Cramer's Mad Money - The Government Is a Poor Man's Berkshire Hathaway (3/8/10)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday March 8.

The Poor Man's Berkshire Hathaway (NYSE:BRK.A), AIG (NYSE:AIG), Fannie Mae (FNM), Freddie Mac (FRE)

Cramer thinks the Federal Government is a poor man's Berkshire Hathaway (BRK.A). Why? Their holdings are eerily similar, even though the government built its "portfolio" through bailouts and is divesting while Warren Buffett's company continues to invest. The government has “more hidden value than people think,” Cramer said. “I bet that Warren Buffett wouldn’t mind cherry-picking some divisions, including the one that AIG (AIG) still has to sell.”

With the auto industry revving up again, government-owned General Motors might be a perfect fit for Berkshire Hathaway, which has invested in fuel efficient cars in China. Cramer thinks AIG's MetLife deal is a winner, and the cash generated by Fannie (FNM) and Freddie's (FRE) transaction fees might offset their "nightmarish" mortgage portfolios. Cramer suggests the government set up a holding company to sell these assets at the highest possible prices; “In fact,” Cramer said, “the government owes it to the taxpayers to do just that.”

Bank of America (NYSE:BAC), Alcoa (NYSE:AA), Ford (NYSE:F), Wells Fargo (NYSE:WFC), American Express (NYSE:AXP), JP Morgan (NYSE:JPM), Caterpillar (NYSE:CAT), Office Depot (NYSE:ODP), International Paper (NYSE:IP), Joy Global (JOYG), 3M (NYSE:MMM)

Things looked really bad at the beginning of 2009, until March when the market rallied. On the first anniversary of the rally, Cramer discussed the state of the market in the past year. He expressed bafflement that investors are sitting on the sidelines rather than taking advantage of the bull market. Since last year, 17 of 30 Dow Stocks are up, led by Bank of America (BAC), Alcoa (AA), American Express (AXP) and JP Morgan (JPM). In the S&P 500, 290 are outperforming, led by Ford (F), Office Depot (OD) and International Paper (IP). The Russell 2,000 for small cap stocks is up 90%.

Obama has cooled off much of his anti-Wall Street rhetoric and healthcare stocks are up because of the delay in expensive reforms. In spite of fears that China would put a halt to its assistance, the Chinese stimulus is here, and Joy Global (JOYG), 3M (MMM), Caterpillar and other industrials should benefit.

Last summer housing bottomed, REITS have issued secondary offerings and things are generally improving. One ignored sector is retail, which has been peforming well, but investors are still a bit phobic. Cramer encouraged viewers to set aside their worries and buy stocks.

“So on this, the anniversary of the rally,” Cramer said, “I am telling you it is still not too late to get in the game.”

Skechers (NYSE:SKX), Deckers (NASDAQ:DECK)

Cramer likes Skechers (SKX), and not just because it sounds like Deckers (DECK). Shoe companies are "smoking hot," and Skechers just announced a "hairless" (Cramer's word for "flawless") quarter with 6 cents above the 52 cent earnings estimate, a 30% rise in sales year over year, and a double-digit increase in same store sales both here and abroad. Skechers has become a master of controlling its inventory, which was reduced by 14%.

Skechers' Shape-Ups walking shoes and Tone-Ups sandals help improve posture, muscle tone and make legs look shaplier. Even though it is only a few points off its 52-week high, Cramer would buy the stock with a multiple of 11 and a long-term growth rate of 15%. Cramer says this is a case when it is okay to buy high and sell higher.

CEO Interview: Charles Davidson, Noble Energy (NYSE:NBL), Xcel Energy (NYSE:XEL)

Natural gas scored a major victory in Colorado where utility company Xcel (XEL) reached an agreement with the governor to cut its coal emissions by a third by 2017 and to make the transition to natural gas. This may be a harbinger for good things to come for the bridge fuel and is good news for Noble Energy (NBL) which has sizable natural gas reserves in Colorado and around the globe.

Noble Energy's operations are evenly divided between the United States and the rest of the world. Davidson says that Xcel Energy's reduction of coal emissions will start a trend around the country, and he is hopeful that more people will see the environmental and economical advantages of natural gas over fossil fuels. Cramer discussed Noble's partnership with Israel, which recently discovered huge reserves of natural gas. Noble Energy says the key is to recreate infrastructure to accommodate the new fuel, and the U.S. can use Israel as a guide for this transition from conventional fuels to natural gas.

Cramer thinks Noble Energy is inexpensive and would buy.


Jim Cramer was up 31% in 2009. Click here now to trade alongside him.

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