seen him since we had dinner. tomorrow billy ray's coming back. plus, tips and tricks for looking thinner. >> then i'm coming back tomorrow. i'm jim cramer and welcome to my world. you need to get in the game! firms are going to go out of business and he's nuts! they're nuts! they know nothing! i always like to say there's a bull market somewhere and -- "mad money," you can't afford to miss it! hey, i'm cramer. welcome to "mad money," welcome to cramerica. other people want to make friends, i want to educate you. call me at 1-800-cnbc. i knew someone would say that apple, a $629 stock is going to the magical $1,000 mark. i knew that someone would predict that this company would be the first $1 trillion stock. and then, kaboom! happened today.
the market stunk out the joint with the dow sinking 65 points, s&p dipping 0.4%, the nasdaq slipping 0.2%. my first reaction? history. is this a case of irrational exuberance. the kiss of death, the phrase uttered by alan greenspan. about a stock market that just wouldn't quit, but maybe should. it sure quit after greenspan spoke, as investors shuddered, that the market was simply too red hot to handle, even after it did come back after his remarks faded. so i said to myself, the apple analyst at piper jaffrey, is he going unrightly exuberant with this piece that apple will be the first $1,000 company? he came out with it on a day when many people feel like the market has run out of steam. the federal reserve feels like things may have gotten good. good enough it doesn't need to boost the market with more money. is this the irony of the irrationally exuberant pronouncement on exactly the day that someone would say that the fed is taking away the punch
bowl, another admission cliche. i sure disliked the timing of this report. this market got yanked from its bullish morning and federal reserve statement. and saying basically we aren't going to print more money. you know, iches suspicious the whole time about having to do more to boost the economy. as i said last night, our nation is in the driver's seat of the world economy. and i don't want to keep hearing that the fed says things are weak. at a certain point, we need the fed to say, we are getting back to normal. because if we don't get back to normal, then the huge rally we've already had may not be justified. you can't bank on the fed's help forever. that has never been their way. they throw lighter fluid on the kingsfords until they catch and then they walk away. and i didn't that like after the close, sandisk blew up, meaning it announced disappointing orders for its flash drives and demand that seemed really bad after the bell. it's a release that will most certainly impact apple tomorrow. but, you know, i have a hard time declaring this analyst
report recommending apple as irrationally exuberant. sure, a $1 trillion company is a heck of a lot of money. sure a $1,000 handle seems unusual. although we've accepted it with warren buffett's berkshire hathaway, haven't we? in fact, i think this call turns out to be perfectly rational, and let me walk you through why. see, munster's analysis is all about fruit arithmetic. it's about making apple juice and selling it, and then comparing apples to apples to set the groundwork for some simple, plain english explanations for what the piper jaffrey analyst is expecting is going to happen. first, the fundamental security analyst to try to figure out what the underlying earnings are going to be, the "e" in the price to earnings multiple, and then determine how much people will pay for those earnings, which is the "m," the multiple in the equation. so to the figure out the earnings, let's use the simple notion of the apple juice stand, a child's twist on a lemonade stand, because it's my show and
not yours and i'll do what i want. you buy apple's, right, or your mom buys them, you smash them up, you add a little sugar, okay? all right, we're making apple juice here that you're going to sell. you put a little water in, because you water it in like when we used to drink tang when i was growing up, then you sell the finished product, juice. what's the difference between these costs and the money people give you? that's your earnings. what do we pay for those earnings? you want to buy my juice stand? what would you pay for it? tough, right? in apple's case, gene is saying that apple could earn $51 with its juice stand in calendar year 2013 and as much as $80 in 2015 with the juice stand. that's what's left in the profit pot after we've mashed the apples and added the sweetness to the elixir. given what we can make next year and what it might make in 2015. figure out what you'd pay for
the earnings is something that can't be done in a vacuum. we have to compare apple to a, well, how about other stocks? we have to compare apples to apples. now, here's where the apple juice gets sticky. first you have to pay something for these earnings, right? we have to figure out how good this company is, how fast it's growing, how strong is the energy, how big a market power does it have versus its components? when you consider the opportunity apple has in personal computers and tablets and cell phones, you're looking at a company that's truly crushing the competition. much of that growth is coming from apple, and to totally belabor the analogy, it looks darn like an apple pie, with huge losses in share comes from the likes of research in motion, nokia, sun, hewlett-packard, microsoft, google. in fact, apple adds up the market cap and comes to abou $959 billion in cap. hence the $1 trillion apple valuation.
