Cramer's Mad Money - Eagle versus EGO (3/25/09)

Includes: AEG, CVX, EGO, GLD, IBOC
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday March 25.

CEO Interview: Paul Wright, Eldorado Mines (NYSE:EGO), Agnico Eagle Mines (NYSE:AEG), SPDR GoldShares (NYSEARCA:GLD)

While Cramer has often said a gold stock is a must in every portfolio, this is even more true now that the Fed is flooding the economy with dollars. There are many ways to invest in the classic weak-dollar hedge, and Cramer is looking for the cheapest and the best. He prefers Eldorado over both Agnico, up 17% and even GLD, down 1.3% because of EGO's low production prices; the company produces gold at $300 per ounce, $100 lower than the industry average. The company expects 10% growth this year and 20% in 2010. While Cramer is concerned about an equity offering diluting share prices, Wright says such a move is usually accompanied by an increase in value. The company's new mine in Turkey and continued expansion in China should mean a significant upside for EGO. Cramer says he prefers EGO because of its low production costs, but added GLD isn't bad either.

Chevron (NYSE:CVX)

Cramer likes the oil sector because it has plenty of cash for generous dividends and share prices that will be driven up by dwindling supplies. He thinks Chevron fits all of the oil metrics: its growth rate is at 4%, reserve replacement rate, 146%. The company is flush with cash and has a clean balance sheet. Chevron currently yields 3.7%, but with a pullback to $65, it might have a 4% dividend. While he doesn't expect as generous a dividend boost as in years past, Chevron is in a position to continue its tradition of raising dividends.

Callers' Questions: General Motors Preferred (GPOM), International Bancshares (NASDAQ:IBOC)

One caller asked Cramer about the advantages of owning preferred stock over common stock. Cramer says common stock is not capped and has more upside, but preferred shares have a tax advantage and are better for conservative investors. Except for General Motors Preferred stock, Cramer is partial to common stock. When another caller asked if International Bancshares' 8.8% dividend is safe, Cramer said he needs to look more closely at the stock before recommending it.

A Sign of Strength

The fact that the Dow finished up 90 points after dropping 110 is a sign of strength and resilience not seen in the market for some time, according to Cramer. Yes,there was a loss, but the fact stocks managed to jump back and those who sold down didn't carry the day spells "terrific action," said Cramer. He discussed the tendency stocks have of predicting news rather than reacting to it; exactly one month after the market peaked on August 11 2008, Lehman Brothers collapsed, and with it AIG and Merrill Lynch. Similarly, Cramer thinks the market bottomed 3 weeks ago and predicted the upsurge that is happening now.


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