Pizza and stereo speakers still good for growth

The stocks of Domino's and Harman remain terrific despite some recent setbacks.

By Jim Cramer May 2, 2014 11:38AM

A worker at Domino’s Pizza hands off a pizza for delivery © Jason Alden/Bloomberg via Getty Images
So let's see. Domino's (DPZ) and Harman (HAR) are now dead stocks? The fact that they opened up and then fell flat is the kiss of death, too, as if they are somehow software-as-a-service stocks or 3-D printers or biotechs?


Thursday night I interviewed Patrick Doyle of Domino's and Dinesh Paliwal from Harman, and I have to tell you that I think the action in their stocks, which were full of the sound and fury, actually signified nothing.


TheStreet.com logoThis wasn't the first time that Domino's has reversed like that in the 70-point run since I met Patrick Doyle, one of my bankable 21 from "Get Rich Carefully." In fact, this stock has had some major problems getting by earnings days, in part because Doyle is so candid about his business. Thursday, he dropped a bomb about raw costs, particularly for cheese, which has gotten a little out of control. But he has a largely franchise model and that price falls to the franchisees for the most part -- they do have some company-owned stores that get hit -- and otherwise the growth here was superb and the cash generation better than ever.


I know this tape has sewed so much confusion with its interaction with the bond market. I think this stock reversed in part because interest rates reversed and headed lower. Plus, when it comes to commodities, what goes up can come down. I simply don't believe the 25 percent move higher in dairy in the last quarter is sustainable, while I do believe the mid-single-digit comps here and the high-single-digit comps overseas are.


Harman is tougher. The action in the stock is mystifying. It opens at $114, a gap up of about 5 points, then cascades 12 points down an hour before the conference call begins. Again, all I can find that disturbs the stock is the bond market, as there was nothing substantive affecting Harman in that period. No earnings notes. No new stories.


Then the conference call begins and the stock works its way back to where it is, slightly in the black from the day before the call. Finally, it rolls over to close down a couple in that last-minute ugliness.


Did we hear Harman say anything bad about its business? Nope. All three divisions -- professional, such as sound for shows like the Grammys; personal, such as the fabulous at-home speakers; and headphones and the auto infotainment segment -- are doing much better than analysts thought. Yes, there was a gross-margin in issue in one small line of business. More importantly was that the company has won a huge number of orders from auto companies worldwide and once they are in they are very difficult to dislodge. When we checked around to see if there is anything that we might be missing, we heard that some thought Apple (AAPL) would challenge them with an in-car system.


I found that absurd. Although I can see that their recent partnership with HTC might be annoying to Apple, there are many things that are annoying, and let's just say it isn't what's driving the stock.


Both have huge moats. Harman is embedded in pretty much every car company in the world. Domino's has harnessed social media, notably Facebook (FB), to generate a huge number of digital orders, which has been a terrific way for the company to take share in the competitive pizza delivery market. The moms and pops just don't have the horses.


Now, of course, when you have these island reversals, the stocks are now being consigned to the dustbin. I am totally cognizant of that. These two need to stabilize, especially because all of the hot money that came in on the opening has got to be flushed out.


And while I am sure there are things that I am missing, I think these two stocks, so fabulous for so long, remain terrific places for growth investors to be in. They have the best managers, the most consistent sales and earnings profiles, and among the best order momentum -- pizzas and infotainment -- of the vast majority of companies I follow.


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Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio for the stocks Cramer thinks could be winners.





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28Comments
May 2, 2014 11:48AM
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"""I simply don't believe the 25% move higher in dairy in the last quarter is sustainable"""

 

yes, all New Yorkers feel anything west of their city line ~ like that pesky drought west of the Mississippi, have nothing to do with their world! 

 

expect meat, milk, veggies, etc, all to go up until there are several years of non-drought rain levels.  Lake Meade is several hundred feet below it's old "normal" level. 

May 2, 2014 1:39PM
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Yup, "Climate Crisis" and "Climate Change" sounds like Global Warming to me....


Remember it's not about the "CHANGE", it's about HOW FAST, it's happening....

Old Al , had something there...IMO.

If you had been living in the country for 45 years or were very close to Nature or had a career mostly working outside; You may have noticed it a lot more.

May 2, 2014 1:03PM
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It's Lake "Mead" and you are absolutely correct. It doesn't do Hoover Dam much good to not have the lake's water volume to keep it integral. Food will continue to inflate and the west of the Mississippi comment is accurate, the Plains States will have another terrible growing season this year and Texas cattle will go to slaughter before maturity. What can anyone expect from New York denizens... they don't have normal brains or commonsense. 
The issue of sawdust as filler for most commercial food spewers is a real issue. Most of us have tight budgets and genuine junk food isn't worth it. I suspect a hunker-down and flight to cure the ever-present stomach aches, nausea and migraines will be our next orders of business and that doesn't mean Big Pharm will benefit, but backyard farm just might.  
May 5, 2014 12:00PM
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"When VL speaks of "Reality" from her padded cell with a view, it's quite funny."