now, here's the difficulty of arriving at that multiple of the price to earnings multiple, the pe multiple. the companies -- all these compaies that they're competing, they have a price to earnings multiple, it's pretty similar to apple's or larger than apple's. munster's struggling with the apples versus apples comparison. it's illogical that people should pay a similar amount that they would pay for the guys that apple's about to lay to wake. here's why i can't call munster's example as irrational or exuberant. he's not even saying we'll pay more for apple's earnings than we will for that of competitors. that's right, he's saying if apple earns the $80 a share that he believes is possible in 2015 and the stock goes to $1,000, when you divide his earnings into the price target to get the multiple, apple will be trading at an astoundingly low 12 times earnings. that's toward the lower end of the multiples of apple's soon-to-be-decimated competitors. if anything, paying 12 times for apple is totally nonexuberant. who would pay the same amount
for apple's future earnings as they would for the other guys? apple's by far the superior company, it deserves a higher multiple. now, things can go wrong, someone could come up with a better tablet, a better cell phone, a better computer. we get farther away from the ideas that steve jobs left on the drawing board. but right now the tide is going with apple, not against it. so the bottom line, as much as i blanched when i heard the name apple with a price tag of a "g" and the market cap of a trillion, it makes sense. the projections are totally rational, totally sober, totally believable. the fed may be about to take away the punch bowl, but munster's drinking nothing except unspiked apple juice in his well-reasoned, well-thought-out report. let's go to jerry in new york, please. jerry? >> caller: jim. jerry, new york. >> hey, jer, what's up? >> caller: i would like to know what your take on ford is, considering that it's just
reported very good figures. >> well, i've got to tell you. ford is an international company. and when people hear spain is bad and they're worried about italy and worried about germany, you've got to think about ford. that's why it's such a stuck in the mud situation. there are lots of situations that don't have a lot of europe in it. ford does. let's go to kevin in new york, please. kevin? >> caller: hey, jim, i want to send a big boo-yah all the way from harlem. >> fantastic. >> caller: i've got two questions for you. sbym, i see they got a big partnership and they've been going up and down lately. tell me what you think about that. and a good stock for this quarter coming up? >> boy, i've got to tell you, i saw that stock was like a rocket today, and it says to me, ken, we've got to let it cool off, because the good news is out. let the stock cool off and the good news won't be reiterated tomorrow, it comes down back to 15, 16, it's supposed -- let's say back to 15, up a buck 72 today, then it might be right to buy. let's go to margaret from the show-me state.
margaret? >> caller: hi, jim! >> hi, margaret. >> caller: what's the scoop on netflix? i know it was downgraded today and there's lots of competition. >> right. >> caller: and i'm short the stock, so what's your prognosis? >> well, margaret, i've got to tell you, i would probably be leaning more towards your side than the other side. the only reason why is the excellent barclay's report today that took it to a hold really did indicate that there was a lot of competition. look, i'm still in netflix, but i'm a dvd guy, but when i stream, i go to amazon. and if that's the case -- or we go to apple, whatever. itunes. if that's the case, too many people are going to be shooting against netflix. apple would be the first $1 trillion company? i think irrational exuberance, nah, just a terrific story and taking over a big piece of the apple pie. "mad money" will be right back.
