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Tuesday, 07/08/08
Posted 07/08/08, 10:07
pm ET |
(Scroll down to see Jim's
comments below) |
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Today's date:
Tuesday, 07/08/08 |
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Dow Jones: |
11,384 |
+ 152 |
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NASDAQ: |
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2,294 |
+ 51 |
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S&P 500: |
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1,273 |
+21 |
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Opening Segment 1
Title: |
'Shoot
From The Hip' |
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. . . .
. |
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Featured Stock(s): |
Smith & Nephew PLC (SNN)
See SNN's official
website
here.
See the Yahoo!
Finance profile for
SNN
here.
See Opening Segment 2,
below...
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After this segment, you
can see Jim's Lightning
Round picks
here... |
JJC: I just
want a few more days like
today. The market staged a
back from the dead rally
today... One of the few in
what seems like ages... So
many times we have seen
rallies look fabulous at
the beginning, only to
fail later in the day and
we choke on everything we
bought... Not today...
Today, for the first time,
we were rewarded if we
pulled the trigger with
fabulous pit action... And
I think that's because
we've got some new
leaders, some new leaders
top business models, so to
speak... And to beleaguer,
and belabor the teen play
at NBC issue, one ripped
from the front pages, but
not necessarily from the
newspapers, no the
"Cramerican Marine Field
Guide to Recessions...
Right on schedule... The
drug and healthcare stocks
that were so hated just
one weak ago are the very
stocks that went up today
and of course the stocks
we are featuring all week
on Mad Money... Remember,
Wall Street is a vicious
and mercurial fashion
show... At times like
this, when the economy is
weak and the global
economy seems like it's
teetering, Uh, well... The
big money guys, who are
the critics and the buyers
of the ready to wear stuff
at the fashion show will
tend to decide that stocks
with safety and
consistency, yeah that's
right, boring ones, were
all over the runway... And
momentarily, the commodity
plays get shoved into the
sidelines...
I think the safest and
most consistent group in
this environment of high
energy prices, yeah, I
know they came in little
today, high raw costs, and
economy that is doing the
dead man's floats despite
the 150 Dow Jones move...
The best one, is the group
I started yapping about
yesterday and will
continue to highlight,
some say tap, some may
promote, I don't care...
Every day this week it's
going to be healthcare...
It's generally immunized
against those energy
prices and I still
consider the price of oil
to be high after the $10
swan dive of the last few
days or high grain prices,
yeah, I see them coming
down too, but it ain't
that much, or an economy
that is flatlining, and a
financial system that
showed a bit of a pulse
today, but otherwise has
been DNR, as in "do not
resuscitate"... These
healthcare stocks, even
the ones I don't like, are
right now worth owning...
As money managers swap out
of less dependable
sectors, that had been ,
and into relative safety,
and boredom of healthcare
stocks... Now drugs, the
drug stocks had been in a
vicious and horrible bear
market, as measured by the
pharma-index, called the
DRG, uh huh drug, aren't
we great on Wall Street,
which fell from $355 in
early January to as low as
$283 on June 11th... But
now the index be
flying!... Ho, ho... Buy,
buy, buy... Closing at
$305, and showing that
healthcare is back and
bigger than ever, just
like Ghandi two... You
might not have seen that
movie...
Remember, it is all
perception... It's the
fashion show... The big
boys like this group now,
versus others because they
fear the more exciting
mineral and oil plays may
not be able to meet
expectations... Put aside
whether you think they can
or not for a moment...
What I need you to
understand is the fashion
show, and the big boys are
comfortable with these new
stocks... Even if they
really are the same old,
same old, really with now
pizzazz... The stocks that
went up the most today,
nothing changed for
them... You could be
sitting there saying wow,
hey, what happened to
Merck (MRK)?...
What's going on with
Bristol-Myers Squibb Co.
(BMY)?...
There is nothing, except
for the fact that the big
boys feel more
comfortable... This (bear)
was Bristol-Myers last
week... This (bull) is
Bristol-Myers today... Oh,
and before I can give you
what could be the next big
healthcare winner... Can I
just say point blank,
right here, right now,
that the only thing that
can immunize you from the
vicissitudes of this
really crazy fashion show
is diversification... See,
if you just own nothing
but the first half of the
year's winners, oil and
gas, you know what would
have happened in the last
few days... You would have
been blown away... A
diversified portfolio with
some healthcare in it to
offset a commodity loser
could keep you in the
game... The ultimate goal,
if we were to keep on
gunning, for the American
Dream... Oh, 7 o'clock
Sunday night, on NBC, for
those who want to catch my
Nascar network special...
Shameless?... Who cares...
Alright, so for tonight's
healthcare play, I give
you a guy and his
nephew...
Uh, more precisely,
Smith & Nephew PLC (SNN)...
