Cramer's Mad Money - Congratulations, Mr. Bernanke (8/25/09)

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Includes: BAC, BJ-OLD, COST, JPM, KSS, TGT, VALE, WFC, WMT
by: Miriam Metzinger

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

Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), JP Morgan (NYSE:JPM), Target (NYSE:TGT), Wal-Mart (NYSE:WMT), Kohl's (NYSE:KSS)

Cramer donned a chef's hat and baked a cake to celebrate the recent rally, which he believes is a harbinger of a real recovery. The main ingredient is the re-appointment of Ben Bernanke; despite Cramer's famous rant against the Fed Chairman over two years ago, he thinks Bernanke has turned out to be the best man for the job.

Cramer also felt vindicated for his housing predictions; he recalls having been criticized for predicting a housing disaster in 2007 and ridiculed for calling a bottom for June 30 2008, but he notes in the past month, housing prices are finally seeing improvement. He would play the trend not with housing stocks, but with banks like Bank of America, Wells Fargo and JP Morgan, which own "whole area codes" of foreclosed homes. The consumer confidence number was "a thing of beauty;" and Cramer recommends buying Target, Wal-Mart and Kohl's.

"Congratulations to Mr. Bernanke, Congratulations to the American consumer and congratulations to the investor," said Cramer, "You didn’t let the inglorious ones get you down. You stayed in the game."

Off the Charts: Completed Basing Pattern

Cramer discussed John Bollinger's famous "Completed Basing Pattern" which indicates a stock is a buy. When a stock tests a level and retreats from it several times, it forms a base that it apparently cannot penetrate. When it finally breaks this level, one can assume that there is significant buying interest in the stock and it is headed higher.

Vale (NYSE:VALE)

There is significant disagreement on The Street about Vale, with HSBC downgrading the stock and Morgan Stanley giving the mining company an upgrade. HSBC noted falling demand for iron ore from China, while Morgan Stanley cited increasing demand from Europe and other countries. Cramer sided with Morgan Stanley, and said that while China is important, it isn't the entire world; in any case, HSBC raised the price target, so there wasn't such a compelling reason to be bearish on Vale, according to Cramer.

Is BJ's (NYSE:BJ-OLD) or Costco (NASDAQ:COST) the Discount King?

Cramer continued his weeklong series searching for the real discount king. TJX was ruled out, but Cramer thinks BJ's has a better chance with same-store sales rising 2.9% (aside from gasoline sales). Costco saw its same-store sales drop 1% for the same period. While Costco excels at cutting costs and keeping inventory low, BJ's is the winner in the quality and selection of its merchandise: BJ's offers 7,200 different products while Costco trails at 4,000 items. In addition, BJ's has more room to expand and can take advantage of cheap real estate prices to grow the number of stores. Costco trades at a multiple of 18 whereas BJ's multiple is at 12. While he prefers to shop at Costco, Cramer thinks BJ's is a better stock.

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