Cramer's Mad Money - Obama's Revenge (3/5/09)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday March 5.

Eli Lilly (NYSE:LLY), Aetna (NYSE:AET), Wellpoint (WLP), Medtronic (NYSE:MDT), Citigroup (NYSE:C), Bank of America (NYSE:BAC), Fifth Third (FIIB), Marshall & Isley (NYSE:IM), Haliburton (NYSE:HAL)

Obama’s wrath is burning against the fat cats who run corporations, and he seems eager to punish those who may have been instrumental in getting us into this mess. The problem is that the draconian measures might hinder the very same fat cats who can help get us out of it, according to Cramer. Those targeted by these “reforms” may find it more difficult to create jobs and generate wealth. Obama’s vengeful gaze is focused on Eli Lilly, Aetna, Wellpoint, Medtronic, Halliburton, and no one is quite sure which sector will be next. Of course, there are many crooks in the financial sector, but not every bank is a Citigroup, Bank of America and Wells Fargo; there are some nice respectable Fifth Thirds and Marshall&Isleys out there. The problem with punitive measures is they tend to take down the whole sector, said Cramer.

This Time, the Chart Doesn’t Lie: ManTech (NASDAQ:MANT)

While Cramer is usually a fundamentalist, in the case of ManTech, he is revising his usual sermon and confesses the chart indicated the decline of this stock more clearly than the fundamentals could have. The stock dropped 16% in four days and its decline was a shock to those who felt this was a perfect Obama stock. How did the chart predict this decline? There was a high-volume breakout in the last week of January 2008 that reversed and brought ManTech to the bottom of its weekly range. The buyers were outnumbered by sellers dumping their shares. Cramer said this was a sign that investors were looking for a way out. There were low-volume rallies for two weeks (low volume demonstrates a lack of commitment), but the selling that followed brought the stock through he 10 and 40 week moving averages. Usually when these lines are broken though, there is a rally back up, but no rally happened, indicating that investors weren’t willing to buy the stock, even when it was cheap. The news of the Chief Operating Officer’s departure and the downgrades came too late for investors to act in time; following the chart would have enabled shareholders to cut their losses. Even though the technicals are right in this case, Cramer found two problems with the fundamentals: first, the company is not integrating its acquisitions well and second, Cramer doesn’t like its two-tiered share structure which gives the CEO an 88% stake.

CEO Interview: Peter Swinburn Molson Coors (NYSE:TAP), with AB InBev (NYSE:BUD)

While conventional wisdom indicates that beer is recession-proof, both Molson Coors and AB InBev are down, but Molson has the advantage that 50% of its sales are in Canada, which is outside of Obama’s reach. Revenue growth per barrel is healthy and the company is introducing a cost savings program that will save $100 million per year. Cramer is concerned about the company’s 2.3% yield, which is lower than that of its peers. Peter Swinburn said a dividend increase is a move he is considering in the future. Cramer says Molson is a buy if it raises its yield.

Mad Mail: Kinder Morgan (NYSE:KMP), Petsmart (NASDAQ:PETM)

Cramer said he is worried that Wal-Mart may give Petsmart a run for its money, and thinks Wal-Mart will win. Cramer explained why a Master Limited Partnership like Kinder Morgan functions differently than a regular stock regarding its dividend: “We shouldn’t be as concerned about typically what I like to see, which is a lot of earnings covering a dividend. This is a lot cash flow covering a dividend. And they’re going to do a good job for that.” Cramer defended the FDIC under the leadership of Sheila Bair, and says the fact that banks are in pain right now is not the fault of the successful program. Cramer doesn’t think the U.K’s mortgage program will work in the U.S. because it is too hard on the banks. He reiterated his proposal of issuing mortgages for the next 18 months with a 4% rate for everyone.


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