: But -- let me -- you said Mattel is down. I mean, didn't Mattel just decline 6 percent in the previous quarter for Barbie, for the Barbie line?

OLSTEIN:

Absolutely. And what happened was they were over inventoried at the retail level. Our information says it's starting to turn up right now.

CRAMER:

It's over? You're telling me there's not a glut of Barbies anymore?

OLSTEIN:

The Barbie glut is over.

BUTTNER:

Dolls are not -- they're not the hot thing these -- in finance these...

OLSTEIN:

The company is going to earn $1.50 a share this year, or maybe $1.40. We think they can earn a $1.70 next year. The stock is only at $22. All of the negativities in the stock, if Barad doesn't turn it around soon, she's going to be taken out and then the stock goes anyway.

There's a lot of good product there. You have got to buy when they're down. This company -- the pessimism is producing great prices and that's what you want. That's the key determinate. This has a lot of product within that company. You've got Fisher toys. You have got a lot of good product in that company.

DAVE KANSAS,

EDITOR-IN-CHIEF, THESTREET.COM: Bob, what about the debt problems? They were recently downgraded. How are they going to solve the heavy debt load that they're carrying, especially trying to integrate all these different acquisitions lately?

OLSTEIN:

The positive cash flow in this company is now running -- going to staring running at the rate of $400 million a year. There will be added debt in three-and-a-half years, and in fact will start to retire stock. They are not in any financial problem whatsoever. It's the farthest thing from the truth.

BUTTNER:

All right, one of the nation's largest retailers, Federated Department Stores, Bloomies, Macys.

OLSTEIN:

Drub, mundane...

(LAUGHTER)

.... we like, we like...

BUTTNER:

You like those kind of stocks...

(LAUGHTER)

CRAMER:

Come on, man.

OLSTEIN:

We were buying the oils, Jim, back in October, putting everybody else's in...

CRAMER:

You have had many great calls. That's why I am glad you are here.

OLSTEIN:

The timing is not important. It's being right. Buffet said he can't tell you when he is going to be right, he's being paid to be right.

Fingerhut, the acquisition, the mundane catalog company, they're starting -- we're playing the Internet through the service companies. This company's revenues -- was it Wal-Mart just hired them for fulfillment. E-toys just hired them for fulfillment. Wet sale (ph) -- the revenues are only $100 million there. They're going to $300 million next year.

The retailer is growing at 1 or 2 percent a year. Inventories are lean.

CRAMER:

Bob, let me ask you something. I have to take advantage of the fact that you're here. I don't want to deviate too much from Federated, but could you tell me what you think of Federated versus say Amazon, a stock that I know you and I are both right now thinking is not so good -- I am shorted.

OLSTEIN:

Amazon. -- I am shorted too, so we tend to agree. Amazon.com has no hopes of generating any cash flow...

CRAMER:

How about versus Federated?

OLSTEIN:

Federated is generating hundreds of millions of dollars of free cash flow. This is something that if I buy Federated as a private investor, I can put something in my pocket. If I buy Amazon, I would run out money in two, three years. So, I have to depend on the public to bail me out.

KANSAS:

Right, but real quickly -- retailing, straight retailing is still a big part of this business.

OLSTEIN:

Absolutely...

KANSAS:

Rising rates, sometimes a problem for these kinds of stocks. What do you think about battening down in the next few months?

OLSTEIN:

You know, there is a cult for growth. What's wrong with putting $300 million a year in your pocket? Why do you have to grow? It's like General Motors too. Here is a company that is putting away $4 billion in their pocket. And everybody is picking on them because they're not growing. What -- you have to pay for growth. It's always the price you pay for the company.

Here is a company that is going to start to grow through Fingerhut. They are a great fulfillment service. They've got good technology in mundane areas.

KANSAS:

OK...

OLSTEIN:

But it's still technology...

BUTTNER:

Another one you really like is Anchor Gaming, which is of course a gaming machine company with the coolest ticker symbol around -- SLOT.

Now why do you like this?

OLSTEIN:

Another sleepy company. They only earn $5.00 a share. They missed...

(LAUGHTER)

.... they missed their estimates. And I'm paying $45.00 a share for a company that's generating $30 million to $40 million of excess cash flow. They will have another good gain, whether it's this quarter, next quarter, next year. They will take the earnings up to $7 a share. They have retainer income. They get a percentage of the take. And they're using the cash wisely.

CRAMER:

Bob, Bob -- this is the kind of stock that normally I would expect you to be on the other side of. I mean, periodically you've been shortened some gaming stocks periodically. Why is this one better than -- what makes you attracted to this thing?

