Cramer’s Homework Uncovers Stock Concerns
Sometimes Jim Cramer tells a caller that he needs to do homework before he can make a decision on a stock. And he's not kidding.
Following is Cramer's research or homework on stocks recently called to his attention by investors who watch the TV show.
TravelCenters of America (TA)
On March 21st Tyler in Virginia called about TravelCenters of America, one of the largest operators of travel centers in the country.
Cramer likes the story. "The stock was spun out of its landlord, Hospitality Properties Trust, back in 2007, and after a rough couple of years during the recession, TravelCenters has come out the other side stronger than ever with improved systems and a more manageable rent agreement," Cramer said.
However, Cramer isn't sure the stock is a buy at current levels.
"The stock has surged 150% year to date, that's a huge run. I'd wait for a pullback before pulling the trigger. It just feels too much like chasing at these levels," Cramer said.
Jazz Pharmaceuticals (JAZZ)
On March 19th, Jeff in New Jersey asked about Jazz Pharmaceuticals, a biopharma company that's focused on treating sleep disorders.
"Jazz has a number of drugs on the market, including Xyrem for narcolepsy," Cramer said. "The stock has been pulling back due to worries about generic competition for Xyrem, which accounts for 69% of the company's revenues and it loses patent protection next year."
Cramer thinks worries may be overdone because even if generic versions are approved, they will still need to license Jazz Pharma's proprietary distribution system.
"Plus, the company is tied up in litigation with the generic player that's trying to copy its drug, and its possible they could end up negotiating a significant delay in when generic Xyrem actually hits the market," he said.
Nonetheless, if you don't already hold the stock Cramer thinks you should avoid the uncertainty. "I'd stick with one of the many other biotechs profiled on Mad Money that have cleaner stories. (Read More: Cramer: Biotech Stock Could Gain; Even If Economy Fails)
On March 26th Joe in Florida wanted some color on Aveo, a biotech company focused on cancer. Cramer said Aveo is "a fully integrated oncology company hoping to approach commercialization with its leading drug candidate TIVO-1 for renal cell carcinoma."
Like so many biotech drug plays, Aveo is largely a bet on whether it's drug will get approval. And Cramer advocates proceeding with caution.
"I would avoid the stock before the May 2 FDA advisory committee," he said. "I am concerned the space for renal cancer is now crowded and there have been too many questions around the data. Let the dust settle and revisit after the FDA panel," Cramer said
On April 4th, Rudy from Louisiana asked about PhotoMedex, a dermatology company that makes products used for hair removal, skin rejuvenation and psoriasis treatments. "This company is posting strong sales growth and it's a cheap stock trading 11.5x with no debt. Also, the company is expanding into new markets," Cramer explained.
Nonetheless, the Mad Money host only sees this stock as a short-term play.
"I can bless it as a speculative trade from $15 to $19," he said, however, "I can't get behind it 100% until we get more clarity on reorders. I'm looking for greater sustainability in the business model."
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"This company does a lot of business with the U.S. student loan program and the U.S. Centers for Medicare and Medicaid Services," Cramer said.
Cramer finds the stock intriguing, but not at current levels.
"While student debt defaults is a big problem, I am concerned that fees for recovering these services will decline as the government looks to cut costs," he said. "I would stay on the sidelines and look for a better entry point."
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