Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday February 20.
Is Obama Failing? Bank of America (BAC), Citigroup (C), Caterpillar (CAT), General Motors (GM), General Electric (GE), JP Morgan Chase (JPM), Chipotle Mexican Grill (CMG), Whole Foods (WFMI), American Express (AXP)
After Obama’s first month in office, Cramer looked at Obama’s report card: the Obama index which Cramer created on inauguration day. Stocks comprising the index include: Bank of America, Citigroup, Caterpillar, General Motors, General Electric, JP Morgan Chase, companies that were expected to benefit from the President’s stimulus plan. Since the day Obama took office, the index is down 35% with the mere 8% decline in the S&P. It is time for Obama to do his homework and look at China, which is making dramatic measures propel its own economy.
One index that is doing well is the Danny Meyer Hospitality Index, which Cramer created in honor of the celebrated restauranteur who developed the theory that hospitality and customer service are a company’s most powerful recipe for success. The Index has held steady in site of declines in the S&P 500. Outstanding players in the index are Chipotle Mexican Grill and Whole Foods, while American Express is facing a 24% decline due to credit problems.
Plenty has been said about the instability of the economy, and Cramer suggested creating a nest egg of cash for the next five years’ expenses. He also recommended investing in 5 companies that are sure to weather the economic storm. He also suggested having 25-30% cash on hand available to buy beaten down, quality stocks.
2. Wal-Mart: This company will thrive no matter how the economy fares, and is the ideal trade-down play. Its clean balance sheet is also a plus.
3. BP: Cramer says this is the best integrated oil and has a fat 8.3% dividend which it has no plans of cutting. Rising demand in oil is also good news in BP.
4. General Mills: will benefit from the recession as more people stay at home rather than going out. The company has less exposure to the dollar, so exchange rates won’t hurt the company. General Mills is a cheap stock, trading at just 13 times earnings while close to its 52-week low.
5. Agnico Eagle Mines: Contrary to popular belief, gold is not bubbling, but will continue to rise as the market becomes increasing volatile. Cramer’s favorite stock in this sector is Agnico Eagle Mines.
Where’s Washington? Should Cramer Take Over?
Where is Washington right when we need them? When there are questions that need answers: Should banks be nationalized? Should some be allowed to die like Lehman? Meanwhile, financials are shrinking before our eyes; Citigroup is a mere $13 billion company, down from $125 billion. Bank of America used to have a $197 billion market cap and now is at $24 billion. Will struggling homeowners be cut off, following Rick Santelli’s “Chicago Trader School” solution? The problem with nationalizing banks is the common, preferred stock and bonds would be completely wiped out. Refusing to rescue ailing banks and homeowners is subscribing to the hard-nosed Herbet Hoover theory which failed miserably during the fist Great Depression. Cramer’s solution: 40 year 4% fixed-rate mortgages valued at the current market price should be made available to everyone. Banks would get Equity Participation Certificates for the leftover principal and these certificates would be used as cash for regulator capital, without mark-to-market rules. If a house is sold, the bank would be the primary recipient and the seller would get the rest.
To a viewer who said he had some difficulty reading a company’s annual report, Cramer said CEO Indra Nooyi, who writes, “the clearest, most enjoyable and accurate and exciting,” annual reports should come onto the show and give a crash course on how to understand a 10-K. When another viewer suggested he have a Town Hall Meeting with Tim Geithner and Obama, Cramer replied he is already having one with FDIC chairwoman Sheila Bair, a woman who could probably solve the economic problems more effectively than anyone else in Washington. When another viewer asked Cramer about Dow Chemical, Cramer pointed to Dow CEO Andrew Liveris on his Wall of Shame; “He told us repeatedly the dividend wasn’t in doubt – and then he got rid of the dividend. So my take is, until they get rid of Liveris, we’re not recommending Dow Chemical.”
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