Cramer's Mad Money - Buy What Obama Hates (2/2/10)

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Includes: ANTM, BAC, BWEN, COF, FLR, GS, HPQ, HUM, JPM, NFLX, QCOM, SHAW, UNH, URS, WDC
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday February 2.

Goldman Sachs (NYSE:GS), JP Morgan Chase (NYSE:JPM), United Health (NYSE:UNH), Humana (NYSE:HUM), Wellpoint (WLP), Capital One Financial (NYSE:COF), Bank of America (NYSE:BAC)

Cramer devised a new investment strategy around Obama. After Goldman Sachs (GS) and JP Morgan (JPM) rallied for the second consecutive day following last week's threats against the financial sector, Cramer realized that the President's bark is worse than his bite, and a good way to play Obama's vitriolic rhetoric against Wall Street is to buy whatever sector Obama is currently attacking, because it is destined to rise again once the pressure is off.

Not long ago, it seemed that the healthcare sector was moribund given Obama's proposed healthcare reforms. HMOs United Health (UNH), Humana (HUM) and Wellpoint (WLP) fell double digits, but since healthcare reform has been stalled, they have rallied to, in some cases, double the amount they fell.

A similar phenomenon occurred with Obama's CARD act which was feared to be bad for the credit card companies. Bank of America (BAC) and Capital One Financial (COF) fell dramatically as the legislation was signed into law, but since the provisions are less damaging that initially feared, Capital One Financial has since rallied 83% from its lows.

Cramer would go ahead and buy any sector Obama hates. This time, it's the banks.

Is Qualcomm (NASDAQ:QCOM) Finished?

Qualcomm (QCOM) did it again. The stock delivered disappointing guidance for the second quarter in a row and dropped 14% on Thursday and fell even further on Friday. After messing up two times, one could conclude that Qualcomm is finished, even though it plays an integral role in the mobile internet tsunami.

The charts, however, tell a different story. While the stock fell far away from its 200 day moving average on Thursday, the trading volume continued to decline. Monday, the stock started to perk up a bit, indicating that it had bottomed. However, according to technical analysis, if Qualcomm drops below $38.50, it will probably plunge lower than that.

In spite the rosier picture the technicals paint, Cramer still thinks Qualcomm is guilty until proven innocent. He says he needs to see a couple of good quarters before he is prepared to bring Qualcomm out of the doghouse.

The Best Play on the Budget: URS (NYSE:URS), Fluor (NYSE:FLR), Shaw Group (NYSE:SHAW)

While not too long ago the investing ethos was to move away from companies heavily levered to the U.S. economy, now it looks like industrials that are overly dependent on China are taking a hit. Following Obama's budget, Cramer thinks the time for nuclear energy has come, particularly since the President unveiled a nuclear loan guarantee plan of $54 billion dollars, a proposal that is expected to garner bipartisan support. URS (URS) is heavily levered to the U.S. economy, but that is okay, given that it is liable to benefit from stimulus spending. URS, which recently acquired Washington Group, will benefit from any nuclear power plants constructed in the U.S. and is heavily exposed to nuclear energy. Shaw Group (SHAW) is a company most often associated with nuclear power, but Cramer thinks the stock is overheated right now, while URS trades at 12.7 multiple with a 10% growth rate, similar to Fluor (FLR).

In addition to nuclear energy, URS is diversified into the transportation and defense sectors, both of which are going to benefit by budget increases of 2% and 3% respectively. The company has a $17.9 billion backlog which is 4.7 times its market capitalization, which Cramer thinks is a "huge" ratio and concluded that URS is the best play on Obama's budget.

Mad Mail: Hewlett Packard (NYSE:HPQ), Netflix (NASDAQ:NFLX), SanDisk (SNDK), Broadwind (NASDAQ:BWEN)

When one viewer complained about Hewlett Packard's (HPQ) customer service, Cramer said he thought the bad experience was an isolated one and praised CEO Mark Hurd. Cramer told another viewer that Netflix (NFLX) is a winner. Concerning SanDisk, Cramer said, "When they didn’t deliver a big upside, and then when they didn’t give a big upside tempo guidance …the stock got killed… I am done liking SanDisk.” Finally, Cramer said not to give up on Broadwind because Obama might get behind wind power and the stock is too cheap.

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