OLSTEIN:

I'm -- I respect cash, respect it very much. They're generating excess cash flow. They have a creative talent. They design games. They have good joint ventures. They just bought a video lottery software company by the name of PowerHouse (ph), that's a power-packed little growth company that's going to tone down the cyclicality of SLOT. This company is cheap. It's going to earn $5 the first quarter they start showing any growth. They're going to take this stock to $75. That's what the stock is worth.

KANSAS:

What about competition? They're losing position to WMS, for instance, has a good game out right now. It seems that they're losing slot position. They've got competition with some of their standing casinos. You talk about down the line, the good cash flow but with this competition, how can you be so sure that they're going to bounce back?

OLSTEIN:

Well, do we have to bounce back from earning $5 a share? They...

(LAUGHTER)

.... they're earning $5 a share and...

(LAUGHTER)

KANSAS:

He likes them cheap.

OLSTEIN:

You see the answer is, Dave, is that you can't look at -- that's in the price of a stock. Most people want to be right all of the time. You can't be right all of the time. You got to be right over time. That's what they pay you for as a money manager.

BUTTNER:

OK. All right, we've got to go. Bob, thanks so much for doing the drill.

Bob Olstein, of the Olstein Financial Alert Fund. And of course we will keep track of your stock picks and update our viewers on their progress the next time we see you.

Jim, and Dave, thanks as well. And we will see you later in the show.

But up next, we are going to Steel Town, Pittsburgh, PA, and while we're there, we will find out if U.S. Steel will prop up your bottom line or just weigh you down.

That's next on Chartman. TheStreet.com continues right after this.

(COMMERCIAL BREAK)

BUTTNER:

Welcome back. You know many of you who invest do at least some research to find out about the company you're about to buy into. But there is a type of investor who only looks at the stock, not the company.

That strategy is called technical analysis; basically that's when you use charts that track price movements to determine when to buy and sell stocks. We call our resident technical analyst Chartman. He is also known as Gary B. Smith who trades for a living from his home using technical analysis. Today Gary joins us from Pittsburgh.

And in San Francisco, our Silicon Valley columnist Adam Lashinsky, who reports on companies by researching their businesses and bottom line.

Quick note, Gary and Adam do not own any of the stocks we will be talking about.

Thanks for joining us, guys.

ADAM LASHINKSY,

SILICON VALLEY COLUMNIST: Hi, Brenda.

BUTTNER:

Well, Gary you're in Pittsburgh, also known as Steel Town. I wonder what the first stock could be?

SMITH:

Well, I will tell you what, Brenda, if you're in Steel Town, you really have to talk about U.S. Steel. And if you look at U.S. Steel, you would say, boy, you know it's not an Internet stock. And then you say, amen.

I tell you, with all of the volatility going, U.S. Steel I think deserves a place in anyone's portfolio. In 1998, this stock was horrible. But it in 1999, this stock has nothing but steady up-growth. In fact, lately it's formed a nice double bottom, and I think right now buyers have the green light to jump in to U.S. Steel.

BUTTNER:

Adam, Gary likes that double bottom. Do you like the bottom line?

LASHINSKY:

Well, you know, Gary, the sad thing is even though you are in Pittsburgh, all you have to look at still are your charts.

(LAUGHTER)

So, you know I'm going to tell you why actually I am somewhat bullish on U.S. Steel. And the first thing is that they recently signed a labor agreement with their unions. That means they've got labor peace. And secondly, the states are spending billions of dollars of the federal government's money for an infrastructure build. That's good for a steel company.

But there are risks. Imports remain a political football for U.S. Steel. Washington has succeeded in getting imports down, but that can flare up again at any time. And Gary, although U.S. Steel has a nifty symbol, the letter X, investors really don't like the letter stock. That's because U.S. Steel is still tied to Marathon Oil. There's some subtle issues that are difficult for fund managers to get their arms around.

SMITH:

You know, Adam, a good fundamentalist argument: The letter is not good enough.

(LAUGHTER)

We will bank on that one.

BUTTNER:

He will be looking at charts soon too, Gary.

(LAUGHTER)

SMITH:

Yes, I know.

BUTTNER:

PC maker Dell, a bit of choppy chart there, Gary.

SMITH:

Yes, I will tell you, I think there is one word you need to think about when you look at the chart of Dell, and that is patience. I don't know whether to like or not like Dell, to be very honest. Rarely do you find me sitting on the fence. But Dell has formed a nice big triangle in descending volume. That means one thing: Something big is going to happen.

I don't know if it's going to be up or if it's going to be down. But I would wait until Dell shows its hand. If it goes up, then I would go long. If it went down, then I would go short. Because whatever move is going to happen is going to continue.

But right now if anyone tells you to do anything on Dell, I think they're being premature.

