Cramer's Mad Money - CIT Group Scandal (11/4/08)

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Tuesday November 4.

 

Taking Profits

Cramer says the current market is overbought and is looking stronger after a tempestuous October. Share prices are rising, shorts are being squeezed and there are more buyers than sellers. Cramer would sell some stocks and trim positions in others. He recommends buying recession-resistant stocks that are trading at or near their cash levels and have seen their dividends rise as their share prices have fallen. "It's time to take profits before they disappear," said Cramer. "Be ready to buy, buy, buy when the next sell-off hits."

 

Bigger is Better: Office Depot (ODP), Office Max (OMX) and Staples (SPLS)

 

While Office Depot and Office Max have had nearly 100% moves to the upside, they are behaving like risky speculative stocks, said Cramer. Bigger is better in this space, and while Staples has had a more modest gain of 43%, it has stronger operating margins, same-store sales, and expected growth than its competitors. Both ODP and OMX have huge debts, which will discourage potential buyers and Staples is acquiring Corporate Express to stimulate its international growth and expanding stores in the U.S. Staples, with its clean balance sheet, is also cheaper than ODP and OMX.

 

Obama’s Infrastructure Boom: Caterpillar (CAT)

 

Caught in the middle between confident management and bearish analysts, Caterpillar seems like a buy, said Cramer, who said it is best to ignore both sides. The Street thinks earnings will fall be half with the rising dollar, and energy and housing in the doldrums. Management thinks end-markets will be stable and expects good things from CAT for 2009. Cramer says he isn’t sure who is right, but thinks the 4.1% dividend is worth the risk since it pays investors to wait. If CAT should drop again to $33, its dividend will rise to over 5%. But Cramer doesn’t think it will decline in an Obama Administration, but envisions an infrastructure boom.

 

CIT Group Scandal (CIT)

 

Cramer was sharply critical of the U.S. Treasury for leaking the news that it wants to bail out CIT Group early so investors could buy; “At this point, the Treasury is literally giving the money away,” Cramer said, and added, “This may be pro-business – it’s definitely pro-shareholder as anyone buying CIT here has been practically guaranteed a win by the Treasury Department but none dare call it capitalism.”

 

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