This one is a medical
equipment company that got
beheaded after a
disappointing first
quarter... Sinking from
$64.73 on April 30th at
the close to $57.40 on May
1, the day after it
reported... Hey, that's an
11% drop, and it's
languished down in the
$50's ever since...
Closing today at a mere
$52 and change, this one
hasn't been recognized
other than Cramer... The
Street is overreacting to
that quarter and shunning
what I think is an
otherwise good company...
It gives you a chance to
get in a great stock at a
much too low price that
hasn't been swept up in
this incredible rotation
of the last three days...
SNN has it's hands in
several different
businesses... 37% of their
sales come from orthopedic
reconstruction, hip and
knee replacement... Good
business to be with our
aging, weight gaining
population, even if SNN is
the number 4 player in the
business... Boy, I'll tell
you, if I were number 1, 2
or 3, I'd snap these guys
up... Both Smith and his
nephew...
SNN also has an orthopedic
trauma business where they
make the equipment doctors
need to help deal with
bone fractures and other
trauma... These are
generally stable
businesses, because
doctors don't like to
change their suppliers...
Then SNN has an endoscopy
business, making the tools
for minimally invasive
surgeries that let doctors
look around their
patients... You've seen
this a million times on
House, I mean, on ER...
And then, finally, there's
SNN's advanced wound
management business, this
is really my favorite...
It's part of a happy
Duopoly with
ConnetiConcepts selling
wound VAC equipment...
$1.6 Billion market for
that equipment... Creates
a low pressure environment
to help wounds heal more
quickly, and with less
risk of infection, get
people out of the hospital
quickly... That's the
story for both democrats
and republicans... Now,
uh, what happened with the
missed quarter?... And why
do I think SNN will make
or beat the numbers in the
future based on the fact
that they screwed up...
It's a tale of two
acquisitions... Last March
SNN bought a Swiss-based
company, an orthopedics
company, it's called Plus,
and another company they
bought called BlueSky in
the middle of 2007, which
is how it got into that
nifty wound vac business,
the duopoly... When SNN
reported its quarter it
turned out that there were
some skeletons in the
closet at PLUS, causing
$100 million in sales
costs and $10 million in
investigational costs
because of it... Here's
some language,
"unacceptable selling
practices"... Woo, with
PLUS... Look, I don't
think it's a big deal,
okay?... Compared to the
$3.37 billion in revenues
the company brought in
2007... But nonetheless,
the stock got pummeled...
Partly because again, no
one wanted this, they were
too busy chasing the
Wildcatters... Uh, that's
the first reason...
The second is that the
expectations for the
second company SNN
acquired, BlueSky, were
way too high... When SNN
bought BlueSky last year
it had 20 employees and it
was generating just $11
million in sales... So,
SNN had to spend some
moolah to build up the
sales force and ramp up
manufacturing... That
aided to the performance
of its wound care
segment... The Street
didn't like this, but I
don't know how they didn't
see it coming, frankly.
Sometimes they just get it
wrong... Now we've got a
stock that is just
incredibly beaten down...
But I believe it has spent
the money it needs to
expand this wound business
and remember it's only
competitor is KCI, we've
had them on this show, we
like this... SNN expects
to see the benefits from
its spending the second
half of the year, which
just so happens to be,
right now!... I think the
bad news is all in the
past... And even with that
so called bad quarter, SNN
still managed to deliver
14% earnings per share
growth... So now we have
what I think is an
incredibly cheap play on
the aging of America with
its orthopedics business
with what it looks like
now an up and running
advanced wound care
division with the
potential to deliver
serious growth that should
only have to deliver so-so
results for the Street to
be impressed, lowered
expectations,
disappointing quarter...
Oh, I should add, SNN has
a terrific 3-year $1.5
billion buyback... Don't
forget, these healthcare
stocks have been out of
favor for so long that
it's only like they
believe, and you didn't...
They've repurchased $640
million of stock, while
you ignored it... Not too
shabby for a $9.4 billion
company, very
shareholder-friendly.
. . . .
.
The Bottom Line!:
Healthcare is back, it's
bigger than ever, and I
think
Smith & Nephew PLC (SNN)
is one of the most
undervalued,
underestimated and, I
think, underpriced stocks
in the group... for those
who are trying to build a
diversified portfolio that
doesn't just include
fertilizer and oil.
. . . .
.
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■ |
Stock Snapshots - Includes
all stocks mentioned above |
■ |
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Jim
Cramer's
rating on
this stock |
STOCK
SYMBOL |
Closing
price
that
day |
Opening
price
next
day |
Full Company
Name/Comments
(see comments above for
each) |
|

|
SNN |
52.84 |
na |
Smith & Nephew PLC (SNN)
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See all of tonight's stocks'
latest quotes on
Yahoo! Finance |
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Most popular
investing books ordered:
(click any book to see at
Amazon.com) |
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