Loss of Integrity - Cramer's Mad Money Recap (9/3/08)

by: Joan Wickham

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Wednesday, September 3.

Failure of Integrity - Regions Financial (NYSE:RF), BB&T (NYSE:BBT)

“The failure of Integrity Bank over the weekend is not just another bank failure,” Jim Cramer told viewers. He said the breakup of Integrity was “a monumental shift in strategy” and illustrates how the Federal Deposit Insurance Commission (FDIC) will handle bank failures from now on. Cramer commended the FDIC for adopting a plan which he has been advocating for months, one that splits failed entities into “good” and “bad” parts. The Integrity deal calls for Regions Financial to acquire Integrity's “good” parts, mainly $900 million worth of deposits, while the FDIC assumes the “bad” parts, including all of the bank's failed and failing loans. “This is the plan we've been waiting for,” said Cramer, who replayed an appearance on NBC's Today Show back in July where he advocated the plan. He called the FDIC's shift in strategy terrific news for stronger banks which are now poised to pick up great assets from failing entities. Cramer recommended BB&T, a strong, yet conservative, Southern bank with a 6.36% yield that is ready to reap the rewards of the FDIC's new strategy. Cramer said BB&T tightened its underwriting policies back in 2005, ahead of the subprime crisis. Only 1.36% of its loans are currently listed as non-performing and the bank has only a .63% charge off rate. The bank is also still growing, with loans up 9% last month. He called BB&T the logical choice to acquire assets from future failed banks.

Big Coal Drop - Joy Global (JOYG), Bucyrus (NASDAQ:BUCY)

Cramer put Joy Global president and CEO Mike Sutherlin in the hot seat to get answers about the company's recent earnings shortfall. Sutherlin said his company enjoyed record orders and revenues this quarter and felt the market overreacted to the company's margin issues. He called the current market environment negative on anything commodity related. Sutherlin said Joy Global is in a strong position with share buybacks, solid cash reserves and tremendous upside potential. The company's backlogs extend well into 2010 to 2011, he said. On China's currently soft market, Sutherlin said the country often goes through stocking and restocking cycles and is now suffering from weakness due to the Olympics and seasonality. He still sees China as desperately short of coal and expects strong demand to return soon. Cramer predicted more pain for Joy Global. He said the oil service sector will have to bottom first before he would recommend buying Joy Global and his other favorite Bucyrus.

Am I Diversified?

Portfolio 1:

  • Teva Pharmaceuticals (NYSE:TEVA)

  • Altria (NYSE:MO)

  • Walgreens (WAG)

  • Home Depot (NYSE:HD)

  • General Mills (NYSE:GIS)

Cramer said this portfolio has two retailers with Home Depot and Walgreens and needed a financial stock. 

Portfolio 2:

  • Bank of America (NYSE:BAC)

  • ConEd (NYSE:ED)

  • General Dynamics (NYSE:GD)

  • General Motors (NYSE:GM)

  • Verizon (NYSE:VZ)

Cramer called this portfolio perfect.

Mad Mail - Schering-Plough (SGP), IBM (NYSE:IBM), CPFL Energia (NYSE:CPL), Celgene (NASDAQ:CELG), CSX (NYSE:CSX), Norfolk Southern (NYSE:NSC)

Stock 1: Although Cramer felt bad about selling Schering-Plough, he stood by his comments on Tuesday's show that the negative press surrounding the company will limit any upside.

Stock 2: The selling in IBM is overdone, and he sees the company as a buying opportunity.

Stock 3: Cramer said he still thinks that CPFL Energia is a buy.

Stock 4: Cramer reiterated buying Celgene.

Stock 5: He prefers CSX over railroad competitor Norfolk Southern.

Sudden Death - Salesforce.com (NYSE:CRM), Genentech (Private:DNA), Steel Dynamics (NASDAQ:STLD)

Cramer was bearish on Salesforce.com, Genentech and Steel Dynamics.

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