Bring it on, moron. Chinese manufacturing is WAY OFF and at least they are smart enough to SELL OFF instead of making up stuff in offset like Wall Street does. With less manufacturing, China will dig into those mile-long warehouses of ancient cheap made crap and ship it to us. YOU will buy the stock in can't-do-enterprise cardboard cut-out business platforms pumping that crap to retail stores that bee-line it to the clearance racks and counters. It will eventually be all YOU can buy with your game token funny money. Everyone else in America  will use or develop commonsense, learn self-sustenance and rely on artificial everything. Then-- both your phony stocks and fake money will be useless worthless and we couldn't care less what you post. You will be humbled by your foul loser hater attitude. 

May 2, 2014 11:54AM
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I think Bobo has went over the edge or is the oncoming train or light in the end of the tunnel...
May 2, 2014 2:12PM
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Every time a Cow farts.....We lose a little fresh air to breathe...


But I still don't understand that Butterfly Wing-Flapping thing yet....

May 3, 2014 12:10PM
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Well Mick, unfortunately that's the way it's been "again" for a couple years...(at least).


Of course, the only thing I can say about ol' Tom Monaghan's past Company is don't step off the curb, when one of the delivery vehicles is coming down the street...

And kind of think Tom went off the rails a few years back, some of my family had dealings with him. 

But I think he is an okay Joe...just nuts.


Hope this helps...

May 2, 2014 1:16PM
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It's actually kind of funny to watch the Fed backing out of QE and now looking more seriously at the interest rate all because of spun information. Wall Streeters crapping their pants because they don't know what to do really.

 

It's kind of like Little Beav asking his left hand.... "Honey will you take care of me tonight?" .. only to have it slap him upside the head.  

 

 

May 2, 2014 1:47PM
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There are "Good Guys" down on the Trading floor....?


That ought to make for a good Movie Script..


Don't get stuck on a Bridge, trying to get out of that shidthole Jersey, and getting into the City..

May 2, 2014 2:06PM
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Mankind, Is having a long term reaction on our Atmosphere..


And Yes, the Sun has bearings on the Planets also..


We have went through cycles over the Eons, caused by Natural Events and Interplanetary reactions.

Such as Volcanic activity, and Plate movement..

Along with Impacts and Collisions...That is not what is affecting us today...

And yes anyone or body, can "parade out" their "so called" experts on EITHER SIDE...

 

May 2, 2014 1:33PM
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LOM.....YUMmm...Is Taco Bell, KFC and Pizza Hut...Not Papa John's, but you probably knew that ?
May 2, 2014 3:15PM
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Well a decent day in the Markets today....But it's been a fantastic week in several equities....

And a pretty good week in the Markets....


About an hour to go and not much is going to change...So this is your closing report...

It's nap time...

Have a nice weekend...!!

ps....Sure that Ice Cold has been watching COP, looking pretty sweet; More to come..

       We made some good decisions.

May 2, 2014 1:04PM
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Folks, folks, folks, if Wall Street believed this jobs report we would be up triple digits and counting; Wall Street looks at this number with plenty of skepticism plus, the labor participation numbers were awful so, we are in the red again fighting to return to the flat line....Face it, job creation is substandard, in other words, it sucks. Like we always tell you, this administration can fool the low information voters out there, they cant fool Wall Street...We will keep trying to get back in the green this afternoon....Don't forget its Friday...More later.
May 2, 2014 4:19PM
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Wow. I skimmed through most of the comments and there are few comments about the article.  What a bunch of mo's!
May 2, 2014 1:38PM
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The word on the floor among the good guys is diversion....A word this corrupt administration loves...How do we get their minds off the bogus jobs report...Mmmmm....Got it!! Said a fool, why not Ukraine, Russia, you know, the other side of the world.....Of course, Obozo and his minions and the popular word diversion....The thing down here is that manipulators win either way, they were selling because the bogus jobs report and now they are selling even more because of the Ukraine BS....Oh well, we will keep trying to minimize as much as we can, sadly its Friday and scumbags are licking their lips with about 2 and a half hours to go....More after the close.
May 2, 2014 12:53PM
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THIS JUST IN!  Bobo finally catching Alzheimers....

And now a word from Papa John's.....

YUMM and Happy weekend all!

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