Nuclear Winter Pick - Cramer's Mad Money (9/24/08)

by: Joan Wickham

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Wednesday, September 24.

Invest in America - Goldman Sachs (NYSE:GS).

Jim Cramer told viewers that Treasury Secretary Henry Paulson is doing a terrible job of selling the bailout plan. The American People are more concerned with punishing Wall Street bankers than making sure the ATM spits out money the next time they need it. And if the plan doesn’t pass, there’s a very real possibility that ATM could end up empty. Instead of speaking in plain English, Paulson has made his sales pitch much more difficult to comprehend by using Wall Street rhetoric. Cramer said “The plan will fail unless people realize it will help Main Street America. Cramer said that the Paulson plan should be called "Invest In America" and not be referred to as a "bailout" of Wall Street. He said the plan is about keeping people in their homes and banks having the money to lend so that kids can go to college. "It's about cash in the ATM machine," he said, and “making sure Wall Street’s problems don’t spill over into Main Street.” Cramer said he's mystified that a plan that is designed to avoid economic disaster and possibly turn a profit for taxpayers, could be so hated. He said the financial markets revolve around credit and confidence, two things that totally disappeared last week. Cramer made his point very clear, saying without this plan, unemployment could skyrocket to 20% to 30%. This is not about saving Wall Street executive salaries, he said, "this affects you." He told viewers they need to stop looking at the plan as a bailout and start looking at the facts. Things are bad if Warren Buffett has to swoop in and save a company as good as Goldman Sachs. Cramer advocated doing whatever it takes to get the Paulson plan passed and passed quickly.

Nuclear Winter Play - McCormick (NYSE:MKC), Ralcorp (RAH)

“If the plan fails, investors will be flocking to food banks.” In his hunt for stocks that can survive nuclear winter, Cramer recommended spice-maker McCormick. Cramer said, “Food is where people are trying to save money. But you still have to grill what you kill.” Cramer's thinks that in hard, uncertain economic times, McCormick's spices sell well because people eat out less and cook more at home. People are poor. They’re saving money any way they can, especially at the grocery store. Grass-fed beef, organic gala apples and name-brand cereals are out. It’s all about generic private labels these days. And that’s where McCormick comes in. The company commands 50% of the herb, spice and marinade market in the U.S. and France and 40% of the market in the UK. Cramer likened McCormick to his earlier recommendation of private-label food maker Ralcorp. With fewer people buying luxury foods and instead opting for store brands, the demand for spices and sauces can only increase. A recent study indicated that 37% of consumer mentioned price as the No. factor influencing their food buying decisions, ahead of even location. Aside of making cheap food taste better, and consumer sales make up 80% of the company’s business, McCormick sells to nine of the top 10 major food companies. Cramer said McCormick is also a play on healthier eating. The company is currently promoting the many health benefits of its spices and other products In addition, Cramer called the company very shareholder friendly, with a 2.3% dividend yield and $49 million left in its share repurchase program. If the quarter is good and the stock goes up don’t buy it. Be ready to buy McCormick if the market collapses. If the company misses the estimates, Cramer told viewers to take a pass as the markets will surely send shares tumbling.

Staying a Step Ahead - Sims Metal Management (SMS)

Cramer welcomed Dan Deinst, CEO of Sims Metal Management, to the show for another take on the health of the economy outside of Wall Street. Deinst said that while the scrap metal business is, has been and always will be a volatile one, his company is still thriving. He said the world has never seen a business like Sims Metal before and his company is providing real leadership in trying economic times. Deinst said that while smaller competitors are now choking on falling steel prices, Sims has been able to use its size to both foresee and capitalize on falling commodity prices. He said Sims has been able to lock in lower prices and continues to benefit from the sustainability of its business model. Cramer said Sims is another example of a "real world" company thriving outside of the financial chaos.

Am I Diversified?

Portfolio One:

  1. Eaton (NYSE:ETN)
  2. Johnson Controls (NYSE:JCI)
  3. Petrohawk (NYSE:HK)
  4. Trinity Industries (NYSE:TRN)
  5. Genentech (Private:DNA)

Cramer said that Eaton, Johnson Controls and Trinity are three of a kind in the industrial space. He said the portfolio is far too concentrated in that area. He recommended adding a defense stock and a consumer stock. He also said to sell Genentech and not get caught up in the takeover bid.

Portfolio Two

  1. Caterpillar (NYSE:CAT)
  2. Covance (NYSE:CVD)
  3. Transocean (NYSE:RIG)
  4. Whirlpool (NYSE:WHR)
  5. Masco (NYSE:MAS)

Cramer said portfolio two was also too concentrated, only this time in household appliances, with Whirlpool and Masco. He recommended selling Whirlpool and replacing it with a food or beverage stock.

Portfolio Three

  1. Boeing (NYSE:BA)
  2. Johnson & Johnson (NYSE:JNJ)
  3. Safeway (NYSE:SWY)
  4. Duke Energy (NYSE:DUK)
  5. Spectra Energy (NYSE:SE)

Cramer identified Duke and Spectra as two of a kind and recommended swapping Safeway in favor of Kroger (NYSE:KR). He also said that Boeing, which is in the thick of labor troubles, needed to be sold.

Portfolio Four

  1. AK Steel (NYSE:AKS)
  2. Schlumberger (NYSE:SLB)
  3. McDonald's (NYSE:MCD)
  4. Coca-Cola (NYSE:KO)
  5. Apache (NYSE:APA)

Cramer said Schlumberger and Apache are both oil stocks. He felt Schlumberger should be replaced by a defense stock.

Cramer said Schlumberger and Apache are both oil stocks. He felt Schlumberger should be replaced by a defense stock.

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