AG Edwards downgraded McGraw-Hill (MHP) this morning and Jim sees an “incredible” opportunity to own this print media company. New York Times (NYT) and the stock of the Dow Jones (DJ) seems to be where people want to be but they do not see the long term secular decline of the newspapers. He said “in 50 years, I doubt anyone will even read newspapers.” MHP is the only print media company worth owning right now because they have growth which is unusual in print media. The New York Times and Wall Street Journal were referred to as the Yale and Harvard of newspapers and you were told that you would be better off putting your money in the universities than in the paper. Traditional print media is on the decline with lower circulation and declining ads. The NYT and DJ are publicly traded but they aren’t really with two classes of stock. Families and management who own these classes of stock will not allow these companies to be bought so Jim told us “there is no reason for the NYT to go up.” MHP publishes BusinessWeek and is the only media play that isn’t a media play if you listen to Jim. He called it a “private equity pay” because whenever there is a private equity deal the deal is rated by Standard & Poor’s which MHP owns. They are a real company with real growth and real dividends any downgrade is wrong.

Denny’s (NASDAQ:DENN) has been issuing a major turnaround and Jim says it should continue. The market does not recognize this because most Wall Street investors are “snobs.” DENN has long been saddled with credit card debt but they have been selling off restaurants and turning to a franchise based business model. CEO Nelson Marchioli was on the show last month and he talked about the refinancing of the balance and said the company would be successful in this quarter. The interview also revealed that DENN would do it without getting rid of its 21 stores. They have become strong enough where they will not need to sell any stores and this is a big deal. You should buy DENN but use limit orders as they are a small cap stock. Use the usual rules.

In this segment Jim looked at Wal-Mart Stores Inc (WMT) telling us to sell this stock. The reason behind the bad numbers is the “shutdown of the immigrant buyer,” Jim said. A new six point ID verification program adopted by New Jersey makes it difficult to renew licenses and he says, therefore, go shopping. The death of the underground economy and WMT was announced. He feels if a liberal state like New Jersey is cracking down you can only imagine how other states will react. He sees it as no car, no WMT, and this puts them in trouble. The stock is not coming back and not just because it is a bad retail store.

Co-founder, co-chairman and co-CEO of California Pizza Kitchen Inc (CPKI) joined the show to talk and Jim asked him to alleviate some worry about his company’s stock. Rick Rosenfield responded that they have “some slippage though he hasn’t seen much of a downgrade” and “investors and analysts have stood by them” along with the “fundamentals” being great and the new restaurants that they have opened are achieving the highest profitability and highest volumes of any they have opened. Long term they feel great at CPKI. The slippage was attributed to bureaucracy, not getting permits or malls do not get permits and this leaves them dead in the water. The company does a good job of control when it comes to their restaurants. Jim worries about the popularity of pizza and Rosenfield say that they are a casual dining restaurant, pizza is just their middle name. Jim would use the slippage in the stock to buy because he “believes in the chain and food.”

Bullish
AMR (AMR), Continental (CAL), BEA Systems (BEAS), Under Armour (UARM), VeriFone (PAY), MasterCard Incorporated (MA), Akamai (AKAM), Level 3 (LVLT), Cisco Systems (CSCO), Walt Disney (DIS), Winn-Dixie (WNDXQ), Safeway (SWY), Humana (HUM), WellPoint (WLP), America Movil (AMX), Sirius Satellite Radio (SIRI) and Sysco (SYY).
Bearish
Koninklijke Ahold (AHO), Tsakos Energy (TNP), Odyssey Health Care (ODSY) and Sirenza Microdevices (SMDI).
Sudden Death
Bullish
Digene (DIGE) and Nike (NKE).

Health Care Rally
The “intriguing” rally in health care was once again talked about. Now that the bottom is being put into the stocks postelection, we are being told to “buy, buy, buy.” WellPoint Inc (WLP) is the best of breed along with MedcoHealth Solutions(MHS). Jim has been buying Quest Diagnostics Inc (DGX) also. Stocks that were called “too cheap” are: Schering-Plough Corporation (SGP), Johnson & Johnson (JNJ) and Amgen Inc (AMGN). Pfizer Inc (PFE) is in fact “too expensive.” After coming out and saying that there is a “giant upside surprise,” PFE is ramping, and Jim says this is not the case after the company has fired a lot of people and they are trying to “create an upside surprise by lowering its bar.” There are drug stocks worth owning more than PFE such as Merck (MRK), Novartis AG (NVS), GlaxoSmithKline PLC (GSK) and SGP.

Sell Citi
A chief executive that is in trouble will usually have the company’s board likely leak information to the media, but with Citigroup Inc (C) this is not happening. The company is fat and happy with executives oblivious to the fact that the financial has underperformed. There is talk that the the company needs to be broken up probably because they have done nothing at the bank. Jim thinks the breakup makes sense but it looks as if they will never break up with the current situation and we were urged to sell C and buy something else.

Homebuilder Talk
The sellers in the homebuilding industry have been “desperate” to sell their houses and are thus cutting their prices, Jim said. Buyers who have been waiting for these price cuts should now be ready to buy, he added. Homebuilders cannot finance their inventories, so they continue to cut prices until they find buyers, which is what is happening now, Jim said. In fact, “there is not an industry in the world that can finance nonproducing inventory except oil, which is why I like that business so much,” Jim said. “Its inventory goes up in price as it sits because of a developing multiyear storage.” He believes that the analysts got “lulled” into thinking that homebuilding was a secular grower, and then they discovered it was cyclical, Jim went on to say. “They downgraded the cyclicals at the bottom of the cycle because the price-to-earnings ratios soared.” Analysts love to wonder out loud where the economy may be going, Jim said. But if market players open their eyes, he believes they will be able to see for themselves where it is headed. The pullback of the auto and homebuilding sectors “two very important industries that matter to the economy” augurs a “big decline” in the economy, Jim said. After all, the housing business is not an industry that can be kept on the books because houses are really expensive. General Motors Corp (GM) and Ford Motor (F) are trying their best to lay off people, and the large homebuilders keep saying they are done with building any more homes, he said. In fact, the only place Jim sees money being spent is in the energy industry. Everyone is focused on its rally as mutual funds spill money into oil stocks, he said, adding that the ExxonMobil (XOM) has become the “anointed” stock in this sector.

Caller Questions
Las Vegas Sands Corp (LVS) and MasterCard Incorporated (MA) may be “beaten down” short term, but they are “winners” long term, Jim told a caller. “As the airlines have had a “remarkable run,” he believes that people should not give back the gains they’ve made in this sector. Jim said although he likes Continental Airlines (CAL), he is not going to recommend it right here as it has already had a “tremendous run.” Saks Inc (SKS) “is in the midst of a major turnaround” and has joined the ranks of Nordstrom Inc (JWN) as a member of the “elite,” Jim said. Moving on, JPMorgan Chase & Co (JPM) is “fine,” but not what Jim considers a “must own,” he told his next caller. Jim likes Bank of America Corp (BAC) as he believes it cares more about its shareholders. When a caller asked about RF Micro Devices Inc (RFMD), Jim said he is a Cisco Systems (CSCO) guy when it comes to telecom. Jim told a caller who said he was in the house of pain with Coldwater Creek (CWTR), to buy more. Jim told the next caller that he likes AK Steel (AKS), but likes Reliance Steel & Aluminum (RS) better. Jim thinks that AKS could get a take over bid any day.