coming up, wrath of the tech titans? the nasdaq has outperformed in 2012, rising nearly 20%. but can the tech-dominated exchange continue to power higher, or is it running out of juice? cramer heads off the charts to look at the titans of the tech sector for answers. and later, jersey score? the nfl unveiled its new look today, but will this gear improve your portfolio's performance? cramer tries an investment in the gridiron on for size. find out if it could be a big hit. plus, warehouse of profits? this stock has paid out dividends for more than 30 years, right through the recent recession. now with the american economy coming back, could it have you packing away profits? cramer's exclusive with the ceo of east group properties is just ahead. all coming up on "mad money". 3q
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that nobody really thinks of as sexy anymore. i'm talking about microsoft, intel, cisco, oracle. so now that the best first quarter since 1998 is behind us, we want to know which of the big cap tech stocks will maintain their momentum going forward. and that's why tonight we're going off the charts with the help of a new guy, l.a. little, technician and my colleague at thestreet.com to compare microsoft, intel, cisco, and oracle. because when we talk about momentum, it's always useful to consult the technicals. how do these tech giants stack up against each other in little's opinion? to evaluate them, first, we need to take a look at a novel kind of a chart. it's one we haven't talked about or seen on "mad money" before, but, you know, i'm always trying to introduce new concepts in this "off the chart" segment. this is what's known as a trading cube. the cube shows all four stocks and it lets you compare the trends from their short-term intermediate term, and long-term charts. remember, those are all very important periods, to be able to take a snapshot of a stock.
think of it as a way of aggregating data from multiple different charts into one single picture, looking for the ideal one that's the rubik's cube. based on the trading cube, little things both microsoft and intel are pristine and clean, okay? what does that mean? it means you've got three in a row, right? it's kind of considered bingo in that sense, or, of course, a slot machine. oracle and cisco, dinged and dented. the reason microsoft and intel have bullish trends in all three frames. whether you're looking at the short-term, the long-term, or somewhere in the middle, the pattern little sees, they're bullish. oracle and cisco, on the other hand, i know a lot of people own these stocks. they have a ton of hair on them. which, by the way, is as negative for stocks as it is positive for humans. cisco has a bearish long-term chart, even as the short and intermediate ones are bullish. someone ask med on twitter, jim, suddenly you like cisco? i said, look, short-term, the momentum is there.
oracle is the opposite, it's bullish long-term, but bearish everywhere else. using this kind of trading cube is like playing the slots. you only have a winner when all three time frames give you the same bullish result. which is why little prefers microsoft and intel and says, let's not be in those other guys. plus, these two have outperformed the others over the last 12 months and since the beginning of the year. that matters plenty, because from the perspective of a chartist, it sure makes sense to stick with the strongest stocks in a strong market. remember, they are momentum driven. so now we've got a two-man race wean intel and mr. softy, the titans of old-school tech. intel versus microsoft. it's like we hopped into the way-back machine, taking a trip to the late '80s or the '90s. little believes both stocks have gotten their groove back, but which is better on a chart basis? first, check out this chart of intel over the last 12 months. that's pretty, isn't it? right now the stock is trading at 28 bucks, only two points
away from a solid ceiling of resistance at 30, and that's been intel's nemesis for over a decade. can you imagine? little believes that intel can overcome this ceiling and the ideal time to buy it would be on a pullback to around 27. so get one of those intraday sell-offs like we had today, keep an eye on this at 27. because if intel does finally break through the 30 level that's been keeping it down since the tech bubble burst, how high can it go? for that we need to take a look at a more long-term chart going back to 2007. little uses what's known as a measured move technique to figure out the size of a future rally. that means he calculates the size of the last rally from trough to peak, point "a" to point "b," and then he extrapolates, assuming the next move up will be similar in scale. most technicians when they do a measured move analysis will take the dollar amount of the last rally and project that the next one will be the same size. little, however, takes the size of the last move in percentage terms and projects it forward,
because he finds that's a more accurate way, it's made him more money. with intel, the last move in 2009, point "a," to the peak in 2010, point "b," was a little less than double. so little will move that from point "c" to point "d," his price target. that means he thinks intel's headed for $35, a 25% gain from current levels. and i want to add, it's got a great dividend, it's got a beautiful balance sheet and a nice buyback. let's take a look at microsoft. here's a chart going back two years. little this is that the ideal time to buy would be from 30 to 31.50. a technician doesn't mind a stock going down to get a better price. those areas would give you the best risk/reward, he says, given that microsoft has been stuck under a ceiling at 34, again, ever since the tech bubble burst manner decade ago.