BUTTNER:

I don't know, Adam, the Chartman isn't committing here. What do you think?

LASHINSKY:

Gary, I'm shocked that the chart isn't telling us what to do here.

(LAUGHTER)

You've got to say yeah or nay...

SMITH:

Chart's telling you to wait, Adam.

LASHINSKY:

Dell is still the best PC maker by far, which is relevant with Compaq having so many problems.

The company reports its earnings on Tuesday. If Dell does even nearly as well as Cisco did last week, and more importantly, if it says good things about next year and that it's getting juice from other parts of its business, this could be good for Dell and all tech stocks, Gary.

BUTTNER:

All right, gentlemen, thanks so much.

LASHINSKY:

Thank you, Brenda.

SMITH:

Thank you.

BUTTNER:

We will see you again next week.

But after this break, is your mutual find overcharging you? You will want to hear the work on the street.

Plus, it wasn't that long ago, that sticking a .com at the end of your company's name would send the stock price higher. But Jim Cramer says those days are over. What's changed? We will find out when TheStreet.com returns.

(COMMERCIAL BREAK)

BUTTNER:

Welcome back.

You always get an edge when you find out the word on the street, so let's get it. Back with us from TheStreet.com is Jim Cramer and Dave Kansas. And also joining the game, TheStreet.com senior writer, Aaron Task.

Well, gentlemen, no surprise that the market ended the week with a huge rally. In fact on Friday, the tech heavy NASDAQ had its fourth biggest daily point gain ever, with an 88 point surge.

But all is not well in .com land. Back in April TheStreet.com's Internet index was an all time high. Since then it's down 33 percent, even with Friday's big gains.

Is the honeymoon over? Does having a .com at the end of a name, now is it a liability instead of a positive for stock?

KANSAS:

I don't think it's a liability, Brenda. I think there's -- a lot of damage has been done, but we saw an enormous amount of fear this week, early this week, and at the end of last week. And what we're seeing is the .coms are being separated in a sense of what's good, what's bad. And the bigger ones that are doing a little bit better. I think they're getting more attention.

Some of the smaller ones that don't have much of a track record, but some of the recent IPOs especially, are really starting to struggle. They're going to have a tougher time.

BUTTNER:

Does good mean you're going to have to make a profit?

KANSAS:

Well, not right now. I still think there's a big market share game going on with the .coms. I don't think anyone can say that all of them are going to the moon any more, which is what you heard a lot earlier in the summer. Right now people are saying, well, who really does have a good plan?

CRAMER:

Dave is right. What I think subtly changed is that people want tech. They just don't really want .com tech. But they do want companies associated with .coms.

This week's big winners were a lot of companies that make the network faster, but have no .com associated with them. That's where the market is headed. The market feels that the .com movement itself if a bit of a liability, I think, but not the sector that they give the money to. We saw a lot of movements in the Red Hat, in the red -- I'm long on the latter. And I really believe that that movement which was incredible at the end of the -- at the end of the last three days of last week -- probably continues.

BUTTNER:

Jim, you said that last week that you hated the .coms. Some change in some...

CRAMER:

No, I think that the .coms are nowhere. I think it's companies that supply to the .coms that have captured this market's...

KANSAS:

So, Jim, you own no .com? Stocks are not -- aside from TheStreet.com, I assume?

CRAMER:

No, I own Yahoo and I own some America Online. I had puts against the America Online last week. I took the puts off. Kept the America Online on. But I have to tell you my enthusiasm for the sector is mixed because I think this market is led by old tech, not new tech.

I think this market likes Intel, which I'm long on. It likes Cisco, which I'm long. And I believe it will like Dell. Like -- I think I'm going with Lashinsky over Chartman who couldn't...

(LAUGHTER)

AARON TASK,

SENIOR WRITER: But also it likes -- it likes Red Hat. I mean I don't think maybe it's not a liability. Maybe having a .com is not the automatic positive it used to be. But if you can execute and you're .com, I don't think people are going to punish you for that. Is that what you're suggesting?

CRAMER:

Yes, but I just think that, you know, we're going to look at .com as regular businesses, and the ones that have good businesses, I think are going to go up.

TASK:

So it's rational.

(LAUGHTER)

BUTTNER:

Yes...

CRAMER:

No.

BUTTNER:

Imagine that.

CRAMER:

No.

BUTTNER:

No, never, never. Gosh. OK, next stop. Mutual funds -- for decades, the widely held Vanguard Funds have been largely guided by Jack Bogle, who has been a big crusader for low costs.

But Vanguard now says that Bogle can no longer be on the board of directors because he's 70 years old. Others think that it's because Bogle has long argued that fund costs are too high.

