Cramer's Mad Money - Five Safety Stocks (10/29/09)

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Includes: AAPL, ANTM, BP, GIS, GS, JPM, K, MCD, PG, XTO
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday October 29.

Five Safety Stocks: Procter&Gamble (NYSE:PG), WellPoint (WLP), McDonald's (NYSE:MCD), Kellogg (NYSE:K), General Mills (NYSE:GIS)

While the Dow was up with triple-digit gains on Thursday, Cramer warned that the leading sectors which drove the Dow's rally from 6,500 in March to 10,000 are in decline. Tech, banks and oil seem ready to take a breather, and while Cramer would still hold the strongest names: BP (NYSE:BP), JP Morgan Chase (NYSE:JPM), Apple (NASDAQ:AAPL) and Goldman Sachs (NYSE:GS), it is time to retreat to safer plays. Cramer discussed five safety stocks.

1. Procter&Gamble (PG) beat estimates on Thursday by 7 cents a share and has redeemed itself after a long period of underperformance. The 3% yield provides extra protection.

2. and 3. General Mills (GIS) and Kellogg (K) are both helped by lower commodity prices and the fact that their brands will be consumed no matter where the economy is headed. General Mills beat estimates by 25 cents a share in September and raised its 2010 guidance. The company also has very efficient manufacturing facilities that keep the costs down.

4. Wellpoint (WLP) had a monster quarter with a 16-41 cent beat, depending on whether one excludes one-time items. While there are worries that Obama's healthcare reforms might affect Wellpoint, Cramer isn't worried, and thinks any potential losses will be minimal. No matter which side wins, Cramer thinks Wellpoint will go to $53 a share after the healthcare debate is over.

5. McDonald's (MCD) saw a 3.8% increase in same-store sales on October 22 and reported a bettter-than-expected quarter. The weak dollar is good for McDonald's substantial overseas business, and a recent dividend hike gives investors a 4% yield.

Even though none of these five stocks rose after the GDP report, Cramer reminded viewers that these are meant to be solid, long-term stocks which aren't tied to any particular catalyst; "They don't need the economy to do well," he said.

The End of Globalization?

Cramer talked with Jeff Rubin, chief economist at CIBC World Markets and author of Why Your World is about to Get Smaller: Oil and the End of Globalization. Rubin's thesis is that oil prices are not just going higher in the short-term, but oil and natural gas are going to cease to be affordable, thanks to dwindling supplies. This will mean that shipments will slow down, long-distance driving will be a luxury and globalization will be reversed. Cramer "disagrees strongly" and points to huge reserves of natural gas in the U.S. as a solution to these problems.

Rubin dismissed claims that oil is driven higher mainly by speculation, and negated natural gas as a solution, because of the amount of natural gas needed to make synthetic oil and the time-frame needed to make the transition; "Our rendezvous with triple-digit oil is not in 5-10 years, but our rendezvous with triple-digit oil prices is in 5-10 months." Jeff Rubin urged developing an energy-efficient local economy rather than relying on global solutions.

Interview: Oklahoma Congressman Dan Boren: XTO (XTO)

While natural gas seems to be the cleanest, most economical solution to the problem of America's reliance on fossil fuels, the potential bridge fuel has been lacking support in Washington because of the vocal and wealthy coal lobby. However, some legislators are starting to get the message about natural gas. Oklahoma Congressman Dan Boren (Democrat) secured an extra $5 billion for natural gas vehicle research, and together with Pennsylvania Representative Tim Murphy is starting a Natural Gas Caucus.

Boren says the new supply of natural gas is causing many to sit up and take notice. New technology should allay any fears of water contamination and explosions, and even environmentalists are getting on the natural gas bandwagon. The fuel is "very safe and very clean," says Boren and will create thousands of jobs; "Look for the White House to say something positive." Cramer added that not only is natural gas beneficial to the economy and to the environment, but natural gas stocks like XTO (XTO) are among "the best-performing stocks I have ever seen."

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