Cramer's Mad Money - 5 Reasons Why Warren Buffett Is Stupid (3/2/11)

Includes: BGS, BRK.A, BRK.B, WBC
by: Miriam Metzinger

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

5 Reasons Why Warren Buffett is Stupid: Berkshire Hathaway (NYSE:BRK.A), (NYSE:BRK.B)

Even on a good day with the Dow up 9 points, the press is so unrelentingly negative that Cramer observed that, according to the standards of most people who talk or write about stocks, the sainted stock sage and greatest investor of all time, Warren Buffett "must be the dumbest man on Earth."

Here's why:

1. Buffett says he wants to invest in America. Doesn't he know we don't make anything in this country anymore? That China is much better than we are? He says, "There is a resiliency to the American system." Doesn't he read the papers?

2. Berkshire Hathaway (BRK.A) is looking for an acquisition. Doesn't Buffett know there is going to be a brutal sell-off in stocks? That every stock out there is grossly overvalued? Why is he saying this? Maybe he likes the attention.

3. Buffett says he is optimistic. Doesn't he see that oil and North Africa are both exploding?

4. He is happy with Berkshire's purchase of Burlington Northern. How on Earth can anyone like the rails?

5. Buffett hasn't been around long enough to know how terribly things can go wrong. He is too young to know what happens to stocks

Cramer concluded, "if Warren Buffett is stupid, then fools are making money. Give stupidity a chance."

CEO Interview: David Wenner, B&G Foods (NYSE:BGS)

You don't need to catch a rising star to make a lot of money in this market. Sometimes you have to keep it simple and remember to stay diversified and invest in high yielding stocks. B&G Foods (BGS) soared 20% following a strong quarter with an 8 cent earnings beat, higher revenues and increased gross margins. The company boosted its dividend 24% to 4.7%. B&G is a relatively small company but has visible brands like Ortega and Cream of Wheat. The company buys and revamps tired brands and can cover its debt load well in this low interest rate environment. Because its costs are contained, it can fight the bitter supermarket shelve wars with bigger companies. The stock has gained 52% in just four months.

Cramer asked the CEO how the company created 10% growth in Cream of Wheat, a brand his mother used to buy. David Wenner replied that the company added new flavors and appeal to the brand, thanks to its deal with Cinnabon. The company has also seen better gross margins even in an environment of skyrocketing raw costs because B&G has a long-term position in commodities and has cut costs significantly. Wenner says the company is able to compete with larger companies because they have been more innovative with revamping bands whereas larger companies invest a significant amount of capital in creating new brands. Wenner said with cash flow strong, the company will continue to return money to shareholders with dividend increases.

"This company has the least risk and the most reward, "Cramer said.

CEO Interview: Jacques Esculier, Wabco (NYSE:WBC)

For investors who are going bargain hunting, it is worth looking for stocks that have been undeservedly knocked down. Wabo (WBC) is a high quality industrial that develops technology that fuels the unstoppable 18 wheeler bull market in trucks. Wabco pioneered anti-lock brakes, and will make a lot of money as emerging market countries start to require these brakes in all cars. The company develops products for safety and fuel efficiency. Wabco is up 37% since Cramer got behind it in October and recently reported an excellent quarter in which it beat estimates and raised guidance. However, Cramer warned that the stock is a wild trader and could go down big on a bad day.

"We are inventors," said CEO Jacques Esculier, and added that there isn't much competition since few companies have technology as advanced as Wabco's. The company has seen an amazing recovery in the truck space; in 2009 Wabco lost 60% of its base in Europe which it partly recovered from rising business in emerging markets. Now there is a global push to build new trucks and productivity is up 5.7%. Cramer thinks Wabco is "tremendously undervalued."


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