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Cramer's 'Mad Money' Recap: He's Got Games

TheStreet.com Staff

Click here for an archive of Cramer's "Mad Money" recaps.

"Bad news can sometimes be good news," Jim Cramer told viewers of his "Mad Money" TV show Thursday, and he wants people to buy Activision (ATVI).

Activision announced earnings Wednesday and the company's outlook for the next six months is lousy, said Cramer. But, video game stocks are cyclical, so you need to buy at the bottom of the cycle, which is now, he said.

Take-Two Can't Play

Microsoft (MSFT) will release its new Xbox at the end of the month, and Sony(SNE) and Nintendo won't be far behind with their console offerings.

The lousy sales at Activision now are a sign that people are waiting and saving to buy new games for the new systems, said Cramer.

Cramer believes that the next video-game cycle will last three to four years, which is about how long it takes for the video-game companies to catch up with the new game consoles, he said. That means visibility.

Cramer prefers Activision to industry leader Electronic Arts (ERTS) because he sees consolidation coming for the video-game industry.

Activision is smaller than Electronic Arts and is more likely to be a takeover target, he said. It also has two highly anticipated games Call of Duty II and Quake IV. Finally, Cramer likes the fact that retailer GameStop (GME) is offering Activision games with all but one of its Xbox 360 packages.

Activision is not for everybody, though. The stock is volatile. It's the "ultimate schnitzel stock," said Cramer. So, buy a little now, and buy more on a pullback.

In response to a question about Take-Two Interactive Software (TTWO), Cramer said the company had "disappointed for multiple quarters" and is "in the pantheon of bad." Stay away, he said.

Cramer is also not a fan of Midway Games (MWY).

Commenting on GameStop, Cramer said he loves the stock but will probably sell a little when the Xbox 360 launches at the end of November.

Mercury's Swift Kick

That's great news for competitor, Keynote Systems (KEYN), said Cramer.

Keynote tests Web sites for performance and analyzes how customers interface with shopping Web sites. That's a "huge, growing, early infancy business," said Cramer, as online retailing is in a major secular growth trend, he said.

Keynote has no debt and lots of cash. After subtracting cash from the stock price, the company is only valued around $5, said Cramer.

Cramer believes that Keynote is headed "a heck of a lot higher" in the next 18 months now that its competitor, Mercury Interactive, is in trouble.

Keynote is a small stock, though, so don't pay much more than Thursday's closing price of $12.34, he said. Try to buy it under $13, Cramer said.

Slow Going

MarketWatch senior columnist Herb Greenberg joined Cramer to talk about Intuitive Surgical (ISRG), Hansen Natural (HANS) and CVS (CVS).

Greenberg said Intuitive Surgical had gone up about 30% since he began voicing concerns, and at one point, he considered maybe he was wrong.

But, after doing some work, he remains convinced that growth will begin to slow, and some signs of a slowdown are already appearing, he said.

"Do you think that my show will still be on air by the time this thing slows?" asked Cramer, incredulously.

"I don't time when I write my stories," said Greenberg. "All I know is when this thing slows ... it's like some of those other stocks ... it will be down 50% overnight.

"I've talked to doctors. There is risk here," said Greenberg.

"Alright. So, we've got a little hair on it, maybe," said Cramer.

Cramer then turned the topic to this week's upgrade of Hansen by Citigroup.

Greenberg said Hansen was up several dollars each day leading up to the release of the Citigroup report.

"You're not saying [Citigroup] may have leaked its 'buy!'" said Cramer, sarcastically.

Cramer then asked Greenberg about CVS's "monster quarter" reported Thursday.

"Relative to Walgreen (WAG), this thing is a piker," said Greenberg.

Greenberg added that although CVS's operating margin is just below Walgreen's, the sales growth is not there at CVS.

Cramer summed up the interview by saying despite the risks pointed out by Greenberg, Cramer remains bullish on all three stocks, at least for now.

ABBsolutely

Cramer is bullish on ABB (ABB), a Swiss power and automation technology company, because he believes that ABB will be the next big company to beat asbestos.

The stock closed Thursday at $7.83, but Cramer believes that it could go to $18 once the company gets its asbestos woes behind it.

That day may not be far off, said Cramer. ABB has already agreed to a "not too punitive" settlement with 95% of its asbestos claimants, he said.

But, just as Cramer doesn't speculate on takeovers if the fundamentals of the company aren't good, he also doesn't recommend speculating on legal outcomes unless the fundamentals of the company are good.

ABB is a worst-of-breed company, said Cramer, but it is getting its act together. The company just reported a good quarter and announced a big contract from Qatar.

The company has real earnings growth for the first time in a long time, he said.

Lightning Round

Bullish

Cramer was bullish on Fifth Third Bancorp (FITB), Wal-Mart (WMT), NGAS Resources (NGAS), Micron Technology (MU), M&T Bank (MTB), Amgen (AMGN), Genzyme (GENZ), Gilead Sciences (GILD), Genentech (DNA), Celgene (CELG), Labor Ready (LRW), Danaher (DHR), Emerson Electric (EMR), ITT Industries (ITT), Sears Holdings (SHLD), Yahoo! (YHOO), Inco (N), Falconbridge (FAL), Southern Copper (PCU), IHOP (IHP), ATI Technologies (ATYT), China Medical Technologies (CMED), Abercrombie & Fitch (ANF), CarMax (KMX), Pike Electric (PEC), PetSmart (PETM) and PetroQuest Energy (PQUE).

Bearish

Cramer was bearish on Pfizer (PFE), Skyworks Solutions (SWKS), Geron (GERN), Hologic (HOLX), eBay (EBAY) and Wynn Resorts (WYNN).

	1.	Pigs Get Slaughtered		2.	It's OK to Pay the Taxes
	3.	Don't Buy All at Once		4.	Buy Damaged Stocks
	5.	Diversify to Control Risk		6.	Do Your Homework
	7.	Don't Panic		8.	Buy Best-of-Breed
	9.	Defend Some Stocks		10.	Don't Bet on Bad Stocks
	11.	Own Fewer Names		12.	Cash Is for Winners
	13.	No Regrets		14.	Expect Corrections
	15.	Know Bonds		16.	Don't Subsidize Losers
	17.	No Room for Hope		18.	Be Flexible
	19.	Quit When Execs Do		20.	Patience Is a Virtue
	21.	Be a TV Critic		22.	When to Wait 30 Days
	23.	Beware the Hype		24.	Explain Your Picks
	25.	Find the Bull Market