Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:
- How investors want the success of Disney without ownership of stock
- How a few companies were the silver lining of the earnings cloud
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Investors Want Disney's Success Without Owning the Stock
Posted on May 11 at 11:30 a.m. EDT
Instead, they wanted to buy the stock of Trifecta Stocks portfolio holding Disney itself, because you got the consistent stream of cable, specifically ESPN. Who needed how toys did or games did that used Disney characters, when you could buy the real thing without worry that Disney might have a movie dry spell, causing the merchants to come up snake eyes?
Today we've seen the exact opposite. Electronic Arts (EA - Get Report) , the game company, is seeing its stock soar, in large part because of its partnership with Disney to produce an incredibly successful Star Wars game. The EA conference call emphasized this remarkable tie-up, with this gem standing out: "engagement in 'Star Wars, Galaxy of Heroes' is exceptional, with players spending two hours a day on average in the game during Q4." Disney's "Star Wars" led the mobile business, too, a division that generated $173 million for the quarter, up 15% for the year.
And it's long term, as the company points out: "We'll most likely have at least one 'Star Wars' title a year over the next three to four years. Next year, we will see 'Star Wars Battlefront' back, with bigger and better worlds, because we now have the new movies to work off, not just the historical movies that we used before." They are talking about a franchise that could be the biggest EA has ever had. No wonder its stock's up nine.
Here's the irony, though: we tend to forget the releases they are depending on are from Disney, and Disney will be the chief beneficiary. Right now, though, no one cares about what it will mean for Disney, because of the slowdown of the rate of growth of ESPN and the issues involving anemic advertising.
Hasbro (HAS - Get Report) is no different. As CEO Brian Goldner told me last night on Mad Money, "the reason we have this strong partnership, we treat Disney's brands like our own brands." Goldner went on to say: "Disney's 'Princess' and 'Frozen', that business is terrific. We're off to a great start." Like EA, Goldner's Hasbro is talking about a close partnership that makes toys seamless creations, using that leverage of the Disney movie brands.
Now, there's genuine irony here. One of the reasons why EA's stock is doing so well is that there was chatter that the 'Star Wars' games were off to a slow start. None other than Disney's Bob Iger told you that just wasn't true, and that sales would be surprisingly strong. It seems as if the shorts who didn't believe Iger are now paying the price.
At the same time, Hasbro's figured out how to integrate Disney characters into a variety of narratives and storytelling at the same time that Disney is shuttering its Infinity video game division, which theoretically could have stolen both Hasbro's and EA's thunder and profits, for that matter.
Now, I personally think EA's gotten ahead of itself, while I think Hasbro represents good value. But the best value may be the company that owns the franchises that these two companies have harvested so well, Disney itself.
I am sure that one day we will realize that just as these two companies see the long-term slate of films and salivate, the average investor will do the same when the noise of ESPN dies down, and I do believe that while the noise is hitting some very high decibels it will ultimately be drowned out by the surety of the studio schedule.
I know I am in the minority right now, but never forget that both Hasbro and EA are derivatives, and in the end I would always rather own the real thing.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.
These Companies Are the Silver Linings Behind the Earnings Clouds
Posted on May 10 at 2:28 p.m. EDT
OK, let me state the obvious. It's been a pretty darned terrible earnings season. We've had disappointments galore in pretty much every single sector. It's been almost non-stop depressing and I can't recall when the misses were so widespread.
But the fact is that even the worst earnings seasons have silver linings, and you are seeing stocks lined with silver everywhere, which is how we could rally like this.
First, the usual caveats: We can only advance this strongly when we have oil going higher and the dollar weaker. Those are prerequisites. Just think of them as rocket fuel. Without them, the rocket goes nowhere. Classic failure to launch. Or when those two doppelgangers are really in the red, we simply crash.
Today we're flying with liquid oxygen. Remember, the market's as stupid as uncoated freesheet paper, which is even dumber than plywood or container board. It knows that when oil's up, there's a pulse to the world's economy. More cars being bought in China. More travel in India. More jobs in the U.S. Why do traders reach these conclusions? Because oil is in glut, so it must take a special amount of new demand to get it to go higher.
The dollar? When it is weak, that's the key for the next earnings report, which will show that so many companies that do business overseas are doing better and estimates can be raised. When estimates get raised, stocks go higher.
L-O-X, not Nova, not belly, but liquid oxygen.
Now here's what's great about the wind-down of earnings season. When we get to this week, with the ne'er-do-well retailers finally reporting, what passes as introspection on Wall Street starts to occur.
We actually look back and buy the stocks of the companies that performed the best in this big-time loser season.
I think after slagging the entire market, it is worth it to go over the big-capitalization winners because they are such good companies and because this quarter's performance really cemented them as such. That's right: When you could deliver this quarter, you have to be doing something right.
First up, let's go consumer packaged goods. This was a pretty nasty quarter for the group even as their raw costs were down, owing to a surfeit of feedstock of all kinds from plants to animals to oil and gas and their derivatives. So who stood out? You could certainly bless Campbell Soup (CPB - Get Report) , which is going as organic and natural as canned soup can be. You may not be a big fan of old-fashioned pantry products, but Kraft Heinz (KHC - Get Report) gave you some good numbers. I know Clorox (CLX - Get Report) didn't hit it into the upper deck, but it crushed the bottom line on its 2% sales growth.
