Boeing Losers - Cramer's Mad Money (9/25/08)

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Thursday, September 25.

Invest in America - Bank of America (BAC), Merrill Lynch (MER), Wachovia (WB), Goldman Sachs (GS)

Jim Cramer dug through the details of Treasury Secretary Henry Paulson's bailout plan to tell the viewers who the biggest winners will be. Surprisingly, the plan's biggest winner surprisingly will be the American taxpayers, he said. While Cramer still told investors to use caution, sell into strength, and cut back at least 20% of their portfolios, he sees some obvious winners once the Paulson plan is signed into law. He said that Bank of America stands to benefit. That's because Bank of America has already written down the value of the loans it acquired through its merger with Countrywide, and is currently in the process of doing the same with the assets it will receive from the Merrill Lynch acquisition. Cramer said once the government begins buying mortgages at values higher than Bank of America's current book values, the bank can instantly revalue these assets and see some upside. Cramer said that Wachovia will also benefit from the bailout. With CEO Bob Steel's previous government experience, Cramer said that he will be able to take advantage of the plan by splitting Wachovia into good and bad components and sell off the bad parts quickly to the government. Cramer said that Goldman Sachs will also benefit from the Paulson plan. He said that Goldman has the currency and capital to become a big international bank. He speculated that Goldman might consider buying Wachovia, which is now valued at just half Goldman's marketcap. But Cramer said the biggest winner of the plan is the American taxpayer, who will likely turn a profit on the mortgages bought by the government. These mortgages, he said, are backed by real homes, which will increase in value just as soon as the onslaught of foreclosures comes to an end.

Strike Up the Losers - Boeing's (BA), AeroSystems (SPR), Rockwell Collins (COL), Precision Castparts (PCP), Goodrich (GR), Hexcel (HXL)

(See update below)

With the labor strike at Boeing's now entering its third week, Cramer said the real loser is not the aircraft maker or its employees but the company's suppliers. He put Boeing, along with all of its suppliers; squarely in the Thursday "Sell Block" segment. Cramer said with both sides of the labor dispute gearing for the long haul, Boeing's suppliers just cannot be owned. Included are:

• Spirit AeroSystems, which derives 87% of its sales from the now idled Boeing, has already cut its workforce to a three-day work week and said layoffs are looming. The company will see a 6% hit to 2008 earnings if the strike lasts a month.
• Rockwell Automation depends on Boeing for 14% of its sales. The company has just laid off 80 people.
• Precision Castparts is Cramer’s favorite. Cramer said the company gets 17% of its sales from Boeing and will take a 1.7% earnings hit if the strike lasts a month.
• Goodrich, maker of aircraft wheels and brakes, and composite maker, Hexcel, are at risk of big losses from a lengthy strike.

Forward Ho! - Ethan Allen (ETH)

Cramer took the pulse of the home interiors market by talking with Ethan Allen chairman and CEO Farooq Kathwari. Cramer said it's time to start looking forward in the housing market and he's still looking for great early-cycle stocks. Kathwari admitted that the current economic situation is the toughest he's ever seen at Ethan Allen, but said that his company has the ability to survive it. He said Ethan Allen's success lies in the fact that it prepared for the downturn, and used the slump to prepare for the next business cycle. Asked about the company's scaling back of its stock buyback program, Kathwari said he aims to maintain a balance between cash and the buyback. He said that he's been worried about whether the company's cash is safe during this economic crisis and announced a new credit card offer to help Ethan Allen customers finance their purchases in this tight credit environment. Cramer said that Ethan Allen is the only furniture company he's ever recommended. He's a fan of the company's new Website, advertising initiative and 3.5% dividend yield.

** Cramer admits to having erroneously included Rockwell Automation (ROK) instead of Rockwell Collins (COL)

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Comments

[PeteK:]

Cramer's analysis makes lots of sense.
Very good, sir.

2008 Sep 26 05:18 AM

[Norman Lepo...:]

BA was a buy, buy, buy when it was over 100. This is typical Cramer. Buy high and sell low. Cramer is the worst!!!

2008 Sep 26 10:07 AM

[Crude Oil T...:]

I agree with Jim, but I am still buying a little bit of Boeing oneach additional dip. Boeing will be back big!

2008 Sep 26 10:48 AM

[FastEddy:]

Interesting: banking and finance = Cramer gives a thumbs up.

Manufacturing and military-industrial complex = Cramer gives a thumbs down.

(" BA was a buy, buy, buy when it was over 100 ..." ??)

2008 Sep 26 11:24 AM

[Idaho CPA:]

You're an idiot Cramer! Boeing will be fine.

2008 Sep 26 02:18 PM

[Jimmy from Pgh:]

Analysis may be good, but he has the wrong company. Rockwell Collins (not Automation) is very dependent on Boeing and has just laid off 80 people. Its symblol is COL.

2008 Sep 26 03:33 PM

[oldman:]

I have owned
BA and PCP since 1978-79 and have done extremely well. My view is longer than your 10 minutes.

2008 Sep 26 05:54 PM

[ptgkc:]

BA will be fine.

How's that WB working for him? He should be writing checks to his viewers now.

2008 Oct 01 10:04 PM