Transcripts For CNBC Mad Money 20150126 : vimarsana.com

CNBC Mad Money January 26, 2015

You know what, i think this take is healthy as evidence by our ability to rally from an Early Morning deficit that didnt used to happen with the dow rising 6 points and nasdaq climbing. 29 . Why is it a sign of health . Let me show you how its done. Heres the eight positive signs that a market is is healthy enough to invest your hard earned capital in. First, can we shrug off the every day overseas worries . Yesterday when the greeks elect elected a government we were ready for the s p futures to open down and when russia was racheting up tensions in ukraine we knew things would be awful. They indicated they would open down a half a percent. However by the time we opened this morning the market had reversed its judgment. Investors were willing to rethink whether the greek election was relevant to us. Might have been good for us because it could force the powers that be in europe namely the germans to recognize that too much austerity has consequences. And while the Majority Party campaign on the need to end the austerity in greece it teamed up with with an extremist right wing government. That kind of inclusion of an extremist into a Central Government is what they fear. They elect a far right government resulting in social unrest. Think france. So it looks like investors calculated the greek election to be positive because it makes the central bankers work even harder to get economies on the continent to grow faster so therefore were willing to buy the weakness. A healthy market shrugs off foreign negatives. Second sign of health when an analyst downgrades a stock and it doesnt even seem to matter. Today we had to downgrade from Dollar General to an outright sell. We had two downgrades of her she last week. It still trades off its 52 week high. You want to stick around for that analysis. Its really important. The oils have been downgraded endlessly but more downgrades today. What happens . They hang in there and they dont seem to get hammered anymore. Third the market has very little memory for the bad. On friday we got a hideous Earnings Report from mcdonalds. It was just terrible. They have a very lackadaisical sense of urgency which does seem to fit the bill. So the stock takes a hit for certain. But then it bounces right back. Its almost where it was before the horrendous quarter. It sure seems to be headed there. Same with wells fargo. Remember how horrible that quarter was supposed to be . The stock is about to take out the level where it was when wells gave you the miserable report. Turns out to be another buying opportunity for this Great American bank. Sometimes this reaction occurs even the same day. Norfolk southern reported a quarter not as good as Union Pacifics last week which was a thing of beauty. The stock looked down at the open as it should have been but then it reversed and went higher anyway. Why . The market is desperate for America First names. Companies that do business here and have less foreign risk. They fit it perfectly. There was no rail line to europe. I dont know if the disk drive company can bounce back from its negative comments about disk drive promising when it reported its am. But the stocks are cheap and if you wait a few days people forgot what went wrong. Of course not all will be forgiven. United parcel was down for a second day because it stunk up the joint reporting a quarter that was marred by bad logistics. Still i think the pile on and second day might give you an entry point tomorrow and microsoft is a resounding negative and really horrible and the commercial business was light but how long can that high quality stock be kept down . Sure i know goes down 3 . Maybe goes down to 5 but that could be an opportunity that my Charitable Trust has been waiting for trying to get big. 4th this market loves, loves, loves supply. Meaning underwritings. When you have a Terrible Market a company can offer stock and the print, the price its offered at is immediately violated as the stock breaks the print or goes below where the deal came and anybody that bought it got crushed but last week we got a really seminole sign. Got an offering from total cramer fav, bmrn. It was 8. 5 million shares. Requested 93. 25 and now the stock rallied to 99 and change. A love of supply. Not only that but all bio tech is worried. Isis pharma climbed another buck. Its doing well. Biogen rallied on hope for its antialzheimers compound. They have great earnings. But then why not . They trade on drug approvals too. Fifth sign of Health Mergers and acquisitions which had gotten off the radar screen in 2015. This morning, thats a packaging rival we liked a lot on mad money for 9. 2 million. Two major competitors in the packing business notorious for dogfighting merge. That could lead to a rationalization of the whole industry. Do you know what i suggest you do . Buy a Little International paper before it reports wednesday and then buy the rest after. The news is that good for this third competitor. Meanwhile Energy Transfer partners made a deal to acquire regency energy. This is the Second Company to make a deal in this space in a week. Last weeks Kinder Morgan purchase. Both are taking advantage of the stresses in the system. Etp got hammered off the deal but you know what after tomorrow when it probably gets hammered again i think its going to reflect descent value and then Access Capital Holdings Gets together. It takes out capacity. You wont be able to do that if youre trying to get insurance anymore. You get multiday moves. Netflix for example is now up an astounding 100 points from where it reported a terrific number just last week. A multiday move higher is a terrific sign of a healthy tape as we call it. 7th, were getting terrific pen action. By one company a sector. Even if the others havent reported anything to write home about. This morning d. R. Horton delivered a really beautiful number. And more important though it also took len