Cramer's 'Mad Money' Recap: Switching Gears (Final)

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NEW YORK ( TheStreet) -- Investors who want to supercharge their portfolios need to look for stocks that have successfully changed their business model, Jim Cramer told his "Mad Money" TV show viewers Tuesday, as the Dow Jones Industrial Average eclipsed the psychological 13,000 barrier.

Cramer said that companies who have changed their model, but are still unrecognized by Wall Street or panned by the pessimists, make for terrific investing opportunities.

Consider Priceline.com ( PCLN), a stock that soared up $41 a share, or 7%, on the heels of its strong earnings. Cramer said this company successfully changed its business, from a negotiation-centric model, to one where travelers can save on just about everything with no negotiating needed.

The result? Not only strong earnings, but also strong upside guidance from the company. Cramer said Priceline now has great earnings visibility and is in control of its own destiny, leaving the analysts with no choice but to upgrade their forecasts.

Cramer said this same pattern has popped up in Apple ( AAPL), a stock which he owns for his charitable trust, Action Alerts PLUS. He said that Apple also surprised to the upside, on strong momentum, leaving investors to realize that with the markets trading at a 14 times earnings multiple, Apple, with its mere 10 times multiple, is grossly undervalued.

Other companies on the move include Garmin ( GRMN), said Cramer, a company that has extended its product lines outside of car-based GPS systems, and Clean Harbors ( CLH), which expanded from pollution clean-up to managing oil and gas drilling sites to protect the environment.

Cramer noted that Whirlpool ( WHR) also surprise Wall Street with strong earnings, sending that stock up 8%. As did Ralph Lauren ( RL), a company that many investors were expecting to disappoint, but instead revised its earnings estimates sharply higher.

The pattern is clear, said Cramer, find stocks that are succeeding in changing their model and buy in before the Wall Street analysts have taken notice.

New Face of Technology

"When you think about tech, don't think about hardware, software and the Internet," Cramer told viewers, "think about innovation." He said that technology companies are all about game-changing innovations, which is why athletic apparel maker Under Armour ( UA) is the new face of technology.

Cramer explained that Under Armour's growth has come because of the company's moisture-wicking compression apparel, a major accomplishment for both the Under Armour and for athletes worldwide. Compression apparel was invented a long-time ago, but Cramer said the company never stopped innovating and is now creating products to take market share in new markets.

Under Armour's Charged Cotton apparel, for example, dries five times faster than regular cotton, noted Cramer, and is perfect for those who prefer natural vs synthetic fibers in their clothing. Under Armour said in a recent conference call that Charged Cotton apparel could quadruple its addressable market.

But the company isn't stopping there. Under Armour is also releasing Storm, a waterproof sweatshirt, along with new running shoe technology to take on shoe giant Nike ( NKE). The company also has new fabrics in the works that repel heat from the sun. Greater still, Under Armour is making strides in appealing to women, with new women's apparel and fabrics coming soon.

With all this effort putting the company's brand to work in new areas, Cramer said it's easy to see why Under Armour grew 38% last year. He said the company's high-tech products have pricing power, meaning that input cost increases can be passed onto the customer and the company doesn't have to discount its products in order to sell them.

Trading at 29 times earnings, shares of Under Armour might seem expensive, said Cramer, but factoring in the company's 20% growth rate and its potential to tap into new markets and shares quickly become very inexpensive.

Better Pizza

In the "Executive Decision" segment, Cramer checked back in with Patrick Doyle, CEO of Domino's Pizza ( DPZ), a turnaround stock that delivered a three-cent-a-share earnings beat with 6.8% same store sales growth. Shares of Domino's shot up 15.7% on the news and have risen 278% since Cramer first recommended it in January, 2010.

Doyle said the secret to Domino's success is simple: better pizza. He said it's been two years since the company relaunched its pizza and the better food and better experience have customers coming back. Doyle explained the phenomenon as "a beautiful thing."

Also helping in its growth is technology. He said that nearly one-third of the company's orders now come digitally, with 6% of sales coming via mobile devices. This trend towards self-service ordering is not only saving Domino's money, he said, but also improving the customer experience. He also said that social media is helping Dominos connect with customers in a whole new way.

