Cramer's Mad Money - Anatomy of a Tech Rally (3/26/09)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday March 26

Best Buy (NYSE:BBY), Corning (NYSE:GLW), Taiwan Semiconductor (NYSE:TSM), Xilinx (NASDAQ:XLNX), Nokia (NYSE:NOK), Jabil Circuit (NYSE:JBL), Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), Research in Motion (RIMM), Hewlett-Packard (NYSE:HPQ), Intel (NASDAQ:INTC), Microsoft (NASDAQ:MSFT), Qualcomm (NASDAQ:QCOM), EMC (EMC), IBM (NYSE:IBM), Marvell Technology (NASDAQ:MRVL)

Cramer analyzed Thursday's tech rally; the main ingredient was a buying war between mutual funds which are bullish on tech and hedge funds, which have hated tech and were scrambling to cover their shorts. The whole sector is up, including mediocre tech names.

There were fundamental reasons for the rally as well: inventories are low after many companies, such as Best Buy, Corning, Taiwan Semiconductor and Xilinx underestimated demand, Nokia and Jabil Circuit reported good numbers. Weak dollar plays are the rage, and this was good news for Hewlett-Packard, Intel, Microsoft and other techs with significant overseas exposures. Also, valuations for these stocks as well as Qualcomm, Hewlett Packard and EMC are at historic lows. Cramer added IBM and Marvell to the list of tech stocks the hedges are going to buy.

Callers' Questions: Suncor Energy (NYSE:SU), Chevron (NYSE:CVX)

On news that Suncor is buying PetroCanda, Cramer says he prefers Chevron and doesn't think it is worthwhile for Suncor to buy a shale sand company:"They require oil to be $80, $90 before they make big money." Chevron, on the other hand, has a clean balance sheet and steady growth. Cramer told another caller that he has full confidence in Sheila Bair and the FDIC.

Sell Block: State Street (NYSE:STT), Bank of New York Mellon (NYSE:BK)

Cramer is taking State Street and Bank of New York Mellon off out of the Sell Block, since these two banks "could be the biggest winners." A policy of forebearance and a relaxation of mark-to-market rules will be good news for these banks which don't have mortgage exposure, were unfairly punished and have not rallied yet.

In spite of the downturn, Bank of New York Mellon is actually doing well and handles the government's transactions. State Street stores money for funds and 35% of its revenue comes from the very steady business of servicing fees. Cramer would not buy these stocks on Friday, because he thinks Obama's TARP meeting might temporarily end the bank rally, but he would buy these stocks on weakness Monday.

Johnson & Johnson (NYSE:JNJ)

While Cramer has never been and advocate of a buy and hold strategy, Johnson&Johnson is worth hanging on to, because it is a top quality company which has a history of dividend increases; it made an 11% hike in 2008. The company derives 49% of its revenues from overseas, so it will fare well in the weak dollar climate. Cramer likes its acquisition of Mentor and Omrix and while two drugs will lose patent protection this year, there are more drugs in the pipelline. JNJ has fallen from $72 to $52 and its dividend is 3.5%. Cramer would buy it on the way down but would get out if it ceases to work.

Mad Mail: Terra Nitrogen (NYSE:TNH), Diageo (NYSE:DEO), Constellation Brands (NYSE:STZ), Nucor (NYSE:NUE)

Cramer told one viewer that he would recommend Terra Nitrogen rather than an agriculture ETF, especially since Terra has a good dividend. The thesis that alcohol holds up well during a recession did not work this time, Cramer told another viewer who hold shares of Diageo; Constellation's pre-announcement was proof that the thesis failed. Cramer justified his Nucor call, and said that it doesn't have the pension problem U.S. Steel does. While Cramer admitted it is a bit expensive at it s current level of $40, he thinks the Nucor is well-run.


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