these are very similar charts. but little believes microsoft can break through that key level. now, take a gander of this chart of mr. softy going back to 2007, to find out how high it can go. using the same measured move technique we saw with intel, little gets a price target of $47 for microsoft. boy, that's a much larger gain of more than 45% from where the stock is right now, and that makes microsoft the clear chart winner. little thinks that microsoft is a tech sleeper play. and it can, in fact, get back to its highs from 1999 and 2000 over the next year or two, which would be a huge move and make ate terrific buy. it makes me think i've got to do some fundamental analysis on that, because i can't get it there. but this is his work. the bottom line, when it comes to the old-school tech titans, microsoft and intel are the best charts. at least as interpreted by l.a. little, who writes with me at thestreet.com. and of those two, little thinks microsoft has the most upside. yet mr. softy's got its groove back.
we'll come back to these names later in the week to talk about why that might be the case based on the fundamentals. after the break, i'll try to save you some more money. coming up, jersey score? the nfl unveiled its new look today. but will this gear improve your portfolio's performance? cramer tries an investment in the gridiron on for size. find out if it could be a big hit. hey, sis... it's so great to see you. you, too! ahh, cloudy glasses. you didn't have to come over! actually, honey, i think i did. oh? you did? whoa, ladies, easy. hi. cascade kitchen counselor. we can help avoid this with cascade complete pacs. over time, a competing gel can leave cloudy hard water deposits, but cascade complete pacs help leave glasses sparkling. shiny! too bad it doesn't work on windows. okay, i'm outta here. there's only one cascade. love it or your money back.
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time to take nike out of the penalty box. look, i know, it might sound crazy, we're talking about nike as though it's been penalized when this stock is three smackers off its 52-week high. but the fact is, i think this one would be a whole lot higher right now if investors would stop holding the company's latest quarter against it. see, about ten days ago, back on march 22nd, nike reported a quarter that some analysts and investors viewed, frankly, as -- i'll use it -- the word "disappointing." and the stock got slammed. falling from $110.99 to $147.72. that's over the course of a day. since then it's inched back up, a little less than two points. i think it deserves to be higher. the reason? nike's last quarter wasn't so much disappointing as i think it was misunderstood.
the stock has been penalized enough for its so-called bad quarter, which was, in fact, quite good, and i think should be bought. the worst is over for nike. and i'm not just saying that because last night the kentucky wildcats won the ncaa basketball championship wearing nike uniforms. we're all from kentucky now, everybody. no, the worst is over because it was never that bad to begin with. and nike has a ton of positive catalysts going forward. catalysts that you want to be in the stock ahead of. so what happened with the quarter? why did so many view it as a disappointment? and why do i think they're dead wrong? the problem here is that people are looking at the wrong metrics. nike reported better-than-expected headline numbers, a three-cents earnings beat on a $1.17 basis was slightly higher than anticipated revenues that rose 15% year over year. so far, so good, right? but there were several things under the surface that scared the heck out of people. people were actually petrified, hence why they dumped the stock. >> sell, sell, sell! >> first, nike experienced weaker than expected apparel sales. second, nike's gross margin declined by a whopping 200 basis
points, or two percentage points to 43.8% input costs. margin erosion, not a good thing. third, nike's inventories bowled, surged, whatever you want to say, rising 32%, and high inventories, they always freak investors out, because when companies have too much merchandise, they often need to radically discount the products to get them off the books. to make matters worse, the company talked about continuing global challenges from the economy, courtesy of unemployment, debt, and currency issues caused by political uncertainty. i don't want to hear nike tell me that stuff. and they also said that higher input costs would continue, continue to be a problem in 2012. i would hoping that they would moderate. scary stuff? so why am i not more concerned? why am i not shaking like everyone else? let's start with the margin issue. we know nike's putting through across-the-board price increases of 8%. and look, nike's king.
