Cramer's Mad Money - A Bull on the China Stocks (2/13/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday February 13.

The Real Stimulus - China; GM (GM), Terra Nitrogen (TNH), Qualcomm (QCOM), Hewlett Packard (HPQ), Cisco (CSCO), Caterpillar (CAT), Honeywell (HON), United Technologies (UTX), Coke (KO), Kraft (KFT), Kellogg (K), General Mills (GIS), Knight Capital (NITE), Goldman Sachs (GS), Credit Suisse (CS)

While the Dow fell on the disappointment over Obama’s supposed stimulus which will not provide expected aid to infrastructure, housing and banks, China stocks surged because the Chinese government is throwing money at its problems. GM is nearly bankrupt, Terra Nitrogen is good only because China is fueling fertilizer demand. Smartphones represent the only growth in tech, except for Qualcomm, Hewlett Packard, Cisco, which may benefit from the Chinese $40 billion telecom buildout. Cramer thinks the China will also help Caterpillar, Honeywell and United Technologies. Recession stocks are mixed; Coke and Pepsi are good, Kraft is bad and General Mills and Kellogg are okay. The only non-China related sectors that are doing well are restaurants (thanks to lower fuel and food prices), biotech and investment banks Goldman Sachs, Knight Capital and Credit Suisse.

General Dynamics (GD), AeroVironment (AVAV), Axsys Technologies (AXYS), Raytheon (RTN), BEA Systems (BEAS)

While some fear a Democrat as commander-in-Chief will make cutbacks in the military budget, Cramer thinks such a move would be unwise and unlikely. Not just any defense stock will do well with Obama at the helm; AeroVironment, which makes unmanned aerial vehicles has risen 31% since Cramer recommended it after Obama’s victory. Cramer thinks Axsys, which makes sophisticated imaging systems, may have a similar story. Axys’ technology allows more to be done with fewer troops on the ground and is perfect in hot zones like Iraq, where troop reductions are expected. Axsys has a long list of clients; Department of Defense, Border Patrol, Raytheon, Northrop Grumman, Lockeed Martin and Boeing.

Axsys is teaming up with Raytheon and BEA Systems to land a $2 billion contract for something called Drivers Vision Enhancer-Family of Systems, which is designed to allow drivers to see more clearly at night. Producing replacement parts is big business for Axsys, which provides 70% of Axsys bookings. The stock is down 49% from its high, trades at 13 times expected earnings with a 19% growth rate. If the multiple catches up with the growth rate, the stock could jump from $40 to $56, and even if it doesn’t Axys may be an attractive takeover target. Cramer reminded viewers this is a speculative buy and to do research before buying. He might consider waiting to buy until after its earnings report on February 18.

Mad Mail: Visa (V), Mastercard (MA), BP (BP), Marathon Oil (MRO), Shaw Group (SGP)

One viewer asked Cramer how proposed reforms to reduce the principal in mortgages can be proposed, when the owner of the mortgage has to be consulted first. Cramer replied, “The owners of the CDOs have the right, and so far to date they’ve done a lot of blocking of the ability to be able to change principal. We fix that, we get to a lot of the bottom of it. Eighty percent of the loans are locked into this junk.”

When another viewer asked if BP was preferable to Marathon Oil now that the latter says it will not split its Exploration and Production from its refining business, Cramer said BP has a great yield, but Marathon is still good with a 4% dividend and as a potential takeover target. Cramer told a third viewer that Visa is too expensive and he prefers Mastercard. Cramer agreed with a fourth viewer that the Dow is not the best gauge of the market since it has only 30 stocks and says he has always preferred the S&P500. Finally, Cramer said he is not so excited about Shaw Group’s yield and he doesn’t see more government regulations of the market on the horizon.

Boston Scientific (BSX), St. Jude Medical (STJ), Medtronic (MDT)

While Boston Scientific has burned investors in the past, at $9 and with serious changes, Cramer thinks the producer of pacemakers and implantable defibrillators is a good investment. Part of the reason for the stock’s decline Boston Scientific’s overspending for its Guidant acquisition in 2006, but after beating earnings estimates and grabbing market share from competitors St. Jude Medical and Medtronic, BSX should see an upside. The company has restructured its asset portfolio and paid off $2 billion of its debt. BSX released six cardiac-rhythm devices last year, and expects to release three more in 2009. What is the catalyst? The European Union is expected to approve a Boston Scientific drug-releasing stent. In spite of two upgrades, Boston Scientific hasn’t seen much of a lift. Cramer sees this as a gift, especially considering the 5-7% sales growth.

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Comments

[Kirk Lindstrom:]

Does anyone have the performance figures for Cramer's Real Money portfolios for past years? If yes, please email them to me at the address listed on my website.

Feb 16 09:55 AM

[thotdoc:]

In like thought. He seems more entertainer, sometimes out of control. Does anyone have any evidence that he adds to the common wisdom?

G

Feb 16 11:54 AM

[Digiweb:]

Cramer pushed Sears from $200 to $50 due solely to an infatuation with Eddie Lampert. He told a Bear Sterns stockholder not to be concerned or pull his money out. BS collapsed the next day. When Burnett asked him about the call, he said he was advising the caller not to pull his money from BS the bank as his money would have been insured. BS a bank? WTF? He'll make a giant show of how he was wrong but never about the horrific calls that go down 80% while he's still bullish on them.


On Feb 16 09:55 AM Kirk Lindstrom wrote:

> Does anyone have the performance figures for Cramer's Real Money
> portfolios for past years? If yes, please email them to me at the
> address listed on my website.

Feb 16 04:05 PM

[momomiester:]

Pray for those poor souls that he told he liked Drys at 15 after it ran from 4 in weeks then bashes it weeks later at 5. Forgive him for he does not know what he does.
Imagine if life worked like Cramer's pics and popularity? You bat .200 and get MVP. You shoot 90 and win Augusta. Bernie Madoff becomes Fed chief. Nerds dating Victoria Secret's supermodels. You eat junk food all day and you get ripped and have a six pack. Is it me or am I in some differn't level of reality or did the world over dose on stupid pills?

Feb 16 08:11 PM