Mad Money Recap

Return to Article

Cramer's 'Mad Money' Recap: Love Qwest for Growth

TheStreet.com Staff

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

"If there's one thing that could make you some mad money, it's mindless hatred," Jim Cramer told viewers of his "Mad Money" TV show Thursday.

"But hatred is nothing unless you combine it with ignorance," he said, because a stock that's washed up, left for dead and hated by Wall Street is generally a money loser. But a hated stock that no one knows enough about, could make you moolah.

This is where Qwest Communications(Q Quote) comes in. "This stock is despised. It's cretinous. It's so disliked ... I am here to tell you that the haters are wrong," said Cramer.

He called it a triple buy -- it's a textbook comeback story, and none of the analysts have caught on.

Qwest is making a "fearsome comeback," has turned around its earnings and has generated some upside surprises, he said, adding that this turnaround is one of best he's seen.

The company is beating the numbers handily and has reduced its debt, but he said it's not the comeback story that will make you money, but the fact that analysts still hate it despite its recent success.

The analysts covering the stock have two buys, 13 holds and 9 sells on it, he said. He said that when the fundamentals are improving, but analysts have their heads in the sand, it's time to move in for the kill.

If Qwest keeps doing well, these analysts will have to upgrade, he said. Many investors buy and sell based on these ratings, so a series of upgrades should finally push Qwest higher.

Ten days ago, Citigroup boosted its earnings estimates for 2006 and 2007, but refused to upgrade Qwest. Cramer believes it will eventually have to capitulate to the good news, just like everyone else who has a sell on the stock.

The Profits In Stores for Sears

Cramer said that there have been some bright spots in these recent dark days for the market, including the fact that Dell(DELL Quote) is switching to Advanced Micro Devices(AMD Quote) from Intel(INTC Quote) chips.

Both Dell and AMD shares moved higher in after-hours trading on the news.

Sears(SHLD Quote) is another bright spot for investors, he said, referring to a company that he owns for his Action Alerts PLUS charitable trust portfolio.

"Most retailers only care about abasing themselves before mighty Wall Street analysts," he said. They run their businesses sometimes into the ground just to keep a bunch of analysts smiling about their same-store sales numbers, the only metric Cramer said the Street cares about.

But Eddie Lampert, the chief executive of Sears, is doing "something totally revolutionary" because profits, not same-store sales, are his chief concern. Cramer said this means that Lampert will actually return capital to investors.

Even after today's unbelievable gain on a first-quarter profit beat, he said that it's one of the best stocks out there, and that it's not too late to get in. It's a $200 stock masquerading as a $150 stock, he said.

The same-store sales numbers actually shrank in the last quarter, but the earnings were healthy. Lampert believes that profits matter, and he turned out better expense controls and better margins, said Cramer.

While other stores give away merchandise to make their same-store sales numbers, throw away margins and run themselves into the ground, Sears saw margins go to 2.8% from less than 1% a year ago. And the Street was only looking for margins of 1.9%.

The company has bought back million of shares and could buy back lots more because it's sitting on billions in cash, Cramer said. This would boost earnings per share by decreasing the numbers of available shares.

Cramer also believes that the company can close a quarter of its stores and not miss them, and that it's sitting pretty as the largest provider of home services in the U.S.

Am I Diversified?

Every Thursday Cramer plays "Am I Diversified," when he judges the portfolios of viewers on diversification and the quality of the stocks.

The first caller owned Corning(GLW Quote), FPL Group(FPL Quote), Exxon Mobil(XOM Quote), Bank of America(BAC Quote) and Burlington Northern Santa Fe(BNI Quote).

Cramer said that this portfolio was diversified and liked that it included what he called the No. 1 bank in the U.S. with a 4% yield and one of his absolutely favorite utilities.

But he said that Burlington Northern is not best of breed and that he would swap out of Exxon and buy ConocoPhillips(COP Quote).

The second portfolio included Barrick Gold(ABX Quote), Advanced Micro Devices, Genentech(DNA Quote), Motorola(MOT Quote) and Pacific Ethanol(PEIX Quote).

Cramer congratulated her on owning Advanced Micro, but he said that Motorola is too similar and that he would sell the cell-phone maker. He also said that Pacific Ethanol is too speculative and that he would ring the register on that stock too.

The final caller owned Wells Fargo(WFC Quote), Transmeridian Exploration(TMY Quote), MGP Ingredients(MGPI Quote), Hi-Shear Technology(HSR Quote) and Informatica(INFA Quote).

Cramer said that she was diversified, but a little speculative, with both an ethanol play with MGP Ingredients and a Russian play with Transmeridian. He also said Informatica is a lower-quality tech stock, and that she could find something better.

The L-3 Defensive Play

Cramer said that L-3 Communications(LLL Quote) is one of his favorite defense companies, and he welcomed chief executive Frank Lanza to talk about the company's latest acquisition of TRL Electronics.

Lanza said that TRL is a strategic acquisition to help L-3 expand its work in the U.K. and that this is a reasonably sized company that should help support L-3's work in this area.

He added that organic growth should stay healthy in 2007, but acknowledged that his company can't maintain 40% growth.

Cramer mentioned an analyst report that touched on the fact that Lanza has had some health problems, but Lanza said not to worry about succession. He said that he is recovering well from his recent surgery and that he has no plans to retire.

Lanza added that he has a good bench of seven chief operating officers that should keep things running smoothly should anything happen, and that he has promised his board that he will give them a year's notice if he decides to retire.

Cramer said that this is one of his top defense stock picks.

To view Cramer's interview with Lanza, click here.

Lightning Round

Cramer was bullish on TD Ameritrade(AMTD Quote), Crystallex International(KRY Quote), Anglo American(AAUK Quote), Joy Global(JOYG Quote), Terex(TEX Quote), Deere(DE Quote), Caterpillar(CAT Quote), Baidu(BIDU Quote), The Pantry(PTRY Quote), Texas Roadhouse(TXRH Quote) and Schlumberger(SLB Quote).

Cramer was bearish on E*Trade(ET Quote), Select Comfort(SCSS Quote), Sirius(SIRI Quote), Wind River Systems(WIND Quote), Goldcorp(GG Quote), CBOT Holdings(BOT Quote), AMR(AMR Quote), Netease(NTES Quote), Expedia(EXPE Quote) and Ruddick(RDK Quote).

For more of Cramer's insights during the most recent Lightning Round, click here.

Want more Cramer? Check out Jim's rules and commandments for investing from his latest book by clicking here.

Here's your chance to pick the stock you'd like me to feature on my radio show May 25: AES ConocoPhillips EuroZinc PetroChina Rentech Smith Micro

REMEMBER to listen in on Thursday for my take on the stock that wins this poll!