When asked whether Domino's is taking share from its competitors, he said that the pizza category as a whole is growing at the same time that Domino's is taking share. He said that regional players in particular simply cannot provide the experience that Domino's provides.

Turning to rising food costs, Doyle once again noted that Domino's is 90% franchised, meaning that franchisees bear the brunt of food costs, not the company. That said, Doyle also said that commodity costs are only forecast to rise 1% to 2% this year, meaning that store profits will be up.

Finally, he talked about Domino's international efforts. He said that business is booming in India, where it's been easy to adapt Domino's products to a largely vegetarian population. Doyle was a little cautious when discussing China however, saying that the company is moving slowly in that country and currently only has 15 stores.

Cramer said Domino's is still a great growth story and he continued to recommend the stock.

Casino Stock Trades

In the "Off The Charts" segment, Cramer went head to head with colleague Scott Redler over the charts of the casino stocks to see which company is leading the sector and which ones are merely following the pack.

He analyzed the stocks of Wynn Resorts ( WYNN), Las Vegas Sands ( LVS) and MGM Resorts ( MGM).

Redler noted that Wynn had been the market leader up until July 19 of last year, when shares hit a higher-high followed by a lower low, a sign that shares have topped. That was indeed what happened, he noted, as shares have been sinking steadily ever since.

But right as Wynn was on the decline, another stock, Las Vegas Sands, seemed to take the lead. After trading sideways for many months, Redler said that Las Vegas Sands has moved above its moving averages and recently broke through a tow-year ceiling. Redler feels the next stop for Las Vegas Sands is $65 a share.

Turning to MGM, Redler felt that this company has merely followed in the footsteps of Sands and is now ripe for a pullback. Redler predicted a 10% pullback in MGM is likely.

Redler also noted that Wynn has been showing signs of strength in recent days however, and is now back above its moving averages. Redler and Cramer agreed that now is the time to go long Wynn and start trimming back on shares of Las Vegas Sands.

Lightning Round

Cramer was bullish on Schlumberger ( SLB), Ensco International ( ESV), Hershey Foods ( HSY), Avnet ( AVT) and Check Point Software ( CHKP).

Cramer was bearish on ZAGG ( ZAGG), Activision Blizzard ( ATVI), Viacom ( VIAB), Baker Hughes ( BHI), VIVUS ( VVUS), Pitney Bowes ( PBI) and Tech Data ( TECD).

Closing Comments

In his "No Huddle Offense" segment, Cramer said he's miffed at the valuations of consumer product companies vs. that of some old-line technology stocks.

On one hand there are tech stocks like Microsoft ( MSFT) and Intel ( INTC), said Cramer. These are good companies, great balance sheets, steady growth and new innovations. Yet these stocks, each with a 10% growth rate, sell for only 10 times earnings.

But on the other hand there are consumer products companies like Procter & Gamble ( PG) and Clorox ( CLX), two companies that have been coming up short quarter after quarter, yet they sell at 16 times earnings despite markedly lower growth rates.

Cramer said these consumer stocks are no longer worth their market premiums and may soon go the way of the big pharma stocks, which saw dramatic multiple contraction when their businesses stagnated.

--Written by Scott Rutt in Washington, D.C.

To contact the writer of this article, click here: Scott Rutt.

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At the time of publication, Cramer was long Apple.

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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Some of the stocks mentioned by Mr. Cramer on "Mad Money" are held in Mr. Cramer's Action Alerts PLUS Portfolio. When that is the case, appropriate disclosure is made on the program and in the "Mad Money" recap available on TheStreet.com. The Action Alerts PLUS Portfolio contains all of Mr. Cramer's personal investments in publicly-traded equity securities only, and does not include any mutual fund holdings or other institutionally managed assets, private equity investments, or his holdings in TheStreet.com, Inc. Since March 2005, the Action Alerts PLUS Portfolio has been held by a Trust, the realized profits from which have been pledged to charity. Mr. Cramer retains full investment discretion with respect to all securities contained in the Trust. Mr. Cramer is subject to certain trading restrictions, and must hold all securities in the Action Alerts PLUS Portfolio for at least one month, and is not permitted to buy or sell any security he has spoken about on television or on his radio program for five days following the broadcast.

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