Jim Cramer's In-Depth Stock Picks 7/7

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Friday July 7. Click on a stock ticker for more analysis:

Getting Defensive : Pepsi (PEP), Genentech (DNA) AAR (AIR), and Alcan (AL)

In addition to reporting sluggish employment numbers, Cramer notes that companies such as 3M (MMM) and Advanced Micro Devices (AMD) announced that their earnings may be on the low side this quarter. He recommends defensive stocks, which thrive even when the market is down. Pepsi has recently undertaken a big buyback scheme, has increasaed value per share by decreasing its number of shares, and is expected to report solid numbers on Monday. Two of Pepsi's products, Gatorade and Frito-Lay, have also been doing well. Cramer is bullish on Genetech, because it is at the head of the biotech rally, and the FDA has recently given the thumbs up to its new drug, Lucentis. For those who prefer aggressive plays, Cramer suggests Alcan which is an attractive takeover option, and AAR, which reports it numbers on Wednesday; "The strength we've seen in the airlines should translate directly into an upside surprise for AAR," Cramer said.

Hogs Get Slaughtered: Smithfield Foods (SFD)

When Cramer warns that "Hogs get slaugtered" it is usually a caveat for greedy investor, but in the case of Smithfield Foods, which is a huge pork producer, this is a good thing. The company shows no more mercy for its competition, according to Cramer, than it does to its pigs; "They kick competitors when they're down. When they see weakness in a company, they go for blood," he said. SFD's purchase of Sara Lee's (SLE) European meat business was a "steal"; taking advantage of SLE's desperation, they were able to pay $575 million rather than $900 million. SFD also purchased ConAgra Foods' (CAG) Cook's Ham division, which increased in value from $276 million to $330 million. Cramer believes that SFD will continue to buy more of CAG's divisions.

Isn't it Ironic?: J.C. Penney (JCP) and Abercrombie & Fitch (ANF)

Cramer notes the irony that, while J.C. Penney reported great numbers, its stock is down, and when ANF admitted to a 4% decline in same store sales, its stock went up. He explains that this is due to expectations; investors know that J.C. Penney is a good company, so it experienced no bounce from its solid numbers. However, those who invest in ANF realize that it is not doing well right now, and are value investors who are holding onto the stock for the long term. Cramer applauds this move, because, in spite of low same-store sales, ANF's guidance is constant, it is not overloaded with inventory, and has a lot of potential with the Hollister brand, which is "the biggest force in teen retail."

CEO Interview: Myron Ullman, J.C. Penney (JCP)

When Cramer asked Myron Ullman to account for the company's fantastic numbers, he responded that JCP has been growing consistently and is marketing brands to suit various tastes and lifestyles. Cramer pointed out that the company is thriving in spite of high gas prices, and Ullman answered that, with 18 merchandise categories to choose from, going to J.C. Penney is a great opportunity for one-stop shopping.

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