Cramer's Mad Money - 6 Reasons to Speculate on Citigroup (12/14/09)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday December 14.

Citigroup (NYSE:C), Wells Fargo (NYSE:WFC)

The banks have been in the doldrums lately because of the need to repay TARP money. However, this problem will soon be remedied as Wells Fargo (WFC) is holding a $10.4 billion offering and Citigroup has a $17 billion equity offering to pay back TARP. Cramer prefers Citigroup's offering for the following reasons:

1) Wells Fargo, thanks to its purchase of Wachovia, has too much exposure to mortgages and therefore, a higher risk of foreclosures.

2) Citigroup is strong overseas and still garners significant respect abroad.

3) The government's 34% stake in Citigroup is a "non-issue," especially considering the fact that the stock trades at high volume.

4) Citigroup's stock price has dropped ahead of the equity offering, and the entry point could not be better.

5) At only $3.40, a Citigroup share is like a "lottery ticket" with better chances of winning. Cramer thinks Citigroup is "the ideal speculation play."

6) Cramer predicts Citigroup will triple in price in 3 years once it cleans up its debt and its book value increases. His motto for the stock is "$12 by the end of 2012."

XTO Energy (XTO), Exxon Mobil (NYSE:XOM), Clean Energy Fuels (NASDAQ:CLNE)

While Cramer was pleased about Exxon's (XOM) $41 billion bid for XTO Energy (XTO), he thinks it is time to move on to the next natural gas stock. Cramer isn't the only one talking about the future of natural gas; Exxon sees "the writing on the wall" that natural gas may be adopted as the best alternative energy solution and is getting exposure to natural gas filling stations with its purchase of XTO. Cramer thinks the next natural gas takeover target will be Clean Energy Fuels (CLNE), which owns 176 natural gas filling stations in the U.S. and Canada. Even though the stock has risen 45% since August, Exxon's endorsement of the fuel may improve prospects for CLNE.

Concerning XTO, Cramer congratulated CEO Bob Simpson on a job well done and inducted him as the first member of his newly instituted CEO "Wall of Fame."

Electronic Arts (ERTS), Sony (NYSE:SNY), Microsoft (NASDAQ:MSFT)

Although Electronic Arts (ERTS) hasn't been the best performer and is just $2 above its 52-week low, Cramer thinks its acquisition of PlayFish, a leader in the social gaming space, will create a major upside for the stock. PlayFish has 60 million users, a 96% increase since June, and will provide new opportunities for Electronic Arts to further expand into wireless gaming. Cramer thinks ERTS may have an edge over more expensive gaming consoles such as Sony's (SNY) PlayStation, Microsoft's (MSFT) Xbox and Nintendo's Wii. Electronic Arts is streamlining its workforce, has $1.6 billion in cash and sells at a multiple of 9.8 compared to a 15% growth rate, which means the stock is cheap.

Cramer would wait for Electronic Arts to take a hit from an expected end of the year selloff and suggests investors wait until early 2010 to buy the stock, before the PlayFish acquisition.

CEO Tom Joyce, Knight Capital (NASDAQ:NITE)

Cramer recommended Knight Capital (NITE) in September, but since then, the stock has taken a hit, and has declined 35%; Knight missed earnings estimates in October, trading volume was down 10% in November, and now it looks like Knight is going to have to deal with competition from the government in its "dark pool" business.

Tom Joyce explained the company got ahead of itself after several good quarters, and wasn't helped by a "whisper number" that was higher than Knight could have achieved. The CEO says that although the last quarter was "pretty good," The Street is now overly negative about Knight. Joyce said low price stocks comprised 24% of trading, and the result was an erosion of margins. He is beginning new initiatives to tackle this problem. Joyce discussed regulatory reforms and acknowledged that some kinks in the system need to be worked out as the computerized platform reaches its five year anniversary. Joyce says it is an exciting time to be a retail investor with tighter price spreads and fast, dynamic trading.


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