Apple Deserves a Breakout
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The two most exciting and risk-loaded stocks in the market right now are Under Armour (UA) and Crocs (CROX) , Jim Cramer told viewers of his “Mad Money” TV show, which was broadcast Wednesday from the University of Virginia as part of his “Back to School” tour.
“Tonight, we’re looking for the next Nike (NKE) ,” Cramer told his student audience at the Darden School of Business on the Charlottesville campus.
While Crocs has more than doubled and has been “flying high” since Cramer recommended it in September, last week Under Armour “hit a wall” before bouncing back on takeover rumors.
Though both look like “faddish” stocks, Cramer said he can smell which fads will fizzle and which will turn into good long-term stocks.
Under Armour and Crocs are so expensive that they can do only one of two things at this point, Cramer said: “They can either become Nike or they can turn out to be one-hit wonders.
“Nike has a great brand and great branding power,” Cramer said. “It’s about more than being just a shoe company.”
Not only does it have “the swoosh” branding, but it also was able to extend it, he said. Nike took its brand and went beyond running shoes. Similarly, Under Armour is already expanding its brand to football cleats, Cramer said.
It is also important for companies to be able to expand internationally, not just among products, he continued. Cramer called Nike a “global brand” and said that Under Armour has made inroads in Europe and Asia.
Moreover, Under Armour had promising guidance and said it expects revenue to increase by 30%, he said. Plus, despite all the rumors, Cramer does not believe it will get taken over.
Under Armour, he said, “is the next Nike, or at least the next Reebok, which got taken out for twice what Under Armour is worth.”
Crocs Comfort
Moving on to Crocs (CROX) , Cramer called it a great performer that he’s proud to have caught a double in.
But although Crocs has had “stellar growth” and people love its product, “it is no Under Armour, which is why it’s cheaper,” he said.
Nike became a “powerhouse,” and Under Armour could follow suit, because it has a brand that is extendable, Cramer explained. So, although Crocs is a great brand for shoes and sandals, Cramer believes it “would fail” at the apparel business.
“It is, in the end, just a shoe company,” Cramer said. It could try to make it with international growth, but 30% of its sales are already from abroad, he said.
Cramer predicts that Crocs “will hit a wall and will probably never recover.” He said it could be like Deckers (DECK) , the maker of Uggs.
Trade Crocs short term, Cramer advised. He said he would own it for the next quarter or two, even though he believes that “it’s a dead-end business” long-term.
Crocs has had a “big run” for the last couple of weeks and 36% of its float is being sold short, Cramer said. Even though the shorts are not wrong, as always, “they are way too early,” he said, adding that he believes the run-up in the stock should cause a short-squeeze and send the stock higher.
“If you want to invest in the next Nike, you need Under Armour,” Cramer told viewers. “If you want to trade, as long as you have an exit strategy, Crocs is two thumbs up.”
Cramer welcomed Robert Hugin, Celgene (CELG) president and COO — and Darden Business School alumnus — to the show.
“It’s great to be back at Darden,” Hugin said to audience cheers.
Cramer asked Hugin his thoughts regarding criticism that Celgene is stalled and the best is behind the company.
“They’re going to be sadly mistaken,” Hugin responded. “We had a great performance, but the best is yet to come.”
He called Celgene’s Revlimid drug “a breakthrough therapy” that makes a difference in tens of thousands of cancer patients’ lives. “The future is very bright for Revlimid,” Hugin said.
When Cramer asked the COO what will keep Celgene’s momentum going years from now, Hugin said that Revlimid is the first of Celgene’s new class of oral cancer drugs called IMiDs.
Further, he said the company has two more IMiDs in the clinic already, and hopefully it will have a third soon.
Even though there are many people betting against Celgene, Cramer said he believes these people are wrong.
To view Cramer’s interview with Robert Hugin, please click here.
In his Q&A session, Cramer told a student he went to law school because he initially wanted to become a prosecutor. But getting hired at Goldman Sachs is how Cramer got his financial career started.
Responding to another student, Cramer admitted that his call on Coldwater Creek (CWTR) call was indeed a bad onel.
However, Cramer wants people to understand what he did wrong. He believed that Coldwater was a regional-to-national story that wouldn’t lose pizzazz, and also, he believed in the management too much — the reasons he got burned.
But in the end, even though he said it would be easier to blame management, Cramer blamed himself only. Lightning Round
Cramer was bullish on Dick’s Sporting Goods (DKS) , Diageo (DEO) , Northrop Grumman (NOC) , Lockheed Martin (LMT) , General Dynamics (GD) , Goldman Sachs (GS) , Six Flags (SIX) , Hanesbrands (HBI) , Lowe’s (LOW) , Exxon Mobil (XOM) , Devon Energy (DVN) and Chevron (CVX) .
Cramer was bearish on Cabela’s (CAB) , Home Depot (HD) and Chiquita Brands (CQB) .
For more of Cramer’s insights during the Lightning Round, click here.
Want more Cramer? Check out Jim’s rules and commandments for investing from his popular book by http://www.thestreet.com/tsc/cramerbook.