Cramer's Mad Money - Semiconductors Are Back (3/17/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday March 17.

Semiconductors Are Back: Taiwan Semiconductor (TSM), Xilinx (XLNX)

It isn't just the Apples and the Googles that are performing well in the tech world; altering his thesis from two weeks ago, Cramer thinks semiconductors are back. This comes after Taiwan Semiconductor's surprise announcement that demand is back while inventories are falling. Xilinx also gave a better-than-expected fourth quarter, and is the semi yet to be discovered. Xilinx's niche is programmable logic devices, of which it controls 51% of the $13.5 billion market. The chief advantage of these PLDs is they can be reused and reprogrammed, and their adaptability saves money. PLDs can be used in a variety of gadgets and electronics. Cramer thinks semiconductors have bottomed and likes Xilinx with a $19 stock price and trading at 15 times earnings.

Off the Charts: Smith International (SII), Schlumberger (SLB), Transocean (RIG)

Looking at Smith International, which has been gradually rising since December, one might suspect the stock is getting ready to break out to the upside. But it won't go far, remarked Cramer, with a terrible balance sheet; the company even needs an additional $365 million by this spring. Transocean, on the other hand, doesn't have quite the debt and trades at a multiple of 4 while Smith is at a rich 10.8.

Amazon (AMZN), Freeport McMoRan (FCX), Toll Brothers (TOL), Wells Fargo (WFC), Bank of America (BAC), Citigroup (C), Illinois Tool Works (ITW), Nucor (NUE)

With a floor in the market after the Dow's 179 point gain, it seems unlikely we are headed for a Great Depression II, but a floor is not a bottom, cautioned Cramer. Retail, housing, banks and commodities look better than they have for a long time, Amazon, Freeport and Toll Brothers rallied and Bank of America and Citigroup have bottomed. Obama's revised, more Wall-Street friendly message should encourage lending and investing alike. One thing that needs to happen before the Dow can again reach 8,000 is the lowering of earnings estimates. In every sector, these estimates are too high, and Cramer thinks companies should follow the example of Illinois Tool Works and Nucor and lower estimates. Once these estimates are low enough to beat, real recovery will begin.

Mad Mail: Nucor (NUE), Altria (MO)

On Nucor's announcement that it was expecting to lose 55-65 cents a share, Cramer warned a viewer the dividend is not safe. On a dramatic rise in cigarette taxes, Cramer said he could understand why one viewer said he was selling Altria.

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Comments

[dsrtwriter:]

I think Cramer is jumping the gun on semiconductors.He is all over the place. A few weeks ago he hated them. Things don't change that fast, and this may well be a sucker rally. We need to retest Dow 6500 -6700 before I will feel confident in this market.

Mar 19 12:58 PM

[ScroogeMcduck:]

Scrooge likes gold

Mar 20 09:00 AM

[bassmaster17:]

Will Nucor really be at these levels five years from now...if so...buy guns and goats, cause it's gonna be bad.

Mar 21 02:47 AM