Final Segment 1

Final Segment 1 Title: 'The Sell Block' .  .  .  .  . Featured Stock(s): Martha Stewart Living Omnimedia (MSO) See MSO's official investor relations' site here. See the Yahoo! Finance profile for MSO here.

After this segment, you can see Jim's Sudden:Death picks here...

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JJC:    You better sit down for this one because you're never going to believe it...

I mean, you're never going to believe it... It is Sell Block time and today we are doing the unthinkable...

We are doing prisoner release...

Even in this time of recidivism... We're doing a jailbreak...

Yes, because I want Martha Stewart Living Omnimedia (MSO)...   You heard me... MSO, busted out of the Sell Block, long after Martha checked out herself...

MSO, the publishing and merchandising empire for Martha Stewart... You know, you're probably not even aware that it's public, it's been so low-profile, reports next week... Nobody cares... It is for those in the cognoscenti, it is a hated and despised stock, with tons of negatives... But just you watch, and Cramer puts on his magician hat and turns all those negatives into positives...

But let's give the parade of horribles its due...

First, magazine trends, right?... They're a softening industry wide, advertisers are pulling back, publishing is 55% of MSO's revenues, Martha Stewart Living, Everyday Food, Body and Soul, Martha Stewart Weddings... The compares for all of these are more challenging...

Second, Susan Lyman, the well-respected CEO left...

Third, MSO, historic high expense structure...

Fourth, its merchandising division is predicted to lose a key sponsor in 2010, KMart... Merchandising is 24% of revenues... Losing KMart could mean losing over $40 million smackers...

Fifth, I think people feel they're still too much Martha, and she owns 50% of the shares...

Okay, I think all those negatives turn into positives if you take a closer look...

And remember, I have hated this company, so you're talking about a guy who despised this as much as anybody... First of all, let's talk about management... Susan Lyman, okay?... As much as I like and respect her, and she is terrific, the company hasn't been able to move much beyond publishing, okay?... No, publishing and some merchandising under her leadership... And remember, under her leadership, the stock's been cut in half in the last year and I have hated the stock all the way down, my bonafides... I think it's time for someone new... I think the Chairman, a man who was always behind the scenes trying to do a good job, is now stepping up to the plate, Charles Koppleman, a proven winner, who practically built EMI, has got more engaged than ever before...

Now, who is Koppleman?...

He's the one who discovered Bobby Darren, Billy Joel and Tracy Chapman and turned them all into successes... I think he can do the same for Martha who is already a household name on nearly every part of the planet... There are two CEO's now, co-CEO's, not my favorite, do I like that structure, not really, but it might work in this case... Robin Marino, 30 years in retail, helped run Kate Spade before she took this over, she was COO... Wendy Harris-Ballard, who I've known for years, is a great publishing exec, both offline and online... She was a key driver of the success that Yahoo! (YHOO) once had...

Since MSO has two main businesses, which is publishing and merchandising, they could make a dynamic duo, and allow Martha to do what she does best, to develop content and Koppleman to do what he does best, think big about where this company is going, and I think it's going merchandising... Most important is Martha herself... People treat her enormous involvement as a negative... I think they're insane... In my opinion, she's proving that Scott Fitzgerald wrong... A fabulous woman who stumbled personally but never professionally and has always been amazing at her job... Take it from me, she seems more energized than ever, determined to mount a second act... It is easy here to build than rebuild, but it seems that Martha Stewart does not want her jail time to be her legacy... I think she wants to prove to the world that MSO is worth much, much more than $7 and change where the stock went out tonight... She's got a lot at stake... But I want to bank with her a fired up Martha, who still looks great by the way, says this from a 63 year old... You've got a great person, behind the scenes... You've got a fabulous chairman Koppleman and two CEO's who want to win... I don't know, entrepreneurs all, I think this could be huge... Now, MSO reports next week... It has already guided down after last quarter so I don't expect much excitement... Then again, expectations are very low across the board... The most important analyst on the stock at JPM downgraded it a month ago and he downgraded it right on Susan Lyman's departure, he said you know, turmoil, all right... I think he'll be wrong... RBC downgraded it in April with a piece entitled "A good guest knows when it is time to thank the host and leave"... He said there's no upside... Actually, I think the RBC guest stayed way too long and way too low... I say this piece should say "here's your hat, what's your hurry, don't let the door smack you on the way out"...

This stock has no sponsorship whatsoever at $7 bucks... After left all the way down from the teens... I didn't like it then... To men, that's classic analyst behavior... There was a sure sign of a bottom, and universal hatred from the guys who used to love it... That said, here's some caveats... It's only about a $350 million company... So, if you pay up, and you pay up and you'll see it like right now, you're watching the screen, it's got the stock popping, you're an idiot... You're a moron, you're a fool... I want limits... I don't think you should pay $8 for it... I want small increments... If you pay above $8, if you use market orders, I think you will regret it, particularly in this market... I am not recommending MSO as a trade ahead of the earnings report... As a matter of fact, I wish you wouldn't buy it until after the earnings report... But I can't have that... I know you get excited... Do the homework, work on the weekend, whatever... But do not pay up... I'm recommending it because I think the future is merchandising worldwide, not just publicly, and that's what I think has been missing here under Susan Lyman... And I believe merchandising is the key to why MSO just bought, not that anybody cares at all, Chef Emeril Lagassi's business... BAM... Like Booyah... Fabulous diversification away from Martha, at what looks like a terrific growth property... Everyone is so worried that this is just Martha... Oh, Martha this, Martha that... But Emeril is one of the four people I know that go by first names only, Oprah, Martha, Emeril, and Madonna, and how about Regis?...

Okay, this company has half of them, or at least two fifths...

Now... about turning the loss of K-Mart into a positive... In a couple weeks time, you're going to see, if you're watching TV at all, Martha Stewart, nationwide TV, big campaign, new crafts line at WalMart... 100 million people visit WalMart a week, and her line will be rolling out in 3000 stores this year... Gigantic... She has a new deal with Macys, a special deal with COST, these are rolling out now... Her housing line with KB is selling well... Really the only bright side in whole darn housing market if you ask me... although, I think housing are bottoming by year-end okay?...

Most important, I believe that Martha's brand is bigger overseas than here... And I think we will see a roll out of Martha Stewart stores worldwide, no one is talking about it... It feels to me like what Ralph Lauren did six years ago, which if you bought it by then you caught a five bagger, five times the initial investment... I look at this company's in transition from publishing into merchandising... It's true that I'm asking you to buy into the (time), the 17 months between now and when Martha Stewart separates from Sears, K-Mart, but the company can see itself through this interlude... Steep decline in royalty payments, not a problem... This company has cash and its cash is full of positive without the royalties... Maybe a better deal lies ahead for a flagship brand, that's the sheets and stuff, the household furnishings... In the interim, you've got international merchandising, we've got Emeril, Bam, Walmart, Macys, Costco...

That will move the needle here... How many other publishing companies are crying in their InBev because of shrinking margins and readers... Well this one has growing readers and more importantly, has been becoming more than a publisher... Hey, ask the New York Times, Meredith, McClatchy, Gannett, are they doing that?... They haven't figured out how to do merchandising... MSO leaves them in the dust.

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The Bottom Line!:    Really, it's Martha herself... The woman is bigger than the stock, but it can't stay that way for much longer... I think the stock is at last going to reflect her work... I don't think you should wait until it does, before you buy it... Use limits or I will come after you at your home...