Jim Cramer is charged up about the stock of EnerSys ( ENS - Get Report) after a caller brought up the company on his radio show Thursday. After looking into it more, Cramer believes EnerSys is a "major buy," he told viewers Friday on his "Mad Money" TV show. EnerSys makes industrial batteries that are used for backup power. It's a sleeper industry, said Cramer, but one he believes is in bull market mode given the need for backup power as demonstrated during the recent hurricanes. Cramer said the company sells to the telecommunications industry, the military and hospitals, all of which could use more backup power. At a multiple of one times sales and 13 times 2007 earnings estimates, the stock is too cheap, he said. Additionally, at Friday's regular session closing price of $14.24, the stock isn't too far above its 2004 public offering price of $12.50. The risks in the stock as Cramer sees them include that more than half the company's outstanding shares are held by insiders. So, if the stock goes up a lot in a short amount of time, Cramer wouldn't be surprised to see insiders selling. Additionally, the company has a lot of debt and not much cash, he said. The company also gets 40% of its revenue from telecommunications companies, which means any downturn in the telecommunications sector could spell trouble. EnerSys may be risky, said Cramer, but there are plenty of great reasons to own the stock. If you can buy the stock within 50 cents of Friday's regular session closing price, Cramer believes the trade will be profitable. But, if you have to pay up $2 or more, take a pass and wait for the next idea, said Cramer.
Best Laid Health Care PlansThe state of Florida is implementing Medicaid reforms that will pay private companies to run its Medicaid program, said Cramer. This could be big for the companies selected, and he sees an opportunity for a trade. Cramer believes WellCare Health Plans ( WCG - Get Report) and Centene ( CNC - Get Report) are the best plays. WellCare already does a large amount of business in Florida, said Cramer, and Centene is best of breed. Cramer would avoid Molina Healthcare ( MOH - Get Report) and Amerigroup ( AGP), which are worst of breed, he said. In response to a question about Centene, which has seen its stock go through a bit of a rough patch, Cramer said Credit Suisse First Boston recently recommended the stock, and he doesn't believe CSFB would have recommended it unless it knew things were OK. Cramer believes Centene will report good earnings Tuesday.
Great Google, What a Quarter!After Google's ( GOOG - Get Report) "unbelievable" earnings report Thursday, Google's stock traded to $346 intraday Friday, within $4 of Cramer's $350 price target. "It's good to be right," said Cramer. Google is benefiting from the "greatest secular growth story of the decade," he said, as the Internet and Google are both killing traditional forms of advertising. The Internet's advantage over TV and newspapers, said Cramer, is that Internet advertising allows one to target customers better and track whether people are actually viewing the ads. Cramer said he probably will not issue a new price target for Google. His $350 price target was primarily an attention getter, he said. And as of Friday, Google has people's attention. "Forget about $350," he said. All you need to know is "Google is going higher. How much? I don't know." Cramer explained his former $350 price target was based on an EPS estimate of $7 for 2006 and a P/E multiple of 50. Now, that $7 EPS estimate for 2006 is below all the estimates on the Street, and a 50 multiple is very conservative for a company demonstrating the kind of growth Google is, he said. One could argue Google could make $10 in 2007, he said, but he stopped short of extrapolating further. "Google remains the lone 'buy, buy, buy,'" he said three times, "on my whole board right now. That's nine buys."
A Nova Take on ChemicalsNova Chemicals ( NCX) CEO Jeff Lipton joined Cramer by telephone. Cramer asked Lipton if the pain was over in the chemical stocks. "It's gone. We're getting ready to move up," he said. How can that be, asked Cramer, when chemical companies' raw costs are "out of control?" Lipton said the key for the chemical industry is not so much the price of energy as it is supply and demand. "We're running out of inventory. We've got plants down on the Gulf Coast, and demand keeps on perking along. So, we're looking at a lot of pricing power for our industry." Cramer wanted to know, if that is true, what Nova plans to do with the cash it should be able to generate. Lipton said his company would continue to buy back shares and would avoid investing in money-losing situations. Cramer pointed out the company had lost money in one of its product areas since the fourth quarter of 2000. "That's true," said Lipton. "The business has been lousy. It's been lousy for three or four years. ... But, it's just getting ready to turn the corner," he said. Cramer summed up the interview saying, chemical stocks are tough. If you're a value-oriented investor, it's worth taking a look. "Me? I'm in don't-buy mode."
Caller QueriesIn response to a question about ITT Industries ( ITT - Get Report), Cramer said ITT is a best-of-breed company and that he would buy it. He believes ITT is headed to $130. The stock ended the regular trading session Friday at $110.50. A caller asked about the use of stop-loss orders. Cramer said if you have to be away from a computer or phone, stop-loss orders can be useful. Otherwise, he doesn't recommend them.
Lightning RoundBullish Cramer was bullish on Whole Foods Market ( WFMI), Best Buy ( BBY - Get Report), Peabody Energy ( BTU - Get Report), Allscripts Healthcare Solutions ( MDRX - Get Report), Broadcom ( BRCM), E*Trade Financial ( ET - Get Report), Charles Schwab ( SCH), Ameritrade ( AMTD - Get Report), LSI Logic ( LSI - Get Report), PepsiCo ( PEP - Get Report), Pike Electric ( PEC), SanDisk ( SNDK), Ametek ( AME - Get Report), Boeing ( BA - Get Report) and Microsoft ( MSFT - Get Report). Bearish Cramer was bearish on Arris Group ( ARRS), NCR ( NCR - Get Report), Quality Systems ( QSII), FuelCell Energy ( FCEL - Get Report), Dell ( DELL), Marvell Technology ( MRVL - Get Report) and Tempur-Pedic ( TPX - Get Report).
Interested in more Cramer? Check out Jim's rules and commandments for investing from his latest book by clicking here. It's a series of articles from Cramer on how to become a better investor. The following table lists some of the rules that Cramer dissects.
|1.||Pigs Get Slaughtered||2.||It's OK to Pay the Taxes|
|3.||Don't Buy All at Once||4.||Buy Damaged Stocks|
|5.||Diversify to Control Risk||6.||Do Your Homework|
|7.||Don't Panic||8.||Buy Best-of-Breed|
|9.||Defend Some Stocks||10.||Don't Bet on Bad Stocks|
|11.||Own Fewer Names||12.||Cash Is for Winners|
|13.||No Regrets||14.||Expect Corrections|
|15.||Know Bonds||16.||Don't Subsidize Losers|
|17.||No Room for Hope||18.||Be Flexible|
|19.||Quit When Execs Do||20.||Patience Is a Virtue|
|21.||Be a TV Critic||22.||When to Wait 30 Days|
|23.||Beware the Hype||24.||Explain Your Picks|
|25.||Find the Bull Market|
|Check back for more of Cramer's Rules|