Prepare to Sell Monday - Cramer's Mad Money (9/19/08)

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 |  Includes: AIG, APA, CAG, CLNE, CLX, FMCC, FNMA, GIS, GS, K, MDLZ, PNRA, SVU, TGT, THS, USB, WFC, ZION
by: Joan Wickham

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Friday, September 19.

After the Rally

"The important take-away from today is not Treasury Secretary Henry Paulson or Securities and Exchange Commission Chairman Christopher Cox" but that rallies are for selling, Jim Cramer told viewers. Cramer said the astonishing 779-point rally over the past two days can only mean one thing: sell. He advised viewers to spend this weekend evaluating their portfolios so that they are ready to sell their bad stocks on Monday and take profits in the winners. Cramer returned to a selling strategy he's used many times. He said to rank every stock in a portfolio from one to four.

  1. The stocks you'd buy right now.
  2. Those you'd buy on a pull-back.
  3. Those you'd sell into strength.
  4. The losers you need to sell right away.

After ranking all the stocks in your portfolio, Cramer advised selling 20% of your portfolio on Monday. He said that there should not be many stocks still ranked "one," after the huge rally the past two days.

Where to Take Profits - Wells Fargo (NYSE:WFC), US Bancorp (NYSE:USB), Zion's Bancorp (NASDAQ:ZION), Target (NYSE:TGT), Clorox (NYSE:CLX), Apache (NYSE:APA)

Cramer recommended taking profits in stocks like Wells Fargo, which he recommended on July 21 at $27 a share, but is now trading at a 52-week high of $39.50. He also recommended taking profits in US Bancorp and Zion's Bancorp. Cramer told viewers to consider selling stocks in other sectors such as natural gas, technology and retail that have been up huge since Wednesday. For example, Target is a good candidate to trim, he said. As for things to buy, Cramer said he likes Clorox should report a good quarter and be a good defensive play. Cramer recommended dumping a natural gas stock as well. Apache was up Friday despite natural gas being down. Tech stocks that seem to be struggling this quarter should probably get cut, too.

Pulling Back From the Abyss - Freddie Mac (FRE), Fannie Mae (FNM) and American International Group (NYSE:AIG)

"Our financial system is built on confidence," Cramer told viewers, as he tried to explain in plain English what the federal government's recent actions really mean to the markets. Cramer said had the government not taken the actions it did, consumers next week may have found their bank's local ATM machines out of cash. He credited Paulson for single handedly preventing a run on our banking system. Until this week's actions, Cramer said the government's takeover of Freddie Mac, Fannie Mae and American International Group had done nothing to restore confidence in the markets and had managed to spend $900 billion of taxpayer's money. However, he said the government is now trying to do everything, from buyouts to trusts to regulations, to restore stability. Cramer said it took a decade to recover from the Great Depression but Paulson's actions will usher a much quicker recovery, despite the size of the current market collapse. The only downside, he said, will likely be just a few hedge fund failures. As for the pricetag of the bailout, Cramer said the government should not suffer as much as some believe. He said many of the mortgages now owned by the government hold value, and it's possible to still reward responsible borrowers while punishing the reckless. Cramer called this "coherent plan" and the best thing the U.S. government has done for the American taxpayers in a long time.

Play with Food - Ralcorp Holdings (RAH), General Mills (NYSE:GIS), Treehouse Brands (NYSE:THS), Kellogg (NYSE:K), Supervalu (NYSE:SVU), Kraft (KFT)

Despite the market's huge rally, Cramer said there are still some stocks worth buying. On that note, he recommended private label food maker Ralcorp Holdings. Cramer said the discounter, which competes against General Mills, should do well for consumers who are trading down to cheaper products during harder economic times. Ralcorp sells its cereals at about a 20% discount to Kellogg and a 36% discount to General Mills. He said Ralcorp reminded him of Treehouse Brands which he said is up $18 since he recommended it on Aug. 18, 2007 at $24 a share. Forty-nine percent of sales come from private-label food, and lately outlets like Safeway and Supervalu have been trying to increase their generics sales. That means these supermarkets are spending money to advertising and boost Ralcorp’s products. Ralcorp’s also made a move in branded foods. The company bought Post cereals – Honey Bunches of Oats, Grapenuts and Raisin Bran – from Kraft. Now branded products are about 32% of Ralcorp’s sales and the Post buyout took margins to 16% from 11%. Cramer said he liked the mix in this economy, adding that no matter how bad things get there will always be people who won’t buy private label. But he said the real catalyst for the company is the falling costs of commodities, which should flow right to the bottom line of the company. He also sees Ralcorp as a potential acquirer if consolidation in the industry occurs.

Mad Mail - Clean Energy (NASDAQ:CLNE), Panera Bread (NASDAQ:PNRA), Clean Energy (CLNE), Goldman Sachs (NYSE:GS)

The wife of investor Boone Pickens called him regarding the large sale of Clean Energy. According to Pickens, it was her stock, not his. She plans to use the money to support an animal-rights initiative on the California ballot in November.
Goldman Sachs is not in the Sell Block although he acknowledges the negative pressure the firm, and the stock, is under. I didn’t sell. Remember, in the piece I said, “I don’t believe the market in this.” But the market’s telling me to sell Goldman. I’m not listening.”

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