Socks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Monday January 5.
Cramer already has crowned Hewlett Packard as the best tech stock of 2009. While the stock is down to $36 from $50, Cramer thinks Hewlett Packard’s acquisition of Electronic Data Systems could mean a 26% bounce to $46. Mark Hurd is one of the few CEOs in the tech sector to express confidence in his company’s earnings, and Hurd plans to cut expenses to make the Electronic Data Systems acquisition profitable. Hewlett Packard is already head and shoulders above its competition, Dell and Lexmark and is expected to steal market share from IBM and EMC. While EDS’ exposure to GM may provide some cause for concern, government aid for the auto company may allay worries. Hewlett Packard has a 13.5% growth rate and a small 8.7 price-to-earnings ratio. Cramer thinks HPQ might be ever more sought-after by big money managers than Intel or Microsoft.
Cramer believes that the crises of 2008 are largely over, and the commodities rally on Monday was a sign that Happy Days are Here Again; “There are no more crises waiting in the wings,” he declared. The rally on Monday was different from rallies in 2008 because it wasn’t inflationary, levered to China and will most likely have a more long-term impact, despite the fact that the Dow dropped by the end of the day. Names like Freeport, Peabody, Nordic American Tanker and Terra Nitrogen don’t all make such dramatic moves together on the same day if the economy is in crisis, he said. However, given negative predictions for the unemployment number on Friday, Cramer would not buy these stocks, but would continue his strategy of buying on pullbacks and looking for accidental high-yielders, stocks which have seen a fall their prices but a gain in their yields.
Cramer isn’t buying the Securities and Exchange Commission’s claims that they had no way of knowing that Bernie Madoff was making off with $50 billion. The SEC made 8 reviews but couldn’t find anything, but Cramer ran the same numbers just once and saw something very fishy about the performance of the options Madoff said he was trading. Letters to the SEC’s Boston office were ignored, and feeder funds such as Tremont looked the other way. Cramer quoted a letter from feeder fund Tremont;
“…in addition, information supplied by the investment advisor may be inaccurate or even fraudulent. The co-managers are entitled to rely on such information (provided they do so in good faith) and are not required to undertake any due diligence to confirm the accuracy thereof.”
Cramer says there is no excuse Madoff’s Ponzi scheme to have continued under the SEC’s radar.
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