Cramer's Mad Money - When Obama Stumbles, Stocks Soar (9/20/09)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday August 20.

WellPoint (WLP), Triple-S (NYSE:GTS)

Cramer has found a direct correlation between two charts: that of the S&P 500 and Obama's disapproval rating, and both have been rising at the same pace since March. This is no coincidence; many of Obama's lofty proposals, such as cap and trade legislation, forced arbitration for unions and healhcare reform are not seen as business-friendly. Now that many of these reforms are off the table, the stock market is breathing a sigh of relief.

With the pressure off Cramer sees a huge buying opportunity in HMOs. In fact, he thinks every portfolio should contain, along with 20% gold and 20% international stocks, 20% healthcare. HMOs such as WellPoint and Triple-S should see multiple expansion, as both were trading at depressed P/E ratios of 8 and 7 with historical levels at around 13 or 14. Returning to their former multiples would mean a 35% upside for WellPoint and a 57% gain for Triple-S. “We've been positive about this group since it became clear that the agenda's stumbling, now it's time to go pedal to the metal on this beaten down sector,” says Cramer.

Shaw Group (SGR) CEO Jim Bernhard

Cramer has been a fan of natural gas, but he is also intrigued by the prospect of nuclear energy, which has not enjoyed much popularity in the U.S. Shaw Group is trying to change that; CEO Jim Bernhard is seeing encouraging signs in Washington and looks forward to new legislation which should expand reactor sites. Currently, fossil fuels and nuclear energy projects comprise 61% of the company's backlog. Bernhard has just hired 1,000 new workers to manage the nuclear part of the company and expects to hire 2,000 more people. The company is working on technology to recycle plutonium and reduce hazardous nuclear waste. Shaw Group is currently building reactors in Georgia and North Carolina and expects to complete the projects on time. Up 23% in spite of a lackluster quarter, Shaw Group may see more upside, according to Cramer.

Netflix (NASDAQ:NFLX), Coinstar (NASDAQ:CSTR)

Cramer suggested playing the entertainment sector using an old-fashioned hedge fund technique - buying a strong stock and selling a weaker stock in the same group. Although this may mean less of a return on an investment if a certain sector gets "hot," it reduces risk if investors turn against a particular group of stocks.

While consumers aren't buying DVDs as much anymore, but are staying home to watch movies, Cramer is looking for an ideal way to play DVD rentals. Netflix has been successful renting DVDs by mail, but even more popular has been Coinstar's "Red Box" kiosks that allow customers to rent DVDs for a dollar. Cramer thinks Coinstar's 37 multiple is cheap considering its growth rate, and while it has just 14% market share, growth is projected at 61% in the coming year. While lawsuits over content distribution may make the stock risky, Cramer thinks Coinstar's growth outweighs the risk. He would therefore buy Coinstar and sell Netflix.

Marc Benioff of (NYSE:CRM) is one of the rare companies out there that raises estimates as well as revenues, in other words it is "a double play." Cramer invited CEO Marc Benioff, who called the quarter "a beat on the top line and the bottom line" and discussed the 32% increase in customers despite the economic climate. Benioff says the company will improve even more as the economy recovers and as users add more licenses. Salesforce raised $1 billion in cash and was able to raise revenue and earnings-per-share guidance. The technology allows business to custom-create their own cloud computing platform to fit their needs. Cramer says Salesforce should reach a "minimum of $70."


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