and they gave you a rare down beat forecast. Horton can turn around the fortune of a company that told you things might not be that good. Finally, the 8th sign its alive and well i took heat recommending people clammer for robost. Cant you read a Balance Sheet . Dont you know theyre getting their butt kicked by google. How can you recommend the stock of a company thats going to lose money. They were coming down on me. My only regret is not being even more bullish than i was because box turned out to be a total home run. Thats is what happens in a real good stock market. Wait until you hear what i have to say about shake shack later in the show. Heres the bottom line. At one point last night things looked pretty dyer but by the time we open the worries were gone and the opportunities were right. Thats the definition of a bountiful tape and its one that gives you a chance to get in before it runs away from you. All aboard. Steve in florida, steve. Caller yeah hi jim, would cablevision along with the existing price wars how do you see this sitting for verizon and at t . I think first of all, this is a great question because you know i have been recommending verizon since the start of the show and i like that yield of 4. 6 but this cuts off the upside. People will be worried that the competition is too great. Have to tell you get that dividend but dont expect a lot of upside because of the competitors. Lets go to al in new york. Al. Caller hey, jim, big booyah to you. My question is about disney. I wanted to add but i wasnt sure if i should do that before earnings or wait and see how they report the quarter. Well i think you should wait and ill tell you why. The stock has a history of going down after its had big runs like it had it has a history of going down and thats when the pull the trigger. Lets be patient. Maybe they give us another chance to get in disney at a discount. Jerry in florida. Its so nice. I hate it here. Jerry. Caller hi, jim. I bought 100 shares of American Airlines at 38. Would you advise me to sell now and take the profit or do you see a higher price target. It did go to 52 week high today and im always of the mind set. Theres two different disciplines going on here. I think american is going to have a terrific year. On the other hand youre up so much on that. You know what you do in those cases . Take a quarter off. People say jim you like a. L. The discipline of not losing money is incredibly important. I like to make money. Do some trimming. All were doing is talking to people in places better than where we are. Renee in florida, renee. Caller hi jim. How are you . Caller im all right. I used to be a fan of Nuclear Power because its so much cleaner and internationally they have always been more accepting. Like the deal just made with india but since the price of oil and natural gas has become so low, and the fear from the fukushima disaster, i was wondering what your outlook is on Nuclear Power in the United States and specifically my stock. I think Nuclear Power is dead. Its not going to happen. However i think that exelon trades like a buy. Only yields 3. 3 . Its had a remarkable run. Particularly after it cut the dividend. People liked it. Im not a buyer at 3. 3 because if im going to buy a company with 3. 3 yield im going to end up wanting to buy con end which had a remarkable run and better yield than exelon and is a better company. All right. This one was a total home run. One that gives you plenty of opportunity. Now mad money tonight, bring on the burgers i say. Living culinary legend danny myer has a portfolio of restaurants packed with stars but should you reserve his newest offering on wall street . Im biting into the shake shack ipo. Then chocolate wars. Battle over Iconic Candy Company hershey. Maybe its time to give the stock a kiss. Plus kimberlyclark is probably in your home. Its stock is stumbling badly after missing the quarter. Time to buy . Or time to stay away . Why dont you stick with cramer . Dont miss a second of mad money follow jimcramer on twitter. Have a question tweet cramer, madtweets. Send jim an email to mad money cnbc. Com or call 1800743cnbc. Miss something . Head to madmoney. Cnbc. Com. Last week i told you to try to get on that box ipo. Sure enough it exploded higher. Immediately after it became public. This week i have another big ipo i think you should call your broker to get a piece of although it wont be that easy. It wont be like box. Im talking about shake shack which becomes public later this week under the symbol shhk. This will be another deal that instantly goes to a premium once it starts trading. Maybe with the letter somebody isnt around you grab some of their stock. As regular mad money viewers know we have been big fans of danny myer. We told you that setting the table, his story about how to be hospitable to guests may be among the best Business Books ever written. Its still in print. I urge you to get it and remember the danny myer hospitality index created by the man himself to highlight companies with the hospitality quotient he snows stock. Its rallied 433 since february 2009. Thats better than the s p performance performance. We never had a chance to invest publicly in one of his own concepts. We just had the pleasure of eating at them. I was supposed to go to one today but the storm messed up my plans. Its the cooler smarter, more delicious and upscale burger joint. Only has 36 locations. Shake shack believes it can open 450 stores in the u. S. Alone which means the company could have a truly Phenomenal Growth proapologetic toir projection projection. I think thats conservative. Relatively young super fast growing restaurant chains have been well received by the ipo market of late. Consider for instance the habit restaurants. Thats another burger chain which is roughly 100 locations. It was 120 on the first day of trading when it became public. You made a fortune. Similar to zoes kitchen. Public last april. Spiked 65 on the first day of trading. Since rallied