Cramer's Mad Money - A Flu Shot Against Corporate Swines (11/9/09)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday November 9.

Duff & Phelps (NYSE:DUF)

With financial scandals reaching the headlines, closer monitoring is needed to ensure more corrupt schemes don't thrive amid collective negligence. Financial valuation firm Duff & Phelps (DUF) is doing important work. Cramer notes the company also benefits from bankruptcies and reorganizations, which provide multi-year earnings. With more and more hedge funds nervous about future investigations, Duff & Phelps works as a third party in the process of valuation, and can provide hedgies an alibi if there is ever a scandal.

Duff & Phelps gives funds a stamp of legitimacy, and operates a boutique investment banking division which is getting more business from the increase in M&A activity. The company provided its services to 12 of the 25 largest hedge funds in 2008 and 13 of the 25 largest private equity firms. The Congressional Oversight Panel on TARP used reports from Duff & Phelps, and the company also advised the government in the Lehman Brothers bankruptcy. In spite of all this, Cramer thinks DUF is cheap and it trades at just 14 times 2010 earnings, in spite of its impressive 25% growth rate.

A secondary offering has been holding the company back, but now that the offering is out of the way, Cramer thinks the stock, which he would recommend buying up to $16.50, is "ready to run."

“This company is the antidote to corporate swagger,” Cramer said, “the swine-flu shot against corporate swines.”

5 Stocks for the Next Rally: Goldman Sachs (NYSE:GS), Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), Google (NASDAQ:GOOG), Apple (NASDAQ:AAPL)

With 35 trading days left until the end of the year, the market has entered a "positive and delicious void." With no earnings, Fed announcements or other data that could feed the bears, there are no longer any obstacles to a bull run which may happen as hedge funds pile back into their favorite stocks before the year's end. Cramer would trade this potential rally with Apple (AAPL), Google (GOOG), Goldman Sachs (GS), Wells Fargo (WFC) and Bank of America (BAC).

In spite of Goldman's stellar performance, some are skeptical about the company's valuation and its lack of a catalyst to propel it higher. However, Cramer thinks Goldman could rise 15 points as money managers pile back in. He isn't worried about equity offerings at Wells Fargo and Bank of America, because they "can pay back TARP and ramp right to 52-week highs.” Cramer thinks estimates for Google and Apple are too low, the companies are enjoying both cyclical and secular gains, and set a price target of $300 for Apple and $700 for Google. “These five stocks have been stuck in neutral,” Cramer said. “I think they’re about to switch to overdrive.”

Dollar General's IPO and Family Dollar (NYSE:FDO)

Dollar General Stores discounts items it sells to the public, so why isn't its IPO a bargain? Cramer doesn't find fault with Dollar General's merchandise, but thinks competitor Family Dollar (FDO) is a better stock because Dollar General's IPO is too expensive. Dollar General's IPO, which will trade under the symbol DG, is priced between $21 and $22, which gives it a 7.7 multiple compared to Family Dollar's 5.9 multiple. While Dollar General might deserve a higher multiple, 30% higher than Family Dollar is a bit rich. Cramer is also leery because he sees insider selling; majority shareholder KKR Financial Holdings wants to get rid of a third of the shares being sold. The $3.7 billion debt is also a reason to stay away. If the IPO were at $19, Cramer would recommend Dollar General, but over $21, he says, "I think you could be robbed."

Mad Mail: American Capital Agency (NASDAQ:AGNC), Fuqi International (OTCPK:FUQI), Genomic Health (NASDAQ:GHDX), Berkshire Hathaway (NYSE:BRK.B)

Cramer devoted part of Mad Mail to discussing stocks that stumped him during previous lightning round segments. He thinks American Capital Agency's 19% dividend is a bit steep, and the stock could be crushed if the Fed increases interest rates. Fuqi International is a good speculative play on the Chinese middle class. Even though it is up 580% since March, the jewelry maker trades at just 8 times 2011 earnings. Cramer likes Fuqi's balance sheet and says it reported "a pretty solid quarter."

Cramer discussed Genomic Health (GHDX), a "very speculative cancer diagnostics play" which creates genomic-based lab services that enable treatment to fit the individual patient. Many of its treatments are covered by health insurance, and a new test for colorectal cancer is expected in 2010. Cramer would wait for news from the analyst meeting on Thursday November 12 before deciding whether or not to buy.

A viewer asked if Berkshire Hathaway is a buy on its 50-for-1 split, and Cramer replied: “I think that Berkshire Hathaway is still a great investment ... and I think that you should buy this stock and put it away.”


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