Cramer's Mad Money - Caterpillar the Infrastructure Survivor (1/29/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday January 29.

Sell Block: Terex (TEX), Caterpillar (CAT), Jacobs Engineering (JEC)

Are infrastructure stocks still worth buying after the disappointment surrounding Obama’s stimulus? Both fell Thursday, and the charts seem to indicate that Terex, Caterpillar and Jacobs Engineering are sells. Cramer says Terex is a worst of breed stock and is not even worth considering. Jacob’s Engineering has little to recommend it, since it lacks a strong dividend yield, is too levered to oil and gas and not levered enough to

Obama’s stimulus plan, and it is up 55%. Caterpillar, however, may still be a buy, especially with its dividend at 5%. Even after reporting a bad quarter and laying off 20,000 workers, Cramer thinks the yield is safe.

The Disappointing Stimulus Plan: Kraft (KFT), Kellogg (K), Colgate-Palmolive (CL), Kimberly Clark (KMB), Coke (KO), Pepsi (PEP), Altria (MO), Celgene (CELG)

The Dow dropped 226 points on Thursday, and Cramer blamed the government this time. While everyone had high hopes about the stimulus plan, Cramer noted the bill passed by the House didn’t do anything to aid financials, didn’t create enough jobs and is neglecting housing, which is the backbone of the entire crisis. Where was the money for tech and infrastructure? Cramer just saw some aid for manufacturing and a whole lot of pork.

Implied in Obama’s harsh words for bank executives was a punishment for those participating in the “bad bank” program. Cramer predicts dividend cuts or appropriating some of their earnings. So now it is back to recession-resistant names like Kraft, Kellogg Colgate, Kimberly Clark, Coke, Pepsi, Altria and Celgene.

Which Oils Are Worth Buying? BP (BP), ConcoPhillips (COP), Marathon Oil (MRO), Chevron (CVX), Exxon Mobil (XOM)

Oil and gas stocks have been beaten down, but now that some edge has been taken off the volatility, it might be time to buy at least one or two names. Bigger is better, because larger companies are diversified in various parts of the oil sector. And of course, Cramer likes generous dividends. Cramer’s favorites are BP with a 7% yield and ConcoPhillips which yields 4.8%. He would pick up Marathon and Chevron when oil goes to $30. He would wait for a disappointing earnings report on Friday from Exxon to create an entry point. Cramer thinks ConcoPhillips is the strongest and is a buy now under $50. BP is a buy just for its 7.8% dividend, but Cramer also likes its diverse array of businesses.

Chesapeake Energy (CHK) CEO Aubrey McClendon

Chesapeake had a devastating decline from $74 in July to under $10 in December. The stock has risen slightly to $16. McClendon was forced to sell $31 million in shares. The company is cutting costs and selling assets, its joint-venture with BP is still strong. Aubrey McClendon said the reason for the decline was caused by the greater economic problem, but he thinks the current Administration is pro-natural gas and predicts the fuel will be favored over coal and oil. McClendon foresees a recovery by 2010 and 2011. Concerning his forced sell of his 21 million shares incurred a huge loss, mainly because he bought on the margin. When asked why he didn’t sell his stock, McClendon said “I couldn’t look my shareholders in the eye and say ‘I got out, you didn’t.” However, since the company makes twice as much oil as Exxon, is a greener option than other fossil fuels and has growth prospects, McClendon says Chesapeake energy “Is set for a really bright future.”

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Comments

[Gravity404:]

I disagree -- JEC is well diversified and is not too leveraged on Oil and Gas; don't forget about their healthcare, education and government services.

Also, Jim's been a long term believer in FWLT and they have the same divy as JEC...

JEC is more agile than most of their competitors; therefore can withstand the down market and rebound better. At these levels, its a buy. It briefly dorped to the high 20s then came screaming back.

Jan 30 09:35 AM

[Jake2:]

Take everything Cramer says with a grain of salt: CAT down 4+% today.

Jan 30 02:21 PM

[BigOlDave:]

JEC a "Sell" ? I don't think so.

I don't own JEC (anymore), but do own McDermott International Inc
(MDR) .

I also don't waste time watching Cramer anymore or even check out SA's recaps. But I understand that he has a big following and is batting better than average and has made money (bought on 11/24/08 at $33.57.

Cramer needs to consistently beat the market.

Jan 30 03:19 PM

[drbob66:]

JEC is a quality company...they've been quite consistent in their earnings growth over the years. That said, it MIGHT be a buy at current levels ($38), but who knows? What will be the trough P/E for 2009? I have no idea. I was a buyer during the frantic deleveraging that occurred during Oct/Nov...bought JEC all the way from 60 to 30. But when it got back to the 50's, I regretfully had to sell most of my position, since gains tend to disappear very quickly in this environment. I'll be watching the price action over the next few weeks, but probably won't consider pulling the trigger unless it gets below 36...and definitely if it retests its 52-week low. This market is still highly unpredictable.

Jan 31 11:51 AM

[Matt Miller:]

Cramer is a joke.

Feb 03 07:01 AM