The star, though, was Pepsico (PEP - Get Report) with is 3.5% organic growth and its 11% constant currency earnings per share. CEO Indra Nooyi delivered a remarkable quarter in every way. Because she reported first, it was hard to figure out exactly how good it is. But now that we are looking back, it was best-in-show, which is why the stock hit an all-time high today.
Best drug stock? Johnson & Johnson (JNJ - Get Report) , hands down. Worldwide sales rose 6.9%, domestic sales increased 9.8% and earnings per share grew 10.3%. Pharmaceutical sales vaulted 12.3% worldwide with an astounding 16.2% domestically. CEO Alex Gorsky was the firstest with the mostest because, like Indra Nooyi, he reported the earliest and we could only look back in wonderment at those figures. All-time high.
I am sure many of you are sick of me singing the praises of Steve Easterbrook, who in one year's time turned McDonald's (MCD - Get Report) around from a real mangy, beaten-up dog into a greyhound. But as Deputy Marshal Sam Gerard said to Dr. Richard Kimball, in that seminal scene in The Fugitive, "I don't care." I remember when this guy first came up with the all-day breakfast, people laughed. Not me, I feasted. Still do. That's how you get a 6.2% gain in same-store sales. Raw costs down, buyback huge, dollar sensitivity fabulous. The result? All-time high.
I am still reeling from those Facebook (FB - Get Report) and Amazon (AMZN - Get Report) quarters. I wrote about them earlier. But these stocks have moved so much I have to admit that I want to wait until someone downgrades them before I suggest you buy them. Still, you could hear the collective breath of Wall Street be taken away when both of these companies caused massive price target increases and reminded you who is boss of an otherwise totally fallow technology sector. It's important to talk about who didn't win: Intel (INTC - Get Report) , Microsoft (MSFT - Get Report) , Apple (AAPL - Get Report) , Alphabet (GOOGL - Get Report) , almost any semiconductor company as well as pretty much every other software and Internet concern. These two had blowouts in the earning sense of the word. The rest had blowouts that precede jackknifed tractor trailers. (Pepsico, Kraft Heinz, Facebook, Apple and Alphabet are part of TheStreet's Action Alerts PLUS portfolio. Amazon is part of the Growth Seeker portfolio.)
It's a broken record, but Honeywell (HON - Get Report) did it again. CEO Dave Cote gave us the requisite beat and raise on the top and bottom lines and painted a story of a strong China. A strong China? What an anathema to pretty much everyone else. We had a lot of good industrial quarters but this one was superb. Does 3M (MMM - Get Report) rankle you with its endless consistency? Does it bother you that there's no excuse making, nothing about soft Asian markets or strong dollar or worrisome input costs? No, just more of a story of innovation, triumph, aristocratic dividends and gigantic buybacks. Inge Thulin demonstrates that a good CEO never complains and never explains. He just delivers. Both Honeywell and 3M are just fractions below their all-time highs, knocked off kilter by the rotation out of the cyclicals.
Accenture's (ACN - Get Report) a rate bird, a worldwide consulting company that we have featured on Mad Money as a company that seems as precise as the best of the Swiss watch companies. But even we didn't see a quarter where the company would trounce the estimates in spectacular fashion: $1.34 per share when the Street was looking for $1.18. This is a huge international company, so the only way to gauge it is to look at constant currency, taking the strong dollar out of the equation. That's how you get 12% revenue growth and a 24% earnings per share increase and, alas, an all-time high.
Boy, it is hard to find anything that stands out in non-pharma health care, except United Health (UNH - Get Report) , which has returned to stardom after a couple-of-quarter fall from grace. UNH delivered a buck eighty-one, the Street thought it was only going to do a buck seventy-two and it gave you a real nice boost to the forecast. That's a 17% year-over-year increase and while execution and strong product helped, so did dropping out of unprofitable health care exchanges set up under the Affordable Care Act. You get out of those money losers and the money just flows right in.
I am calling out a couple of amazing real estate investment trusts here, too, because of some herculean performances by CEOs. I am talking about Don Wood and Federal Realty (FRT - Get Report) , David Simon and Simon Properties (SPG - Get Report) and Deb Cafaro and Ventas (VTR - Get Report) . At one point during this already tumultuous year, each of these REITs -- a shopping center, a shopping mall and a senior housing community agglomeration -- were pronounced dead by investors. Didn't Amazon destroy the bricks-and-mortar outfits? Didn't Cafaro lose her magic touch? I was appalled by what was written about her. Doesn't matter. She came on at the low. Took us to the high. Nice work.
Finally, a trend can be so palpable it doesn't matter who rides it. The world is re-arming, and we're the arms dealers. Pick your defense contractor, it's a winner.
I know this sounds almost preposterous, but when you get winners in a typical earnings season, they stay winners, like a Super Bowl champion is the king until the next season. Same with these. Until we get conflicting reports, these are the go-to stocks. Congrats to all for an amazing set of quarters, Mr. and Mrs. CEOs. You stand out in an otherwise totally forgettable earning morass.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long PEP, KHC, FB, AAPL and GOOGL.