Recession Season - Cramer's Mad Money (7/7/08)

by: Miriam Metzinger

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Monday July 7.

Recession Season: Genentech (Private:DNA), Amgen (NASDAQ:AMGN), Heinz (HNZ), General Mills (NYSE:GIS)

If Wall Street is a brutal fashion show in which the "styles" change day to day, export-oriented stocks are now out of style and recession season has begun, said Cramer. Earnings expectations are down 11% from last year and Cramer would sell on any gain to buy defensive stocks. He compared the current situation to that of 1990-91 when the S&P 500 dropped 16% because of financials, while biotechs like Genentech and Amgen shone. The rules of what makes a good defensive stock have changed, and food companies, apart from Heinz and General Mills, are not working because of problems with rising raw costs. "If you want to get through the next three months, you need secular growth stocks with pricing power and no problems with raw costs."

Genentech (DNA)

Cramer says healthcare is the safest place to be right now and his favorite company in the sector is Genentech, which produces a "wonder drug" for cancer Avastin. The treatment can be used for a variety of cancers and a story in the New York Times criticizing the company for producing expensive drugs should create a buying opportunity for DNA. Cramer is not concerned about this negative press, because even in a recession people will pay up for life-saving treatments. Not only is Avastin a good drug, but Cramer also praised DNA's pipeline. He expects the stock to rise from $76 to $88 and even higher.

CEO Interview: Larry Lee, RAM Energy (RAME)

Natural gas has been hot, perhaps a bit too hot, according to some, but Larry Lee says with oil continuing its rise, natural gas also has a good chance of going higher. Natural gas is the best fuel alternative said Lee, noting the U.S. has a healthy supply of it. Although land speculation in the shale areas may not be a good sign, Lee says the natural gas story is here to stay. Cramer agrees and likes natural gas long term, but would use caution.

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