Jim Cramer's Mad Money In-Depth, 2/8/08: All You Need is L-U-V

by: Miriam Metzinger

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Friday February 8. Click on a stock ticker for more analysis:

Ambac (ABK), MBIA (NYSE:MBI), Toll Brothers (NYSE:TOL), DR Horton (NYSE:DHI), Pulte Homes (NYSE:PHM), McDonalds (NYSE:MCD), Pepsi (NYSE:PEP), Kohl's (NYSE:KSS), J.C. Penney (NYSE:JCP), Jones Apparel (NYSE:JNY)

Cramer says recovery comes in three different shapes forming the letters L-U-V. Those who believe in a V recovery believe stocks will be exactly where they were before the crisis.. Cramer believes the V investors are wearing rose-colored glasses, and would even buy risky stocks such as Ambac, MBIA, Toll Brothers, DR Horton and Pulte Homes. The overly-bullish Vs are creating suddenly rallies, and Cramer would sell stocks into these rises. L investors are excessively bearish, and believe in the potential of stabilization rather than recovery. They would only consider stocks like McDonald's or Pepsi, and Ls create down days, which Cramer considers as good buying opportunities. Cramer says he is in the moderate U camp, and says recovery will be "slow and grinding but ultimately successful." Although there is no hurry, since complete recovery might take a year, the U investors like retailers such as Kohl’s, J.C. Penney and Jones Apparel for the long term.

Gafisa (NYSE:GFA)

Cramer saved his favorite Brazilian stock for the end of the week-long carnival. Thanks to the rising middle class in Brazil, mortgages have grown 80%, and recent laws have transformed the "socialist utopian" thinking of delaying repossessions for 8 years to a more progressive, capitalist strategy of repossessing homes in less than one year. This new policy makes lending more feasible and the world's richest man, Sam Zell, owns 14% of Gafisa which shows that Zell "thinks it is going much higher." Gafisa is expected to see a 203% rise in earnings for 2008 compared to last years gain of 53%. Cramer says Gafisa is an "unbelievably cheap play on one of the best secular trends in one of the strongest global economies."

Flowers Foods (NYSE:FLO), Pharmerica (NYSE:PMC), Clorox (NYSE:CLX), EnerNoc (NASDAQ:ENOC)

A few weeks ago on Mad Money's Ladies Night edition, a few stocks were pitched by Harvard's Smart Woman Securities, and after doing research, Cramer has reached his conclusions on the stocks. FLO was "right" two weeks ago, but now that it has risen 13% on earnings, its rising costs are a reason to use the spike as a selling opportunity. Pharmerica may look good, but it is not tried and true enough for Cramer to get behind it. While Clorox was recommended as a great defensive play, Cramer sees rising raw costs and says the Lehman downgrade of CLX was "dead right." EnerNoc, which provides insurance for electric companies, is the best pick of the bunch, said Cramer, because it will improve energy efficiency, is a strong speculative play and has backing from top venture capital fund, Draper Fisher Jurveston as a backer. Cramer would buy EnerNoc.

CEO Interview: David Aldrich, Skyworks Solutions (NASDAQ:SWKS)

Skyworks supplies chips that give the cutting edge cell phones the capability to surf the net, give GPS directions and use energy more efficiently. SWKS has been investing funds in research to develop new products and has landed deals with big players such as Research in Motion and Apple. Cramer would buy SWKS now.

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