Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Friday, September 12.
The Market That Roars (Or Not)
"If the Federal Reserve cuts interest rates next week, this market will be ready to roar," Jim Cramer told viewers. "If not, be prepared for more of the same." Cramer hopes for a 50-basis point rate cut at the Federal Open Market Committee meeting on Tuesday, but he says it's difficult to figure out what the Fed will do. "You just can't count on this Fed." Despite falling oil and commodity prices, weakness in the dollar and gold, and rising unemployment, Cramer said the Fed still seems to be worried about inflation. "The signs of deflation are all around us; inaction isn't going to cut it," he added.
Financials Hit Again - Fannie Mae (FNM) and Freddie Mac (FRE)
Banking and financial institutions have been hit again, said Cramer, now that the government has all but wiped out the preferred shares of Fannie Mae and Freddie Mac. The preferred shares of the two mortgage giants are the vehicle many institutions use to raise capital. If investors now think the added protection preferred shares usually offer is gone, no one will buy them.
More Fortress Four - US Bancorp (NYSE:USB), Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC), JP Morgan Chase (NYSE:JPM)
Cramer said if the Fed does cut rates on Tuesday, he'd be a buyer of his "Fortress 4" banks, including US Bancorp, Wells Fargo, Bank of America and JP Morgan Chase.
Also for next week, Cramer said he expects oil to dip below $90 a barrel. If that happens, he said he'd be a buyer of stocks that benefit from lower gas prices, companies like United Parcel, Walt Disney and Kimberly-Clark.
Standing Up to the Bully - Foster Wheeler (FMLT)
Cramer said in the war against relentless hedge fund selling, some companies are starting to fight back. He talked with Ray Milchovich, chairman and CEO of Foster Wheeler, a stock about his recent decision to buy back one-eighth of his company's common stock. Milchovich said the $750 million decision was in direct response to its share price being cut in half, despite the fact that company doubled its earnings in 2007 and increased them another 35% so far in 2008. He said Foster Wheeler holds no debt, has $1.3 billion in cash and is worth far more than its current market valuation. Responding to the critics who worry of project cancellations, Milchovich explained that Foster Wheeler has not seen a single cancellation or delay of any project. He said the company's toughest challenge remains finding the capacity to meet demand. He said he's seen no material change in the company's order flow, and still sees strong growth around the globe. Cramer reiterated his buy on Foster Wheeler.
"The paper and packaging business may be boring," said Cramer, "but it can make you money." He last recommended box maker Temple-Inland on April 7 at $13.98 a share. Since then, that stock is up 37%. Cramer says it's time to swap out of Temple-Inland in favor of its rival Packaging Corp of America. He said that Packaging Corp is a classic "catch-up" story and poised to surge higher as it "catches up" to its peers. Cramer cites the simple economics of the packaging business to support this view. The industry recently put through a $55-per-ton price increase, raising its top line growth. In the case of Packaging Corp, 50% of the company's costs are for energy, mainly coal and natural gas. With plummeting commodity prices, the company should be able to beat estimates handily. Cramer said he also likes Packaging Corp's 4.7% dividend yield, which is not only higher than investing in Treasuries, but essentially pays you to wait until the upside surprise occurs. With unplanned mill outages and strong exports keeping supplies tight, Cramer said Packaging Corp is a sure bet in an all too boring business.
Cramer said that in addition to Whirlpool, other "early cycle" stocks include durable goods, retailers and homebuilders.
Cramer said that he feels negative press coverage makes Schering-Plough a stock you cannot invest in.
Seeking Alpha publishes a summary of Jim Cramer's stock picks every day including: Mad Money Recap, Lightning Round and Stop Trading!
Get Cramer's Picks by e-mail -- it's free and takes only a few seconds to sign up.
Seeking Alpha is not affiliated with Jim Cramer, CNBC or TheStreet.com