another 45 . Not bad. If shake shack is like these deals and i think it will be a better deal then its lucky right out of the game especially since the 14 to 16 price range which would give the company a valuation of 533 million. Its going to be far more highly valued than that but its not just the small cap restaurant ipos have given you a first day pop. We also know with the exception of mcdonalds the burger industry has been very strong of late with premium burger chains out performing the broader category. Basically shakeshack is the polar opposite of mcdonalds. But this one is all natural. Its hormone and antibiotic free. Its well designed stores and friendly committed workers which is exactly what you expect from a danny myer vehicle. My sister and i found ourselves down in the dumps in philly. We couldnt figure out how to treat ourselves until weshe said lets go to shake shack. Good call. Shake shack has some of the best numbers of any restaurant chain out there. In 2013 its average unit volumes came in at 5 million. Thats an astounding number. Thats more than twice the 2. 2 million chipotle demonstrates. They have an astounding 65 meaning the payback period for opening a new restaurant is less than two years and that dwarfs the habit restaurant which is more than doubled on its first day of trading. This is much better than habit plus its expanding overseas. Opening up lots of International Franchise locations. Over the past two years all of the companys new International Stores they have been franchises where as all but two of the domestic openings have been company opened. Its a two prong strategy. They use franchises overseas to get more growth with less risk but they want to fully own most of the locations in the United States so they own all the upside in the more predictable domestic market. Theres two areas where they lag the competition with its margins and same store sales. Thats whats disappointing here. The companys earnings before interest and taxes margin of just 4. 9 . Chipotle has 16. 8 . The reason for the deficit is half of the Company Owned store versus been open within the past year and they have yet to reach maturity. Based on the actual Unit Economics i wouldnt be surprised if over the longterm their margins are able to meet or even exceed chipotles. That would represent a ton of improvement. In its most recent quarter shake shack had a gain of 1. 2 . You would think that number would be much higher right . But heres the thing, shake shack doesnt include restaurants unless they have been open for 24 months or longer. That means this isnt really an apples to apples comparison with other chains. Companies once the restaurant has been open for 12 months and given that the growth is explosive 24 months ago they didnt even have that many locations at all. However this company is brilliant at Opening Stores in high density, high traffic locations. That includes the seven manhattan restaurants with one in the theater district and the mall location in dubai. We will continue to not only fill an existing market such as new york philadelphia washington, atlanta, south florida to leverage optional effectiveness but also enter new markets such as austin where we have signed leases. We currently have only 63 shacks around the world we have identified many attractive markets for the shake shack experience and remember theyre doing all of this with the danny myer touch. I remember the first one on madison square. This is an incredible story. The real upside here is the about for growth. They plan to triple over the next five years. They could expand to 63 locations to nearly 190. In 2015 they plan to open 10 more stores. 40 unit growth. Some of the fastest in the industry. How do you value a stock like shake shack . Thats what were trying to key. Given that the company is plowing all of its profits back through the business the current earnings dont tell you that much. How about the sales . At the midpoint of the price range it would trade at 3. 4 times forward sales which would make it more expensive than a stock like zoes kitchen. Still for me you have to judge a stock lake shake shack based on how much money it could make several years down the road. Remember what we call that . We call that the out years and i have to believe the earnings power four or five years from now could be enormous and thats why we have to pay up. So heres the bottom line. Your brokers probably not going to be there because of the storm. Try it anyway. You want to get a piece of the shack. Its energied to give you a big pop right out of the gate. But if you cant get in on the actual ipo im giving you only a 20 dollar leeway here. I dont want you to trade it but 20. Otherwise well say we missed it. Thats all right. Given the volatile nature of this market. If you cant get a piece of the ipo wait for broad based market wide pull back to give you a sbr entry point and in the meantime eat one of these delicious burgers. Much more mad money ahead including the battle heating up over hersheys. Should you stay away or could it coat your portfolio. Then the Company Buying kleenex is in the red after a disappointing quarter. I have the ceo. Plus what you need to know before diving into another domestic oil or gas stock. You have to stay with cramer. Last friday we got a 2 pull back as hershey was hit the second time in a week. Its still 2 off its highs. Americas largest chocolate maker and one of the worlds Biggest Candy companies is the sight of a massive shoot out. A Tag Team Death match between the bulls and the bears. A week and a half ago wells fargo upgraded hershey in a rerating of the whole staples group. Jpmorgan downgraded it and then on friday it got hit with a second downgrade. Taking it from a buy to a hold. As regular viewers know this kind of an analyst faceoff is actually a good thing because it helps us clarify the bullish and bearish positions hershey has so we can do a better job

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