So, are money managers more worried about their own bank accounts than yours? And are investors still getting good value when investing in mutual funds?

Jim.

CRAMER:

Jack Bogle is the Diogenes of our business. As far as I'm concerned, Jack Bogle stands for everything that's good for shareholders and not necessarily what's good for money managers.

And when I heard about this news with Vanguard, I have money, my family has money with Vanguard, I told my dad, I said listen Bogle is out. I want to be out. That's how good he is and that's sending a bad message to the industry when guys like Bogle are retired.

BUTTNER:

Yes, but Jim, Vanguard is still a fantastic fund family. They've got the lowest costs in the business. They invented index funds. Just because Jack...

CRAMER:

Jack Bogle invented index funds. And this is -- and this is the due they give him? Forget it.

TASK:

Is this a sign? You know we've heard a lot about active managers are doing better than the index funds for the first time in forever. Is Bogel being shown the door unceremoniously? Is this a sign that maybe, you know, the era of the index fund is over?

CRAMER:

I don't think so. I think there is some irony there. I mean I think it is kind of poorly timed. The S&P is not doing well this year. And funds so-named S&P funds are doing that well. But I think that's coincidence.

What I don't find to be coincidence is that Bogle is the man who ways fund managers are overpaid. And it was always strange to have a fund manager say that. I will miss him if this guy is retiring.

BUTTNER:

Dave.

KANSAS:

Absolutely. And I think the fact that he's leaving does send a bad signal. Because I do think that some of the fund managers, especially for index funds, even though the fees are low, it's not that hard to run an index fund.

BUTTNER:

No, there are some trading issues. Gus Soder (ph) at Vanguard is one of the best index fund managers out there. He's not just sitting there, you know, playing with the computer...

CRAMER:

Pushing the button.

KANSAS:

Right.

CRAMER:

How do they select their stocks...

(LAUGHTER)

.... I mean, I have mixed emotions about that. I think that they're -- if anything they don't really need to charge that much. But at least Bogel agreed. There's other guys who charge a lot more than he did.

BUTTNER:

OK. Gentlemen, we have to take a quick break.

But when we come back, is a very dark day for investors on the horizon? You will want to hear our panel's predictions right after this.

(COMMERCIAL BREAK)

BUTTNER:

Welcome back. You know this is the part of the show where our Street.comers go out on a limb. It's time for predictions.

Jim, let's start with you. What's going to happen and why do I care?

CRAMER:

I don't even feel like this is a limb.

(LAUGHTER)

I feel that...

(LAUGHTER)

.... I feel good about Intel. I think Intel is the new general. It's going to take us out of the wilderness. Intel goes to 100.

BUTTNER:

A new bellwether for the market?

CRAMER:

It's going to lead us. It's got the momentum.

BUTTNER:

Dave.

KANSAS:

Well, there's been a lot of concern about inflation. We get the consumer price report coming up on Tuesday. I think it's going to be another indication that inflation is not a problem. And it's going to be good news for the market.

BUTTNER:

And Uncle Alan will be listening to that.

KANSAS:

I would hope so.

BUTTNER:

All right. Aaron.

CRAMER:

Gee, everything is pretty good, Aaron.

TASK:

I'm going to go out on a huge limb. I'm going to be nude on this limb.

(LAUGHTER)

TASK:

I know, I'm sorry, I'm sorry.

CRAMER:

Wait a second...

TASK:

I'm sorry. It's a family show, I know.

BUTTNER:

This is a Saturday morning, Sunday afternoon show, yes...

TASK:

If it's 1998 all over again, like a lot of people, a lot of smart people like Don Haze (ph) at Weekfirst (ph) are saying, we need one of those really scary days, those 500 Dow down days where Jim Cramer is writing about I feel your pain, doing his Bill Clinton impersonation. And there is rioting in the streets and there's panic. And then we will know that the correction is over. And I think we might get it soon. Sooner than people think.

CRAMER:

Well, what kind of thing is going to trigger this dogs crying in the street?

TASK:

I wish I knew. But maybe people will wake up and say...

BUTTNER:

But read this site and you will find out.

TASK:

... you know what, the Fed is going to raise rates the week after...

(LAUGHTER)

CRAMER:

He's got me real scared.

BUTTNER:

All right, if you've got another opinion on these forecasts, just hop on to the Internet and punch in TheStreet.com/tv and rate our panel's predictions. There is also a place there to send us a comment or a question about the show.

We look forward to hearing from you as always.

And we invite you to visit us and read us at TheStreet.com. Every day Jim, Herb, Aaron, myself and many others write stories geared to help you make your own investing decisions.

And that does it for this edition of TheStreet.com. We will see you here, same time next week.

Until then, we hope you invest wisely.

END

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