Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Tuesday January 30. Click on a stock ticker for more analysis:
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Short Busting: Waste Services (WSII)
Cramer devoted the program to short-busting, which is a technique of beating the shorts, or people who bet against a particular stock. Short-busters make money in a short squeeze, when all of the shorts try to cover their shares at once. To benefit from a short bust, Cramer suggests keeping track of a stock's average daily volume, which indicates how difficult it would be for shorts to close or cover their positions. If shorts are deep, they will bring up the price to sell with profits. Cramer also suggested taking a look at insider buying, which shows that a stock is alright. Cramer's first short-buster is WSII, which is disliked because it has high prices and low margins. Although the company seems "heinous" Cramer notes that with 1.5 million of its shares sold short and an average trading volume of 104,000 shares a day, it would take the shorts 15 days to close their positions on WSII. Since the company has "significant insider presence" and improving fundamentals, Cramer would bust the shorts and buy WSII.
Seeing Green with Greenbrier Companies (NYSE:GBX)
Cramer's next shortbuster is GBS, which produces and sells equipment for freight cars. Although the company did not make its quarter, has a large debt and "serious production issues," Cramer feels that the rail industry is in "a multi-year bull market." With 1.98 million shares sold short and an average daily trading volume of 519,000 shares, Cramer says that the shorts would not be able to close their positions quickly enough. Cramer notes that the company has a strong backlog for rail cars, robust insider buying, and that its acquisitions will kick in during the next quarter; he says GBX is "excellent."
Related: Marc Gerstein says that railroads have room to grow.
Cramer says that the best way to play a cyclical stock is to pay next to nothing for then when it seems the economy has peaked. For instance, when the economy reached its peak last spring, CAT came tumbling after; "The drop was based on fears that its growth would slow, and the fears turned out to be true," Cramer said. However, Caterpillar reported a quarter that many found disappointing, but the stock rose, which is what happens when you "catch a real bottom," observed Cramer, who commented that its not too late to buy CAT as well as BDK and ASD, all of which are going up.
Related: CAT reported record earnings, but still fell short of analyst estimates.
CEO Interview: Frank Sullivan, RPM International (NYSE:RPM)
Cramer asked about how the holding company deals with the names of its subsidiaries which produce coatings and sealants for industrial and consumer markets. Frank Sullivan replied that keeping the names of its acquisitions is an essential ingredient to RPM's success as well as its policy of maintaining the management of companies it purchases. "RPM has never let us down, and it's not going to," commented Cramer who said RPM is a triple buy.
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