Cramer's Mad Money - The Diversified Momentum Portfolio (12/6/10)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday December 6.

Jabil Circuit (NYSE:JBL), Weyerhaeuser (NYSE:WY), Noble Energy (NYSE:NBL), Goodrich (NYSE:GR), Wellpoint (WLP)

It is frustrating but it happens too often; stocks roar into their earnings reports, deliver better-than-expected earnings, and then, for mysterious reasons, get hammered after their conference calls. Investors may be tempted to sit on the sidelines after such treatment, but Cramer came up with a list of six stocks worth buying that not only rise into their quarters but stay up after and even go higher.

Cramer analyzed the movement of the S&P500 stocks, only 21 of which remained standing at a level the same or higher than the level going into their bullish quarters. Of these 21, Cramer narrowed down six that were worth buying. Jabil Circuit (JABL) assembles all things tech, and is up 11% since Cramer recommended it in July. It trades at a multiple of 7 and has a 12% growth rate. Weyerhaeuser (WY) is one of Cramer's favorite ways to play the impending housing boom. Noble (NBL) is a strong oil company up 17% since Cramer recommended it. Noble is shifting to become 50/50 natural gas and oil and is expanding production around the world. Goodrich (GR) is a play on the multi-year aerospace cycle and trades at 16 times next year's earnings with a 20% growth rate. Wellpoint (WLP) is Cramer's HMO of choice, and he predicts there will be pressure off the group since the elections. The company trades at a multiple of 8.5 with a double digit growth rate.

These six stocks form Cramer's diversified momentum portfolio; "We will keep coming back to these stocks," he said. "

Wells Fargo (NYSE:WFC), Home Depot (NYSE:HD), Lowe's (NYSE:LOW)

Things are looking up for housing, if Home Depot (HD) and Lowe's (LOW) are any indication. Cramer also pointed to the record pending home sales number. The question is which financial is a buy in a housing comeback, since most banks have damaged portfolios. Cramer thinks Wells Fargo (WFC), the country's leading lender, will continue to lead. Wells Fargo didn't make as many bad loans as competitors and benefited greatly from the Wachovia acquisition.

"It has the legacy inventory and the underwriting capacity to really go to work,” Cramer said, “when the public realizes that rates are done going down.”

Cramer would buy Warren Buffett's favorite bank on the incipient housing recovery.

Mad Mail: Nordic American Tanker (NYSE:NAT), Cisco (NASDAQ:CSCO), Transocean (NYSE:RIG), MEMC (WFR), OptionsXpress (NASDAQ:OXPS), Motricity (MOTR)

Cramer told one viewer that Nordic American (NAT) was a broken stock, not a broken company, but the problem is sector wide "there are just too many ships." Even though Cisco (CSCO) has caught some upgrades, he still won't get behind the stock because it disappointed him two times in a row and has "lost control of its destiny....there are 499 stocks in the S&P 500 I like better than Cisco," Cramer said.

Transocean (RIG) can sustain recovery and is an "excellent company." OptionsXpress's (OXPS) "incredibly huge special dividend" was not unexpected, since the company said it would be returning excess capital to shareholders. Cramer thinks the move is smart and says "the naysayers have been unbelievably wrong" about the stock.

Cramer admits he is baffled about Motricity's (MOTR) decline on Friday; "It is very unnerving...sometimes strange things happen to stocks." Finally, MEMC (WFR) is an inexpensive stock which should see a significant upside next year.

Pessimism Painted by Numbers

"Don't overthink the market," says Cramer. With doom and gloom beginning on Monday over Ben Bernanke's comments on 60 Minutes, the Dow was down only 20 points by the end of the day. Bernanke's comments were not bad news; he simply said he would keep stimulating the economy if jobs didn't pick up. Would a better solution have been for him to say he would do nothing?

Gold and oil have been strong, but why be negative about this trend? Both indicate growth in demand. Cramer denied gold's rise was because of a weak dollar, because the yellow metal has been climbing for a decade, regardless of the movement of the dollar. Housing doesn't seem to be improving. But is it getting worse? Cramer says housing is currently treading water, but looking at pending home sales, the sector will come back before long.

Cramer urged viewers not to be fooled by "pessimism painted by numbers," especially since earnings have generally been strong.


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