they have the power, the pricing power to make those price increases stick. that should be a huge boon for the company's gross margin going forward. as for the inventory surge, 20% came from higher input costs and changes in their product mix. in other words, only 12% of the increase were from having more stuff, some would say too much stuff. the 12% increase doesn't worry me, given when revenues were up 15% for the quarter. especially when its competitors are being applauded for having the vision of excess inventory. but more than anything else, i'm not worried because as important as the gross margins to the inventories are, none of these things are a key metric for nike. nike is a one-of-a-kind company that provides you with a unique way to look into the future. they have a system that allows retailers to order merchandise five to six months in advance, and that gives us an almost crystal-clear idea of what nike's busy will be like going forward. the results of this system are called futures orders, and they're the key metric that matters above all others when
you analyze nike's results. so how are the futures orders? they were up 15% worldwide, or 18% when you account for fluctuations and exchange rates. that's a terrific number. it tells you nike's business is in great shape. if more people knew how to look and to look at the futures orders, i think the stock would have rallied after the quarter instead of getting pounded. that's right! had people looked at this prism right, i think they would have said, great quarter, not bad quarter. and when you take away the worries from a quarter that was actually quite good, there's no reason to stay away from this consistently excellent company. nike is the top dog when it comes to both footwear and athletic apparel, with a $75 billion total addressable market, the company's annual marketing budget is the larger than most of its competitors' revenues. most of all, catalysts, catalysts in 2012 coming right down the pipe that i bet will make a big difference. just today, the company rolled out its much-anticipated football business line,
unveiling the nfl's 32 uniforms at an event today in brooklyn. nike now makes uniforms for the nfl. the contract had stalled away from reebok. nike's new contract is expected to last for five years, it should generate about $350 million in annual power revenue. i actually think that's low, with the new jerseys going on sale at april 26th, the day of the nfl draft. you've also got the summer olympics this year in london and nike tends to outperform the s&p 500 dramatically in summer olympics. we've looked at these statistics. plus, there's the world cup not too far down the road in brazil, a lot of smelly feet that need shoes on them. nike's growing like a weed and rapidly expanding in emerging markets, like china. talk about a lot of feet. and nike's domestic business here in the u.s. is so robust that the management joked about how the u.s. was like an emerging market for them. i thought it was funny. on top of that, the company's been successfully rolling out direct-to-consumer retail stores all over the world, cutting out the middleman, keeping a larger sale of the profits from every sale of nike merchandise.
i know a lot of kids who have built their shoes online. and don't make the mistake of thinking that nike is just the maker of sneakers. i think it's a technology company. nike's rolling out all kinds of high-tech products, like this sold-out fuel band. i want one of these. well, this was bought for the show. no, i can't. this is a wristband that uses a accelerate ormt which is used to track everything from the number of steps you take to the number of calories burned. this summer nike's coming out with a new shoe, the hyperdunk plus, which digitally tracks your speed, as well as the height and quickness of your vertical jump when you play basketball. you can share, compare, all this info with your friends, through the company's nike plus online community. they've got 6 million registered users. yeah, nike's going social and mobile on us. we get nike cloud, we've got a real tech company. when you back out $6 per share
in cash on the balance sheet, nike trades at just 17 times earnings with a 13% long-term growth rate. i think it deserves to go much higher. here's the bottom line. stop punishing nike for a so-called disappointing quarter. it was actually quite good. remember, futures orders are a key metric here, and they were darned fabulous. given those numbers and all the positive catalysts coming, i say stop penalizing nike, and as the stock market goes down, like it did today, get started buying something. let's go to joyce in texas, please. joyce? >> caller: oh, jim, i've got to talk to you real fast. we're under a tornado watch down here. >> yeah, i hope everybody's okay. i hope everybody's okay down there. >> caller: okay. the stock is fossil, fosl. i want to know if it's a buy. i would like to buy 50 shares, i owned it at one time, made money on it, and i would like to get back into it. also, i heard that they're going to start to make more watches for chanel.
