Stocks discussed on Jim Cramer's Mad Money program, Tuesday November 11.
Kicking off his “Back to School Tour” series at the University of Iowa, Cramer said the best remedy for the economy is to fix housing. He expressed his disapproval of Treasury Secretary Henry Paulson’s proposal to dedicate the $700 billion TARP program to propping up financials rather than buying up mortgage-related securities. With the Dow down 400 points, Best Buy slashing its 2009 earnings outlook, AIG requiring yet more federal funds, GM on the brink of collapse and insurance companies struggling to raise money, Cramer says the answer to all of these problems is to fix housing, since unpaid mortgages affect the entire economy. He suggests a freeze on building new homes, and says the government should buy existing homes and offer big tax credits to new homeowners. In the meantime, Cramer would invest in recession-resistant names with strong dividends. He is bullish on Caterpillar, KBR, Kimberly-Clark and Clorox.
While Cramer has not liked ethanol in the past, he now likes ADM as its ethanol-producing competitors are stumbling and with a President-elect committed to developing ethanol as an alternative to fossil fuels. ADM’s large size gives it an edge over other companies; it can easily shift from making corn syrup to ethanol if needed, and a failed crop in one area of the world need not be a problem, given ADM’s global reach. In addition, the company is opening a new bioplastics plant in Iowa; bioplastics have been developed to replace oil-based plastics and are expected to grow by 122% between 2007 and 2012. While Cramer is bullish on ADM, he says investors should wait for a pullback before buying and be patient since it may be while before the stock makes a big move in this market.
On Deere, Cramer says the farm equipment company, like ADM, will be the last man standing its sector, but the next two months are going to be very rocky for the stock. Cramer recommends waiting to buy Deere at its 52-week low.
Cramer took questions from the University of Iowa’s two investment groups. While one student was bullish on Shire because of its strong pipeline, Cramer agreed about the company’s strength of its pipeline but noted Shire lowered its estimates, so he would not buy. Another student tried to persuade Cramer to change his mind on Cameco, a nuclear energy play with gold exposure. Cramer said that since the deflationary cycle makes gold not the safe haven it once was, and since the price of uranium is dropping and the chances of building a nuclear plant in the U.S. is “nil” he is still bearish on Cameco
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