Cramer's Mad Money - Ranking the Banks (5/18/09)

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Includes: BAC, BBT, COP, DGI, GS, JPM, LOW, SHW, SMG, STT, USB, WM
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday May 18.

Goldman Sachs (NYSE:GS), JP Morgan Chase (NYSE:JPM), State Street (NYSE:STT), BB&T (NYSE:BBT), US Bancorp (NYSE:USB), Capital One Financial (NYSE:COP)

The leaders of the financial sector are still Goldman Sachs and JP Morgan Chase, but while it is worth holding these stellar names, Cramer would search for banks with more potential upside. Cramer's top pick is State Street, a custodial bank which holds funds for other banks and is not affected as dramatically by the economy. In second place is BB&T, which raised capital even though it was not desperate and is preparing to make some acquisitions. U.S Bancorp has raised $2.5 million and is a bit of a speculative risk, because it depends on a housing turnaround. Cramer's least favorite financial right now is Capital One, which may be the victim of Obama's proposed credit card legislation.

Lowes (NYSE:LOW), Scott's Miracle Grow (NYSE:SMG), Sherwin Williams (NYSE:SHW)

Cramer says Lowe's conference call showed signs that housing is in a "turnover phase" when buyers look for bargains and it is actually cheaper to buy than rent. This turnover phase is followed by a recovery when housing prices finally stabilize. On the housing turnover, Cramer would buy Scott's MIracle Grow and Sherwin Williams as people give their homes makeovers before turning them over. Paint and lawn supplies will be in demand, and Sherwin Williams is a buy in spite of the hike in its share price. Scott's Miracle Grow benefits not only from the housing turnover, but the growing popularity of gardening.

Waste Management (WMI)

Waste Management is one of Cramer's "accidental high yielders" and is actually seeing double digit earnings growth during the downturn. With a dividend of 4.2% and a 10.3% increase in its stock price since March, Waste Mangement has a good reason to expect more upside. While volumes have decreased, collections have increased by 8%, and are expected to continue growing as housing recovers. Cramer thinks Waste Management will make more acquisitions and increase its dividend on June 19, so he would buy before May 27 to qualify for the yield increase.

Mad Mail: Bank of America (NYSE:BAC), DigitalGlobe (NYSE:DGI), MFS Special Value Trust (NYSE:MFS)

Cramer thinks the Bank of America/Merrill Lynch merger may be better than many expect. In spite of its 13% yield, the MFS Special Value Trust is a complicated stock and Cramer is bearish. He told another viewer the trade in DGI is over, since it was only the benefit from the IPO.

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