Cramer's Mad Money - How Do You Spell Recovery? (8/5/09)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday August 5.

LUVMW Spells Diversification: Pepsico (NYSE:PEP), Procter & Gamble (NYSE:PG), Schlumberger (NYSE:SLB), Devon Energy (NYSE:DVN), SPDR Gold Shares (NYSEARCA:GLD), Agnico Eagle Mines (NYSE:AEM), Randgold Resources (NASDAQ:GOLD), CPLF Energia (NYSE:CPL), Cemig (NYSE:CIG), TransCanada (NYSE:TRP), StatoilHydro (NYSE:STO)

There are many theories circulating about the kind of recovery the economy will have; Cramer says that since there is no way of knowing how the economy will bounce back, the best bet is to stay diversified, and he recommended a group of stocks that will fit every scenario.

An "L" shaped "recovery" is not a recovery at all, but a rapid decline followed by steady depressed performance. Cramer says very few people are so bearish as to suggest that the "L" scenario will happen, but just in case, Pepsi and Procter & Gamble would be the stocks to buy.

A "U" indicates a "gentle, soft recovery," and if this is happening, we are at bottom and are on the way back up. In this scenario, Cramer would buy natural gas stocks Schlumberger and Devon. A "V" shaped recover signals a more dramatic, sudden recovery which would mean rapid gains in housing and autos,and would result in strong performances by Ford, Emerson Electric and Nucor.

Cramer isn't sure what stocks to recommend in a W shaped recovery, a decline followed by a recovery, and then a repeat of the pattern. In a W-shaped recovery, Cramer admitted he would have to see the first "V" before knowing what to buy. The M scenario is a double decline, which would basically spell doom for most stocks, except for sturdy gold plays SPDR GoldShares, Agnico Eagle Mines, Randgold, and international stocks such as CPLF, Cemig, TransCanada and Statoil Hydro.

“I don’t pretend to know the letter that awaits us,” Cramer said, “but I do know what those letters truly spell. They spell diversification.”

Nordic Oil

This week, Cramer has been in search of investment excursions away from the flat domestic economy. On Wednesday, he donned a horned Viking hat and discussed Norway's strong, stable economy with budget and trade surpluses and countless barrels of oil. He recommended Statoil Hydro, the largest offshore driller in the world and Europe's sixth largest crude oil company. Statoil keeps production costs low while having more exposure than its peers to rising oil costs. The company reported 4% volume growth through 2012, 30 new discoveries in 2009 and pays a 4% dividend. Cramer says Statoil is a buy for anyone who believes oil is headed "even just slightly higher."

Tellabs: CEO Robert Pullen (NASDAQ:TLAB)

Cramer has been talking a lot lately about the mobile internet revolution. While that is good news for stocks like Apple and Research in Motion, Cramer has been on the lookout for more speculative names that have more upside. While Tellabs is up 45% since November, he thinks the stock has "more room to run," especially given its better-than-expected earnings and growing orders. The company also holds $3.12 in cash per share as a cushion, derives 40% of its revenues from outside the U.S. and is expanding in Brazil and China. Cramer gives the stock a triple buy under $6 a share.


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