>> you're absolutely right and your homework is excellent. joyce, it's really difficult for people to understand, this stock is flying and that's the problem. this stock gets hit on down days. you get a break in this stock that is not related to fossil but related to the market, then pull the trigger. why not do it now? because the stock just doubled. and coming in after a double, not prudent. let's go to ed in my home state of new jersey, please. ed? >> caller: happy boo-yah, jim! >> a front-running easter boo-yah back to you. >> caller: thank you. sparta, new jersey. >> sparta! a lot of bears there, man! the wrong kind of bear. i'm a bull guy, not a bear guy. >> caller: a lot of bear, you're right. i've got to get the bulls up here. skull candy, they have good fundamentals. the "sports illustrated" models advertise in many countries. i wonder if it's a buy or not? >> i blew this one. i thought when they had some shake ups at the top that people would sell the stock. they sold it for a second and
then it went right back up. i don't feel myself qualified to opine, others did a better job than i did. i was negative on it. i should have been positive. better to own the mistakes and just come out there and say it. all right. time to take nike out of the penalty box. there is so many catalysts ahead. geez, wait a second, there's a problem here. oh, yeah, now i've got it figured out. stay with cramer. coming up, jim goes fast and furious as he faces a nonstop barrage of calls, giving stock after stock their final verdict on the "lightning round." and later, warehouse of profits? this stock has paid out dividends for more than 30 years, right through the recent recession. now with the american economy coming back, could it have you packing away profits? cramer's exclusive with the ceo of east group properties is just ahead. all coming up on "mad money"!
it is time, it is time for the "lightning round" on cramer's "mad money." rapid-fire calls, one after the other. i don't know the callers or the questions ahead of time. when you hear this sound, then the "lightning round" is over. are you ready skee-daddy? it's time for the "lightning round" on cramer's "mad money." i'm starting with steven in new york. steven?! >> caller: jim, a big boo-yah to you. how you doing? >> what's going on? how are you? >> caller: you drive my nuts wife. i watch every night.
i've done well with srz last year, i picked it up again this year, and i don't like the way the stock is trading. >> no, the stock hasn't traded well. i'm betting with mark, but i tell you, we need a more robust housing market than we have. that could be the key. but i do think that he's money. let's go to chris in massachusetts. chris?! >> caller: hey, jim, big boo-yah. my question for the "lightning round" was mcmoran exploration. >> it's been a very disappointing stock and a lot of people, did what i think is a very coherent piece of real money.com, talking about how the oil stocks all look like they're rolling over, particularly the most aggressive independents. i don't think i want to sell this stock at this level, but it is just a nasty decline. let's go to keuren in california. keuren! >> caller: hey, jim, hi, it's keuren from california. listen, first of all, thank you for red hat. >> yeah, we got that right. jim whitehurst, a very good guy.
what's up? >> caller: secondly, molly corp., is it going to die on the vine like last year? what do you think? >> i've read a lot of pieces that said, given the strength of that market, you've got to own molycorp., i remain believing that that is too speculative for most viewers. ed in new york! >> caller: boo-yah, jim. i'm down here on the south shore of long island. i'm also an action alert member. >> thank you. >> caller: lionsgate back in february, and now i just want to know where we are now. what do you think? >> first of all, thank you for subscribing to the actionalertsplus.com, that's where i talk about my charitable trust. glad we're in sink there. now, lionsgate, i think that's a great long-term buy now. because they've got a franchise, they've got four. i've got my mockingjay pin today from my colleague, melissa lee of "squawk on the street." i believe strongly that you can own lionsgate.
it's no longer a trading name. i think you're in good shape. jim in virginia, jim?! >> caller: my stock is asg, long usa. >> refining, i don't think that's good anymore. it's too hard a play for me. matt in texas? matt? >> caller: hey, jim, boo-yah from houston, texas. >> nice! >> caller: all right. i've got a question about, okay, so, with the financial report just right around the corner, i would like to see what do you think of bac, bank of america? >> it's had a big run. it's had a big run. it's no longer the cheapest in the group. however, i mean, it's up 70% year-to-date. i like the regional banks, i've been -- you know, really, really pushing those. i think that that's the best buys. this is a national bank, i can do without it. i need to go to minesh in louisiana. minesh. >> caller: hi, jim. first of all, i want to thank you for what you do. you're making trusted and informed decisions for investors. >> that is my goal.
