Cramer's Mad Money - Obama, Take a Break (2/3/09)

 |  Includes: BAC, C, EIX, FSLR, KO, PEP, WFC
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday February 2.

Obama, Take a Break

Cramer says Obama should take a break from his budget plans to give the market a chance to breathe, otherwise there is likely to be another 300 point Dow decline. While the recession is causing a lot of the problems, his announcement of health care reforms wrecked havoc with that sector and now the proposed tax on the rich may also hurt the markets. If Obama doesn’t take a breather, the Dow may drop to 4,000, said Cramer.

Pepsico (NYSE:PEP), Coca-Cola (NYSE:KO) and Dividends

Cramer gave viewers a crash course on dividend analysis and then discussed why he prefers Pepsi to Coke. Pepsi pays a 42.5 cent quarterly dividend, a 3.5 yield, and the next payout will be on March 31. The “must-own date” to still receive a dividend payout is March 3. What many investors don’t know is they could theoretically buy Pepsi on March 3, sell it by March 4, and still receive the dividend. However, Cramer would hold on to Pepsi even after its dividend increases. It is not suffering as badly as Coke is from the strong dollar, overseas sales for Pepsi are strong and commodity prices are low. Pepsi is opening new plants in China and is expected to have $7 billion in cash flows for 2009. Pepsi trades at 13 times earnings, a 20% premium to the market, but Pepsi used to trade at a 30% premium, so it is actually cheaper. While Cramer is confident Pepsi will continue to thrive in spite of the market, he would still buy it in increments.

Obama-Proof Stock: Edison International (NYSE:EIX), First Solar (NASDAQ:FSLR)

While utilities are usually safe, conservative investments in tough economic times, the sector is facing financing difficulties in the current climate. In addition, Obama’s cap-and-trade budget, which is effectively a tax on emissions, will also hit utilities hard. However, the one utility Cramer likes is Edison International which operates a utility and non-utility power production divisions. The utility division covers most of Southern California and is only 13% dependent on coal, which produces copious emissions. Edison plans to spend $880 million on developing solar energy and will team up with First Solar on several projects. In spite of its earnings beat on Monday, the stock dropped and it might fall farther if there is a downgrade on Tuesday. However, according to net asset estimations, the stock may move from $25 to $56 and has a generous 4.9% yield. Cramer would buy before the California Public Utility Commission meets on March 12 to vote on a rate increase. The one risk is the vote may be deferred yet again, but Cramer would still buy and start building a position.

Cramer’s Outrage: Geithner Again: Citigroup (NYSE:C), Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC)

Cramer criticized Timothy Geithner for harming the preferred stock of Citigroup, a move which may have implications for Bank of America and Wells Fargo. He reiterated his theory of forebearance for banks, and suggested the government lend financials money in return for promissory notes for repayment. Cramer thinks it is a better idea to allow banks to take care of their own problems.


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