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

by: Miriam Metzinger

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

The Real Stimulus - China; GM (NYSE:GM), Terra Nitrogen (NYSE:TNH), Qualcomm (NASDAQ:QCOM), Hewlett Packard (NYSE:HPQ), Cisco (NASDAQ:CSCO), Caterpillar (NYSE:CAT), Honeywell (NYSE:HON), United Technologies (NYSE:UTX), Coke (NYSE:KO), Kraft (KFT), Kellogg (NYSE:K), General Mills (NYSE:GIS), Knight Capital (NITE), Goldman Sachs (NYSE:GS), Credit Suisse (NYSE: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 (NYSE:GD), AeroVironment (NASDAQ:AVAV), Axsys Technologies (AXYS), Raytheon (NYSE: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 (NYSE:V), Mastercard (NYSE:MA), BP (NYSE:BP), Marathon Oil (NYSE: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 (NYSE:BSX), St. Jude Medical (NYSE:STJ), Medtronic (NYSE: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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