so many people stop me on the street and tell me that and i feel good a lot of days. what's up? >> caller: i own viacom, should i hold, buy, or sell? >> i like time warner and discovery more. let's go to valentine in georgia, please. valentine? >> caller: hey, jim. i've got a big atlanta boo-yah to you! >> man, i'm worried about your rotation boo-yah. i think you guys look good this year. >> caller: oh, okay. i'm worried about newfield exploration, nfx, what can you tell me about it? >> newfield, that's way too dangerous. that is one of the stocks that is really coming down, and i'm very worry withed about it. that's one of the worst charts, joined with that is enkana, which is moving out of natural gas. ultra, which is just a disastrous stock, got to be very careful here. we don't want too much nat gas, and i think newfield has it. and that, ladies and gentlemen,
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we spend a tremendous amount of time on "mad money" trying to assess the strength or weakness of the american economy, important on a day when the fed minutes come out. we've got lots of ways to gauge it. we can listen to the federal reserve and its pronouncements, we can focus on factory utilization reports, retail auto sales, labor department numbers, like the ones that come out friday. these are all what we call macrofigures. aggregates that we can form late a picture with. and then we can do it in a way that i like more. building our own bottoms-up
microanalyses by talking to different companies in different industries. many that you've never heard of or may not be interested in as anything other than the piece of the puzzle, but maybe you should be interested. and my favorite way to get the pulse is interviewing executives in the industry. we've had hotel execs, retail execs, shopping centers, shopping mall execs. i want to examine one more key area of real estate, industrial properties. we want to talk to one of the finest out there, east group companies. it's a $2 billion company focused largely in the sun belt. big holdings in texas, florida, other states. close observers of this show have heard us talk about egp and it's up 37% from when we recommended it two years ago, because we thought at the time it was too bountiful to pass up. i commented that in the depth of previous crashes like the s&l crisis of 1999, east group has shined.
that's a high-quality problem. i'm thrilled to welcome east group ceo and president david hoster to "mad money." good to see you. all right, merrill lynch had a terrific piece which recommended your stock earlier this year, said that egp is a high-quality industrial pure play reit and provides our investors the best opportunity to invest in an grooving industrial market. you guys see it. is it really improving and how korlative are you to the industrial market in that country? >> we're in the distribution aspect of it, and our buildings are what we would call midsize warehouses, 80,000 to 100,000 square feet and we're multi-tenant. we tend to see the smaller users, but many times, a small part of a bigger company is in our space. and we're seeing a tremendous pickup from an occupancy standpoint in the sun belt. and right now, some of that's
just a flight to quality, where people "b" to "c" assets are moving into the "a" assets. but we're a firm believer in the population from the upper midwest and the northeast, across the mason-dixon line. >> let's talk about that. because a lot of people in the country, you know, you heard the hard-hit real estate market in phoenix, the hard-hit real estate market in orlando. but those -- florida is getting better for you and phoenix is really good, right? >> exactly. there was really a turnaround, that net migration in '09, '08, but really starting in '10 and '11, there is a whole new movement back to the sun belt. and economists in florida project that there'll be a pickup of 200,000 people net migration in '12. phoenix is is experiencing a real resurgence.
the housing industry there is less than a four-month inventory. in texas, that goes without saying. if there's a boom state, it's texas. >> right. which is terrific for you guys. >> yes. >> now, there's a quote from your terrific conference call, february 15th. we've had a tremendous increase in occupancy. you go back two years, we were in the low 86% range. you're well above that now, aren't you? >> correct. we were hit a lot harder than we thought we were going to be by the housing crisis. we had a lot of the tile and granite providers, cabinet makers, carpet companies, and they moved out and we've been very pleasantly surprised at how we've been able to pick occupancy back up. we were up over 400 basis points last year to 93.9%. and that's without a recovery in the housing industry. so we do get a recovery in the next couple of years, i think it will really be beneficial for us. >> but also in the research and comments, it's very clear that the construction industry has
not come back. it's not like people are adding warehouses that compete with you. >> no. and our buildings tend to be in fill sites, where there are barriers to new entry. and that's become somewhat of a cliche in the real estate business, but it really does describe us. what makes us different is most of our customers or tenants are distributing to the metropolitan area, where our buildings are located. and as a result, if there's a vibrancy in that metropolitan area, like there is in a lot of the sun belt markets today, we're going to do well, because our customers are going to do well. >> okay. well, let's see what they think get away with on their end. i know you had a lot of deals that were made in the 2007 that are rolling over. you have 18, 30% coming up in 2012, 2013, 2014. some of the analysts are concerned that you're not gong to be able to get rent increases, because the economy's softer than it was in 2007.
