Cramer's Mad Money - The Best Stock for the Real Estate Recovery (5/30/09)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday May 30.

How to Play the Housing Recovery: Bank of America (NYSE:BAC)

Cramer looks to California for signs that housing is bottoming, since this state along with Florida was the hardest hit by the crisis. The median housing prices are down 36% from a year ago, but have increased for the second consecutive month. Transaction prices are up 49% from 2008 and inventory is clearing out.

Cramer said this is a recipe for a bottom in real estate, and would play the upward trend with Bank of America, which benefits more from the number of transactions than housing prices. A full 36% of Bank of America's mortgages are located in California, and the number is expected to increase. Its Merrill Lynch acquisition has been successful with new management and a streamlining of its workforce. Cramer says that when Bank of America is finished with its secondary offering and paying off TARP, it is "off to the races."

10 Reasons to Hope: J. Crew (JCG), Monsanto (NYSE:MON), NYSE (NYSE:NYX), Procter & Gamble (NYSE:PG), iShares Dow Jones US Real Estate (NYSEARCA:IYR)

Cramer once again addressed the negativity he blames on the media trying to grab the public's attention and urged investors to focus on the positives in the economy:

1. The weak dollar is good. American products become more attractive to overseas buyers if the dollar falls. Cramer noted the market was up 3.6% the past week even a the greenback tumbled.

2. Housing is bottoming. Cramer cited a Wall Street Journal article that said California's housing market is picking up again, and there is a rising demand for mortgages.

3. The consumer is spending. While luxury retailers might not be back yet, consumers are looking for value for their money and are buying at stores like J.Crew, which jumped 26% on Friday.

4. Tech is rallying. It seems that everything tech is winning - another sign that the consumer is alive and well.

5. Bad news isn't killing stocks. Procter&Gamble's stock price wasn't hammered by its lowered 2010 earnings forecast. Monsanto, NYSE, and Coca-Cola also performed well under pressure.

6. Commodities are not driving inflation. Cramer was worried rising oil prices would hurt consumer spending, but this has yet to happen. He added that hedge funds are largely responsible for commodity prices.

7. The market absorbed new bank equity. Even after $70 billion in equity was raised by banks threatened with nationalization, the market still rallied.

8. Foreign markets are thriving. With double-digit growth overseas, how can America sit out the prosperity?

9. Commercial Real Estate is not a disaster. This is contrary to popular belief which holds that this sector is ready to collapse. Cramer said it is actually performing well and he recommends IYR.

10. Mutual funds are attracting investors. While many were sitting on their piles of cash since the crash last fall, mutual funds are seeing an increase in customers.

Cramer's Outrage: Sign the Petition to Reinstate the Uptick Rule

Cramer has spoken many times about reversing the repeal of the uptick rule, which required traders to wait for a stock to tick up in price before they could sell it short. Since the rule was repealed, the shorts have been able to savage stocks and drive prices down to artificially low levels. Cramer urged viewers to visit the SEC website and sign the petition to reinstate the uptick rule.

We Don't Need No Education (stocks)? Strayer (NASDAQ:STRA), American Public Education (NASDAQ:APEI), Bridgepoint Education (NYSE:BPI), Grand Canyon Education (NASDAQ:LOPE), Apollo Group (NASDAQ:APOL)

There is a great debate about education stocks. While some see the recession as an opportunity for companies like Strayer and American Public Education, others are cautious that education companies' use of revenues from tuitions, often paid for by government-sponsored scholarships, might arouse the disapproval of the President, who might come down hard on these companies, particularly because they use these funds for marketing. While the fundamentals of education stocks are sound, Cramer thinks there is a way to invest in the sector and avoid the wrath of Washington.

Bridgepoint Education charges 30% to 50% less tuition, which means it does not derive much of its revenues from government-sponsored scholarships. The company also spends much less on marketing than companies like Strayer and Apollo. Bridgepoint's recent IPO means that it missed the rally in the sector and is up a mere 2% while Grand Canyon has had a run of 70% already. Although investors should do homework on Bridgepoint before buying, it has a great story.


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