Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Wednesday, October 1.
We Need to Throw Everything We Can At It
To all the naysayers of the $700 billion bailout package, Jim Cramer told them they're "dead wrong." He told the viewers that we need to throw everything we can at the financial crisis. Cramer is in disbelief over the, well, nihilism he’s hearing from market pundits these days. Rate cuts don’t matter. Buying mortgages won’t work. It’s too late for a stimulus package. "Tell us what will work," he asked those opposed to the bailout plan. Listening to them, you’d think the world was going to end tomorrow and there was nothing we could do about it. But that’s not how Cramer sees it. In fact, “these people are dead wrong,” he said, adding that such talk was “economy-destroying analysis.” He believes we should be throwing everything we can at this problem: rate cuts, tax cuts, rescue plans, home loans, you name it. “We can’t print money fast enough,” he said. And Wednesday’s rally in financials is proof that this stuff works.We’ve been here before, though. The U.S. didn’t do enough to stop the Great Depression, and we could find ourselves there again if we take the same approach. Not only does Cramer think we have to do anything we can to avoid a similar fate, but it would be “heartless and punitive not to try.” "There will be plenty of time for subpoenas later," he said.
Criminally Undervalued – KBR, Inc. (NYSE:KBR)
Cramer said he understands that it might be difficult for investors to think about stocks at a time when they're worried about losing their jobs or their home, but he feels the market now represents a great value for the long term. He said Monday's sell-off was a clear sign to sell stocks, but Tuesday's was a sign to buy them. Cramer said he's taking the middle ground, staying defensive with consumer stocks and high dividend stocks while looking for real bargains amidst the rubble. Cramer said there is one company that's so criminally undervalued he can hardly believe it. That company is KBR, and he said he's "never seen a company so cheap in my life." After hitting a peak of $43.25 earlier in the year, the stock now trades at just $15.13. Cramer said the decline in price is not due to the fundamentals, but rather to fears that a Barack Obama presidency will hurt business, as well as hedge funds being forced to liquidate their positions to cover redemptions. With a $15 billion backlog, KBR's paltry $2.5 billion marketcap just doesn't make sense, he said. Furthermore he said the company has $9 per share of cash on its balance sheet, and trades at just 7.5 times its forward earnings, or just 3 times earnings if you back out the cash. Cramer said that while infrastructure and energy may be out of favor on Wall Street, it's still very much in favor in the real world. The company continues to secure new business and grow its backlog. Market rules state a company can’t sell itself for two years after a spin-off or IPO. Cramer noted that in April, 2009 KBR will be eligible to sell itself, making it a prime takeover target for a multitude of companies. Giving KBR the same valuation as previous deals, Cramer said the stock could fetch as much as $55 a share. Even when more conservative numbers are applied, Cramer said the stock would fetch a $33 price target and a 118% gain in the stock.
Am I Diversified ?
- Exxon Mobil (NYSE:XOM)
- Honeywell (NYSE:HON)
- Proctor & Gamble (NYSE:PG)
- Pepsi (NYSE:PEP)
- Williams (NYSE:WMB)
Cramer said he liked the portfolio except for the two oil companies with Williams and Exxon. He suggested selling Exxon in favor of a defense stock or a healthcare company.
- Baldor Electric (BEZ)
- Vertex Pharma (NASDAQ:VRTX)
- John Deere (NYSE:DE)
- Jos. A Bank Clothiers (NASDAQ:JOSB)
- BB&T (NYSE:BBT)
Cramer said he's not a fan of Joseph A Bank, but called the portfolio perfect if a better retailer were added in its place.
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