is that a correct characterization? >> it is. >> it is? okay. >> about a year ago, i would have said -- or i did say, that rents were going to continue to roll down, probably through the end of '12. they've not moved as much as i thought they would. so they're probably going to roll down until we're in the middle of '13. >> okay, but that leads me to the last question. because i recommend your stock because of the yield. i think you're well-covered for your distribution, even if you get that rolloff. is that a correct -- >> absolutely. absolutely. in the last couple of years, we've made up for that rolldown in rents by an increase in occupancy, and now that we've been able to acquire some very good properties and get back into the development business, which is a true value creator for us, we're going to make up for those rents still rolling down, particularly in arizona and florida. >> well, you've been a great survivor and a great thriver and i congratulate you for all that you've been able to do in a tough market. you're really not the only guy left the last time around and you've thrived this time around. that's david hoster, president and ceo of east group properties.
look, when you're picking stocks, few things are more important than price. too often commentators announce that price doesn't matter. they'll keep recommending the same piece of merchandise at wildly different prices, so it's the same thing. but it's not. at a different price, it can be a different security. i say all this because on last night's show i recommended annie's, the newly minted organic food ipo as a play with a potential upside. maybe i should have thrown in some additional caveats last night, because the stock ran up a staggering $4.10 today, 11.8%. you cannot chase a stock after that kind of move. i told you annie's was a good buy when it was trading at 34 bucks. obviously not as good where it was offered much lower on the actual ipo. now it's become too hot to handle. you have to wait until this pulls back. after this kind of spike, it's
not the same stock it was yesterday. over the last 24 hours, annie's has become a lot more expensive. over the last 24 hours, the risk/reward has changed, and not in a good way. this is why i'm always telling you not to chase stock and use limits, because as any stock goes higher, it becomes less attractive. i apologize for not throwing you more caveats, to make sure that a spike like we saw today didn't happen. mea culpa, but my opinion of the stock hasn't changed. we practice buying homework on "mad money," not buying home. it would be reckless to like annie's as much at $39 as $34, when there's been no wall news about the underlying company. so do not pay up for annie's. you've got to wait for a pullback, because there will now be a vacuum of news for some time. i expect this will give up today's gains. and take this as an object lesson in why you have to be patient when you're trying to buy a stokt. when you're patient, you use limit orders.
you almost always get a better price over time. just jumping over something after i recommend it's not responsible. i think annie's is still a good business. i love the organic food space, you know that from hain and whole foods. but the stock has moved too fast, too far in the day since i recommended it. so now we've got to put it on the back burner until it cools. there's one more reason i'm moving to a more cautious stance. last night i recommended annie's and used aggressive earnings estimates. some would say too aggressive. i was trying to anticipate the wall street promotion machine. even if you use lower numbers on annie's adjusted numbers from last year, i still think the underlying thesis here is sound. because annie's has so much growth potential. it's just that the price movements stole some of the upside. why was i so aggressive? because in about 35 days, the quiet period will end, and all the brokers that took annie's public will be able to initiate research coverage on the stock. typically, typically when this happens, the analysts tend to be extremely aggressive themselves,
and you can catch a big move in the stock. i was trying to help you get ahead of the wall street promotion machine. it looks like the stock got ahead of where i thought it could go. when the quiet period end, i believe the stock will spike as it did today, but most likely spike from a lower level. so be patient, wait for a pullback, and only then should you do your buying, as the over evaluation makes it a stretch after today's move. above all, don't forget price. price matters. which is why limit orders matter. which is why by being too aggressive by me or you doesn't help the cause and at times it can hurt it. stick with cramer. [ male announcer ] this is lois. the day starts with arthritis pain... a load of new listings... and two pills. after a morning of walk-ups, it's back to more pain, back to more pills. the evening showings bring more pain and more pills. sealing the deal... when, hang on... her doctor recommended aleve. it can relieve pain all day with fewer pills than tylenol. this is lois...
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after the close, two pieces of disappointing news. one from sandisk indicating that business is week. that's going to send down the tech complex right from the get-go. the other, really surprising. big truck orders, remember i told you in our playbook what was going to happen. they were very disappointing. that's going to hurt cummins. i'm jim cramer. see yoto