Cramer's Mad Money - Buy Bank of America (3/10/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday March 10.

Buy Bank of America (BAC)?

Technicals might well be the only strategy that is working in today's market. The charts predicted the rally on Tuesday and it might provide a case of buying Bank of America, even though the stock has already moved up. Cramer used DeMark analysis to show that not only is Bank of America's fall finished, but it could rally into the double digits. The trend for the S&P 500 is similar, noted Cramer, but everything depends on what happens in Washington. If the uptick rule is reinstated and Ben Bernanke fixes mark-to-market rules, this positive prophecy for financials and the market in general will be fulfilled.

"Everything rides on Washington," said Cramer.

Comfort in Chocolate: Hershey's (HSY)

In the dismal economy, many people may be indulging in a favorite comfort food and are willing to buy top quality brands of chocolate. Private labels are not successfully taking share from Hershey's, a name synonymous with chocolate; Hershey's exposure to private labels is a mere 3% of revenues and the company holds 36% market share. Although there has been some slowing down of sales, low-cost advertising may sweeten Hershey's prospects and help fend off competition from Mars; Hershey expects to increase spending on advertising by 20% in 2009. The Mars-Wrigley merger might be slow to integrate and may give Hershey an edge.

The company beat The Street's estimates by 5 cents and saw sales for its main brands rise by 8%. Even price increases didn't threaten sales. The company gave growth guidance of 2% to 3%. Cramer thinks the 4% dividend is safe because of the company's strong cash flow. While it is trading at 15.8 times earnings, Hershey is just a tad above its 52-week low, and Cramer thinks it is a buy. Analysts have been negative, but Cramer sees room for an upgrade. Rumors of a merger with Cadbury may or may not be true, but a merger could bring the stock from $30 to $35, according to Cramer, and will help the company diversify overseas.

The Rally Will Continue: UltraShort Financial Proshares (SKF), Texas Instruments (TXN), Research in Motion (RIMM), Analog Devices (ADI), Skyworks Solutions (SWKS), Chevron (CVX), Citigroup (C), Morgan Stanley (MS), Goldman Sachs (GS)

Cramer attributed Tuesday's rally to overwhelming bearish sentiment that moved the market up. He thinks this rally has legs gave several reasons:

The uptick rule may be reinstated: this is good news for financials and bad news for UltraShort Financial Proshares which has been instrumental in decimating values of financial stocks.

Texas Instruments said inventories are low and demand for 3G cell phone components are increasing. This information is good for Research in Motion, Analog Devices and Skyworks Solutions.

The bearish news on oil is overdone. This could actually be good for the sector, along with the fact that Chevron is doing well.

Ben Bernanke may adjust mark-to-market accounting. This reform will help financials. Also, Citigroup's quarterly numbers will mean Morgan Stanley and Goldman Sach's data will look even brighter.

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Comments

[JonnyUtah:]

Cramer just said two shows ago during his doomsday scenario... "Bank of America (BAC): Cramer doesn't see why this bank shouldn't join Citi and plunge to $1. "

Cramer is such an emotional investor. Don't listen to him. He takes credit when he gets something right and blames Obama if his pick was wrong. He may be partially right but Obama didn't get us into this although everyone expects him to get us out yesterday.

Mar 11 12:31 PM

[ATLBob:]

Cramer has the same dedication and attention span related to any individual stock as a four year old does when watching a 30-minute cartoon show. This is OK as long as you remember that Cramer (who is a really smart and experienced guy in addition to being a CNBC entertainer) is essentially an 'uber trader' and not a long term investor. Unless you define long-term as one week.

Between all of the emotional, bipolar rants on government policy or pleas to buy/sell a particular position or a particular industry, Cramer often discusses some informative and educational investing and trading concepts that can be helpful to those with limited financial experience.

Watch Cramer for the entertainment value and the occasional financial lesson, but don't base investing decisions on what he says. By the time a particular stock is praised or reviled by Cramer, the time to act has generally already passed and the audience needs to remember 'caveat emptor'.

Accept him for what he is (entertainer, educator and trader) and make your own informed, researched investment decisions and only take the risks that are appropriate for your financial position, goals and timeframe.

Mar 11 01:34 PM

[Marianthi:]

I would feel better about Wells Fargo than Bank of America.

Mar 11 02:05 PM

[terryg8:]

Bank of America had been one of the most dependable banks in the US until they decided to do the Government’s bidding and hoped to pick up some assets on the cheap. BAC had suspended all Sub Prime loans in 2001. Their holdings of MBS were minimal. Their reserves were in place. their loan portfolio was conservative, and they were profitable. The buy out of Country Wide and then Merrill Lynch were supremely stupid moves that turned a solvent and well-run bank into a complete mess. For a $28 Billion buy of ML they got at least $118 billion in bad debt. The fact is that BAC is now insolvent, well remain to be an insolvent "Zombie Bank" even with the Government’s guarantee of $95 billion in bad debt, and the equity of the stock holder’s will be wiped out as soon as the US government takes control of what they have ruined and then purchased with TARP funds.

BAC may be a good trade, but it is a terrible investment. They are faced with debt levels they can never repay and assets that are worthless or near worthless. I gave up on them after a 40% hair cut and I sleep much better now. The only investment I can see that would be worse is CITI bank. So trade if you will but do not cry if you get burned in this Ponsi scheme.


Market Cap (intraday)5: Current Price $4.92 share 31.56B
Balance Sheet
Total Cash (mrq): 284.43B
Total Cash Per Share (mrq): 56.688
Total Debt (mrq): 632.95B
Total Debt/Equity (mrq): N/A
Current Ratio (mrq): N/A
Book Value Per Share (mrq): 27.773001


Cash Flow Statement
Operating Cash Flow (ttm): N/A
Levered Free Cash Flow (ttm): N/A

Mar 11 08:18 PM

[Chaim Kimel...:]

Everybody is happy with the recent rally.
Unfortunately my charts are telling a completely different story.
Several key charts and indicators are loosing the support lines, and the trend is overall bearish.
I hope to be wrong, because an uptrend now would be good for all, but unfortunately the charts are seeking for a bottom that is deeper than todays prices and indexes.....
This rally is giving investors the opportunity to sell at better prices, thats all..........

Mar 12 07:23 PM

[Victhom:]

Hey Jim Remember when you are manipulate the markein hedge fund???

You still do...I can prove it with Barclays (BCS)

read yourself...

Cramer is a "MANIPULATOR" read..I prove it...watch date....

seekingalpha.com/artic...

Barclays (BCS): “No! We are talking about a bank that is in grave trouble. No European banks are investible, nor do I want to invest in any of their securities.”

www.thestreet.com/stor...

Cramer: Dangerous Debt
01/26/09 - 09:52 AM EST

Random musings: Barclays(BCS Quote - Cramer on BCS - Stock Picks) makes it? They actually didn't blow up? It's interesting to see what happens to a bank when it reports decent numbers. It can go higher.

Now this....

seekingalpha.com/artic...

Barclays (BCS): “Such a sell it's scary…”???

NOW CEO OF BARCLAYS JUST SAID THIS...
"We have committed to recommencing dividend payments during the second half of 2009. Thereafter, and as
previously announced, dividend payments will be made on a quarterly basis. We will set out our dividend policy
at the Annual General Meeting in April."John S.Varley

BANK OF AMERICA TRADE AT $6.00 US now without DIVIDEND FOR 3 years...and you put Barclays down with dividend coming....

WATCH YOU JIM ON THIS SHOW IS BETTER...LOL

www.thedailyshow.com/f...

Mar 13 02:41 PM