Bristol Buyer - Cramer's Mad Money (5/5/08)

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Monday May 5. Click on a stock ticker for more analysis.

Bristol-Myers (BMY)

Bristol Myers is a company that is making investors nervous; 50% of its drugs are scheduled to go off patent in three years, and few believe the BMY will be able to recoup its losses. However, Cramer is a believer that big moves will pay off; BMY recently sold its wound-care division, ConvaTec for $4.1 billion and is planning to spin off 10-20% of its Mead Johnson baby formula division. In addition to the total $9 billion these sales are expected to generate, BMY has HIV, arthritis, leukemia and breast cancer drugs in the pipeline and is planning to acquire new companies to beef up drug offerings. BMY trades at just 11.4 times next year’s earnings, has an 11.5% growth rate, and is aggressively cutting costs. The bottom line, says Cramer is BMY is “not getting enough love,” especially considering it has a solid 5.4% yield.

Alcoa (AA)

As steel prices rise, companies will search for cheaper solutions such as aluminum, and Cramer would play this trend and buy AA, which has 11% of the world’s aluminum and 19.8% of all raw alumina. The light metal is also more energy efficient, and supplies in China are running thin. AA has produces a million fasteners for BA’s Dreamliner, and its products are being used in other industries. While AA has been a disappointment in the past, Cramer thinks the worst is over for AA, which may be a takeover target and trades at only 10 times earnings with a 21% long-term growth rate.

Google (GOOG)

Cramer admitted he got it wrong on Google and urged investors to learn from his mistakes. After he made a bearish call on the stock, the company moved from $449 to $595 a share. He regretted relying on faulty Comscore data which indicated traffic was down when it was actually up. He admitted he should not have compared Google to Yahoo, which has been stumbling because Google is taking share. Cramer underestimated Google’s international growth; 50% of its business is overseas, even though Baidu dominates China. Cramer would wait to buy the internet giant, which has recently jumped on news that Microsoft is shelving its Yahoo bid. However, he would buy on a decline, and predicts the stock will reach $697 a share.

Mad Mail: New Oriental Education and Technology Group (EDU), Shaw Group (SGP)

Cramer would not buy EDU because he says the stock is too hard to analyze. While SGP is expanding its green projects, Cramer says the U.S. is too resistant to nuclear energy right now.

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