Cramer's Mad Money - The New Market Leader (7/8/09)

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 |  Includes: ABT, ANTM, ASNA, BSX, DGX, GILD, GIS, HSY, MDLZ, MDRX, MHS, STJ, WMT
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday January 7.

MedcoHealth (NYSE:MHS), Allscripts-Mysis Healthcare Solutions (NASDAQ:MDRX), St. Jude Medical (NYSE:STJ), Boston Scientific (NYSE:BSX), Gilead Sciences (NASDAQ:GILD), Abbott Labs (NYSE:ABT), Wellpoint (WLP). Quest Diagnostics (NYSE:DGX)

Why is the market in the doldrums? Cramer thinks news of oil manipulation in the oil futures market crushed investor confidence in this market leader. With oil out of its leadership position, tech and financials have to battle it alone, or is there another big new sector? Although healthcare took a beating initially on news of Obama's reforms, it seem that the President's plans are not as draconian many feared. Obama will prefer companies that save money; MedcoHealth brings savings to customers by selling drugs in bulk and has consistent growth. Cramer predicts Medco could jump from $46 to $60 if the sector becomes a market leader.

Quest catches diseases early and makes conditions cheaper and easier to treat while Allscripts digitizes medical records; both companies generate savings. Other healthcare picks include Boston Scientific, Gilead Sciences, Abbott Labs and Wellpoint. Cramer predicts an upside surprise for Gilead next quarter. Unlike oil, healthcare can see significant growth even in a slow economy.

Plus-Sized Profits: Charming Shoppes (NASDAQ:CHRS)

After Dress Barn was purchased at a 20% premium, Cramer thinks it is time to look for the next valuable takeover target. Since America's waistlines keep growing, plus-sized clothing for women, a specialty of Charming Shoppes, is in demand. Cramer says Charming Shoppes is a broken stock, not a broken company, and with Levi Strauss' "turnaround artist" Paul Fogarty at the helm, Charming Shoppes stock has risen 67% and can go higher if the company cuts costs and moves its inventory. While the stock trades at a mere $3, it has $1.32 per share in cash. Revenue and same-store sales declined last quarter, but gross margins improved and operating income was flat. Declining gas prices could help sales, said Cramer, and just a slight improvement in same-store sales could mean a big improvement in earnings. Cramer considers CHRS a speculative stock and would use limit orders when buying.

Off the Charts McCormick's (NYSE:MKC), General Mills (NYSE:GIS), Hershey (NYSE:HSY), Kraft (KFT), Wal-Mart (NYSE:WMT)

Cramer took issue with technical analyst Dan Fitzpatrick, who said that McCormick, which broke out of its 200 day moving average on high volume after trading flat for 8 months, is a buy. However, the fundamentals paint a different picture. While he once thought McCormick was a good defensive stock, Cramer says sales of its spices are declining across the globe. Major supermarkets are stocking less McCormick products and Wal-Mart is promoting its own brand of spices. For investors looking for defensive plays, Cramer recommends buying Hershey, General Mills and Kraft because of their high dividends.

Cramer's Outrage: Oil Futures

Cramer says anyone who claims that oil futures are too big to be manipulated is "full of it" and the oil futures market is a "farce." what is the scandal? Energy traders are required to put down only 10% of a position to make a move that will dramatically affect the market. Case in point; the London trader who pushed crude higher with a relatively small $10 million. Oil's vulnerability to manipulation has been an open secret for years. There has been no change in place because certain traders prefer the status quo; “They’re just too big, and they’re more powerful than the government,” Cramer said, “and they have never yet been defeated.”

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