Cramer's Mad Money - All The Black Holes Have Been Filled (6/1/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday June 1.

The Seventh Black Hole: Fannie Mae (FNM), Freddie Mac (FRE), GM (GM), Ford (F), AIG (AIG), Citigroup (C)

On September 11, 2008, Cramer said there were seven black holes in the market (Fannie Mae, Freddie Mac, GM, Ford, AIG, Citigroup), and when these black holes are filled, the market will recover. With GM's bankruptcy, there is no hole left to suck up prosperity, and Cramer declared, "As of today, the worst is behind us."

NetApp (NTAP), Data Domain (DUUP), EMC (EMC)

Cramer says few stocks are obvious buys, but NetApp made an unusually bullish move on its bid to pay a 40% premium for Data Domain; the stock moved up. Usually, when a company makes a bid to take a company over, the share price goes down, but the move up was an unusually good sign that signaled confidence in the company. Only eight of 30 analysts cover NetApp rate it as a buy, and Cramer thinks the tide will turn as this inexpensive stock (trading at a mere 14 times earnings) improves its fundamentals and solves its margin problem. EMC is also bidding, but it doesn't matter if it beats out NetApp, which can also be an attractive takeover itself.

Costco (COST), BJ's Warehouse (BJ)

Cramer compared Costco and its less famous competitor BJ's Warehouse. Costco is located mainly on the East Coast and BJ's is a West Coast outfit whose location gives it exposure to troubled markets in California; however, Cramer says Costco is in danger of saturation and BJ's can open many more stores. While BJ's has met its estimates the last four quarters, Costco has had a 50/50 success rate in this area in the past year. BJ's same store sales grew recently by 7.5% while Costco's same store growth is stalled. Finally, BJ's is cheaper and trades at 14 times earnings while Costco trades at 18. Cramer is bullish on BJ's.

Mad Mail: GM (GM), Sandisk (SNDK)

Cramer says GM's stock is definitely not worth buying now. Cramer removed Sandisk CEO Eli Harari from his Wall of Shame. Harari's crime was having overpaid for an acquisition, but Cramer says demand for Sandisk products high enough to merit forgiving Harari.

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Comments

[KFC007:]

GM is mirror for the rest of US manufacturing industry. It may die a slow death if nothing radical is done to revive, modernize, reengineer, and make it globally cost competitive. GM also shows that if we just insist we are the largest and refuse to adapt and change, we fall as did the empires and their rulers. GM's slow march to death started 25 years ago. Itcould have been prevented if it had leaders with business acumen and unions genuinely interested and committed.

Jun 02 08:18 AM

[geoinvest:]

I am a bit puzzled by the observation of seven black holes. There only appear to be six listed.

Jun 02 09:39 AM

[J M Keyes:]

The seventh is Lehman Bros.


On Jun 02 09:39 AM geoinvest wrote:

> I am a bit puzzled by the observation of seven black holes. There
> only appear to be six listed.

Jun 02 10:47 AM

[Maxe Paul:]

"Cramer says GM's stock is definitely not worth buying now", wow this guy IS A GENIUS, LOL

Unfortunately the biggest black hole is the one between Cramers ears..................... it's not likely to be filled any time soon!

Jun 02 12:00 PM