Cramer's Mad Money - The Consumer Just Won't Quit (2/26/14)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday February 26.

The Consumer Just Won't Quit: Wal-Mart (WMT), AutoNation (AN), GameStop (GME), Best Buy (BBY), Conn's (CONN), Target (TGT), Amazon (AMZN), Home Depot (HD), Macy's (M), Dollar Tree (DLTR), Target (TGT), J.C. Penney (JCP), D.R. Horton (DHI), Cracker Barrel (CBRL), Senior Housing Properties (SNH), Ventas (VTR)

Since the beginning of the year, the word on the street has been that the consumer isn't spending. The 2 months in a row of bad employment numbers, the government's failure to extend unemployment benefits, the meteoric rise in natural gas prices and heating bills and tough competition is hurting the retail sector. Wal-Mart's (WMT) disappointing results, AutoNation's (AN) excess inventory and Target's (TGT) security breach didn't help matters. While many thought the consumer was opting for hard goods rather than apparel, GameStop (GME) and Home Depot (HD) gave some dour news, and Conn's (CONN) was obliterated after earnings. The assumption was the consumers were spending at Amazon (AMZN) rather than bricks and mortar stores, but Amazon hasn't been so hot, either.

However, there has been a dramatic turnaround in retail. Dollar Tree (DLTR) missed earnings, but rallied. TGT, HD and Macy's (M) and even J.C. Penney (JCP) rose unexpectedly. Strong home sales and decent sales since Valentine's Day could be marking a turn for retail, but Cramer thinks the main reason for the retail rally is that the sector was experiencing too much negativity, and the stocks were reflecting only the bad news. Despite the headwinds in retail, the consumer won't quit.

Cramer took some calls:

D.R. Horton (DHI) spent time in the wilderness, but there seems to be a housing shortage going into spring, which will be DHI's "time to shine."

Cracker Barrel (CBRL) reported a tepid quarter. Cramer would take some off the table since it has run so much.

Senior Housing Properties (SNH) is alright, but Cramer prefers Ventas (VTR).

CEO Interview: Dan Hesse, Sprint (S). Other stock mentioned: Softbank (OTCPK:SFTBF)

Sprint (S) had a successful 2013, when it bought the remaining portion of Clearwire and attracted the investment of Japanese telecom and internet company, SoftBank (OTCPK:SFTBF). Sprint rallied from $6-$11 last year, but has dropped down to $8.39 so far in 2014. The company reported a decent quarter, with less than expected losses in earnings and subscribers. CEO Dan Hesse discussed Sprint's radical turnaround; it is completely replacing its network, and this might lead to higher churn rates and some short-term slowness. However, Hesse insists that Sprint investors have bought for the long-term. Hesse is not worried about competition and says that the use of tablets and other devices is good for Sprint.

Keep Some Cash Handy. Stock discussed: Zynga (ZNGA)

Most investors know that they should have some cash handy to buy more stocks on down days, but how much of a portfolio should be in cash? Cramer thinks the absolute minimum is 5%. Keeping cash on hand prevents the temptation of buying stocks on a margin, a potentially ruinous strategy. When the market rallies, that is the time to take some profits and increase the cash position. In boom times, 7-10% of a portfolio should be in cash to prepare for buying on a correction. There are times when one can be fully invested, but these times are rare; only when the S&P 500 corrects 10%. Otherwise, it pays to raise cash.

Cramer took some calls:

Zynga (ZNGA) has great management, but has caught a double. Cramer would buy on a decline.

CEO Interview: Gregg Engles, WhiteWave (WWAV)

The front page of the New York Times featured a story that the obesity rate for children fell 43% in the last decade. Cramer thinks this is an indication that the healthy eating trend is taking hold, and parents are looking for healthier options for their children. WhiteWave (WWAV) is a leader in the healthy eating industry, and its focus is organic milk and plant-based milks. The company beat earnings by 2 cents, reported an 11.5% increase in revenues and shot up 10% after earnings. The company has seen a 30% gain since November. Its powerful brands include Horizon, Earthbound and Silk, and CEO Gregg Engles discussed the fact that these brands continue an upward trajectory of growth and that the focus of brand innovation is to create more products geared towards children. While there was concern about how the higher price of almonds would affect the company's Silk almond milk, Engles said WWAV saw the higher prices coming and made the necessary adjustments. WWAV is in the process of a joint venture in China, and when Cramer asked if WWAV would consider being bought, Engles responded WWAV's brands will have more impact if WWAV remains an independent company.

2 Troubled Sectors

Cramer discussed two battered sectors that might not see relief in the near term. The banks need interest rates to go higher so that the 10 year Treasury yields around 3%. Currently, banks need to get a good net interest margin running to perform well. In addition, many banks are facing litigation, investigation or government regulation.

Money is pouring out of consumer packaged goods, and Cramer thinks the healthy eating trend is having an effect, causing consumers to stay away from traditional, less healthy processed foods. In addition, these companies' yields are not so compelling if bonds are heading higher. Another factor is that consumers are choosing store brands instead of the leading names in order to save money.

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Source: Cramer's Mad Money - The Consumer Just Won't Quit (2/26/14)

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