Cramer's Mad Money - Housing Has Bottomed (6/16/09)

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Includes: BAC, FCX, GLD, JPM, PHM, QLGC, SEPR, SWN, TGT, TOL, WFC, WMT
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday June 16.

Housing Has Bottomed: Wells Fargo (NYSE:WFC), JP Morgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), Pulte Homes (NYSE:PHM), Toll Brothers (NYSE:TOL)

Cramer declared a housing bottom on Tuesday, fourteen days before his predicted bottom on June 30. The housing starts number indicates that demand is coming back as inventory is thinning out, and homebuilders feel confident that they can get to work again. Even the most troubled areas of the country showed improvement. There was a 17% increase in housing starts since May, especially in the South and the West which were hit hard by the housing crisis. The increase of sales is an indication is the worst is over, and while some feared rising interest rates would hamper a recovery, they are still low compared with last years figures and tax credits for first-time homeowners can offset higher rates.

Cramer would hold off buying homebuidlers; he doesn't expect prices to rise immediately, but would instead buy banks with significant mortgage exposure like Wells Fargo, JP Morgan and Bank of America.

Off the Charts: Sepracor (SEPR)

The charts paint a rosy picture of Sepracor; the stock has broken its 200-day moving average and year-long downtrend line. Technician Rick Bensignor notes fundamentals paint a different picture; its leading drug, Lunesta, is losing market share, two of its drugs are losing patent protection and it has a paucity of new projects in the pipeline. Cramer disagrees with Bensignor, and thinks Sepracor is not headed up.

Target (NYSE:TGT) vs. Wal-Mart (NYSE:WMT)

On Tuesday, Goldman Sachs upgraded Target and downgraded Wal-Mart. However, Cramer thinks the decision had nothing to do with the fundamentals of the companies, but with consumer sentiment. Those who feel the economy is recovering favor the more upscale Target, while those who believe the recession will continue would buy Wal-Mart. The fact that Target is up 16% and Wal-Mart has declined 11% is an indication of the general sentiment that the economy is recovering. While Cramer favors Target, he would stay away from retailers in general right now because of rising gas prices.

Mad Mail: Qlogic (NASDAQ:QLGC), Freeport McMoRan (NYSE:FCX), SPDR GoldShares (NYSEARCA:GLD), Southwest Energy (NYSE:SWN)

When a viewer asked Cramer about QLogic, he admitted he needed to do some more research before commenting on the stock. He advised another viewer not to play gold with Freeport, but to buy GLD. When asked about the disparity between the price of oil and the price of natural gas, Cramer said it was the 18 to 1, the widest he had ever seen. He would buy good natural gas stocks like Southwest energy rather the the ETF UNG.

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