Cramer's Mad Money - The Wal-Marts of Healthcare (3/6/09)

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Includes: BAC, BAX, BDX, BIG, C, FDO, HPQ, KMB, KO, QCOM, SKF, USB, WFC, WMT
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday March 6.

The Wal-Marts of Healthcare: Becton Dickinson (NYSE:BDX), and Baxter (NYSE:BAX)

Obama's Medicare reforms brought down the healthcare sector, flattening stocks once regarded as recession-resistant. However, two names may end up surviving Obama's healthcare reforms: Becton Dickinson and Baxter. Cramer called these companies "the Wal-Marts of healthcare" because they make essential equipment and products which will continue to be purchased even as times get tough. Becton Dickinson gets 58% and Baxter gets 37% of revenues from hospital supplies which always need to be replenished. These include syringes, needles, scalpels and drug items. Thirty percent of BDX's revenues come from diagnostics and only 6% from "extras." A large portion of Baxter's revenues are derived treatments for hemophilia, immune deficiencies and cancer; these are a far cry from the high-cost drugs Obama's reforms may threaten. Baxter also makes IV care products and injectible drugs, which are required for many different procedures. While both reported decent quarters, Baxter was a bit light on revenues. However, both companies should perform well in 2009. Cramer noted both Baxter and Becton Dickinson's multiples are at historic lows, and would go ahead and buy.

Any Good News? Wal-Mart (NYSE:WMT), Big Lots (NYSE:BIG), Family Dollar (NYSE:FDO), Qualcomm (NASDAQ:QCOM), Hewlett Packard (NYSE:HPQ), Coca Cola (NYSE:KO), Kimberly Clark (NYSE:KMB)
With 8.1% unemployment, a 40% decline in domestic car sales and Citigroup shares trading at only a dollar, there is every reason to expect the worst. While the bad may outweigh the good in the current climate, Cramer pointed out a few good stories to take an edge off of a bleak economic outlook.

1. Retail: Wal-Mart's same-store sales were better in February than they were in December. Big Lots and Family Dollar are also strong. Sure, these are tradedown plays, but in a deep recession, even these stores would be feeling the pain.

2. Tech: Semiconductors' inventories are growing smaller and Qualcomm's estimates were raised because chips are doing better thane expected. While there is some doubt about the health of end-markets (Hewlett Packard CEO Mark Hurd is not optimistic), the Philadelphia Stock Exchange semiconductor index was up over a terrible December.

3. Commodities: Copper is on the rise, oil has stopped dropping and there is increasing demand for metals. While China, not the U.S., is fueling demand, at least it is good news for American companies.

4. Dividends: Some companies, such as Coca-Cola and Kimberly Clark are actually raising their yields.

While further decline is all but inevitable, Cramer thinks the White House can lessen the pain by focusing on housing and unemployment and Treasury Secretary Tim Geithner could at least provide more visible leadership and outline a coherent plan of action.

Cramer's Outrage: Proshares Ultrashort Financials ETF (NYSEARCA:SKF) with Bank of America (NYSE:BAC), Citigroup (NYSE:C), US Bancorp (NYSE:USB), Wells Fargo (NYSE:WFC)

Cramer called again for a ban of Ultrashort ETFs, particularly SKF which gives one short dollar the impact of three and kicks banks like Citigroup, Bank of America, U.S. Bancorp and Wells Fargo when they are already down. Ultrashorts get by essential SEC rules and are wrecking the financial system. Cramer thinks these ETFs should not exist.
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