Jim Cramer's Mad Money In-Depth Stock Picks 7/17

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Monday July 17. Click on a stock ticker for more analysis:

Cramer's Litmus Test: Nabors (NBR) and eBay (EBAY)

Cramer has designed a litmus test to determine which stocks are worth keeping and which should be dumped. First, he suggested looking at the stock's sector, comparing its price with similar stocks, checking how well the company is run, and deciding if it has a future. His first example was Nabors, which is down 21% and is in the strong oil sector, but is also tied up with natural gas, which has declined terribly. However, the stock is cheap and Nabors' CEO, Eugene Isenberg, is one of the best, according to Cramer. Nabors passes the test, since Cramer believes that natural gas should be up again in hurricane season. On the other hand, Cramer wouldn't touch eBay, because he believes the company is not well-run, has little growth-potential, and is too expensive a stock. Moreover, Cramer remarks that e-commerce is down, and such internet stocks have little competitive defense.

Absolute Value: Home Depot (HD) and Lowe's (LOW)

Cramer has a formula to determine whether or not a stock is cheap. Many investors talk about HD and LOW as being "cheap stocks," but Cramer suggests looking at the S&P 500. Although both companies' multiples are below the S&P's multiple at 16 (HD is at 12 an LOW is 14.8), Lowe's is actually a cheaper stock, because it has a higher growth rate with more potential to expand, better margins and solid management. Therefore, in spite of the numbers, Cramer concludes that Lowe's is cheaper than Home Depot.

A GE-ocentric Universe: General Electric (GE), DuPont (DD), ABB (ABB), IT Group (CIT), Boeing (BA), Whirlpool (WHR) Varian Medical Systems (VAR), China Medical Technologies (CMED), Vesta and Gamesa

When GE reports its earnings, the whole market is affected, since GE is one of the world's most diversified companies. GE's report came out last Friday, and Cramer suggests looking for pin action; his rule of thumb is that if GE reported success in one area, similar businesses will do well, and the opposite also applies. For instance, Dupont (DD) should be avoided because GE plastics were weak. GE reported gains in infrastructure, so Cramer recommends buying ABB (but to wait three days). Other good buys based on GE results are CIT, BA, WHR, and VAR. The wind power business should be expanding and Cramer touts Vesta and Gamesa. Cramer suggests getting rid of CMED, since GE's healthcare in China was not strong.

CEO Interview: Kirk Benson, Headwaters (HW)

Cramer asked Benson why his stock is considered low and he replied that the company has implemented some cost-efficient improvements and that he was "happy with our funadmental businesses" in spite of the pressure of high oil prices. HW is at a 52-week low, and Cramer wanted to hear that it was extremely cheap, but he decided that he is not bullish on the stock.

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