Mad Money Recap

Return to Article

Cramer's 'Mad Money' Recap: A Study in Stents

TheStreet.com Staff

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

In a "Mad Money" show devoted to helping market players determine the type of investors they are, Jim Cramer told viewers Tuesday to check out an article in that morning's New York Times.

According to "Federal Panel to Review Use of Artery Device," the Food and Drug Administration is convening a panel this Thursday that will ultimately determine whether drug-coated stents, medical devices used to open clogged heart arteries, stay on the market.

This is a story he believes people can play in one of two ways: with Boston Scientific (BSX Quote) or with Johnson & Johnson (JNJ Quote), a stock he owns for his Action Alerts PLUS charitable trust.

The choice offers "the perfect opportunity" for people to figure out what kind of investors they are, he said. The question here has nothing to do with Boston Scientific or Johnson & Johnson, but instead it has everything to do with what kinds of goals individual investors have and what kind of personalities they possess, Cramer said.

Together, Boston Sci and J&J control 90% of the stent market and have consequently been "punched" down, Cramer said. Cramer believes that the panel should approve the devices, and that creates an opportunity for viewers to make a trade Wednesday morning.

In this case, Boston Scientific is "the higher risk, higher reward trade," he said. If things go well for the company and the FDA panel approves stents, the stock should "soar;" if not it will get "crushed."

Johnson & Johnson, on the other hand, has diversified its business and therefore, it has less riding on the panel's outcome, he said.

If market players want to make the Boston Scientific trade, they need to be comfortable taking a lot of risk and not be afraid of losing a lot of money, Cramer warned.

"Buy it with money you are not afraid to lose and you can afford to lose," he said.

If the panel says that stents are safe and the stock spikes, "you should sell it right then and there," Cramer advised. "Boston Scientific is not an investment, but a trade."

Boston Scientific is risky, but it is also cheap, he went on to say. Although its buyout of Guidant was risky, there's "serious potential there," Cramer said. In addition, even though the company recently had a bad quarter, he believes there is no reason it should repeat it.

There is also an age component to factor in when making a trading decision, he told his viewers. At 51, Cramer said he would not buy Boston Scientific, because he believes someone that age is too old to make such a risky trade. When you're young you have all the time to make your money back, but "once you get older it's better to stay risk averse," he said.

Investor, Know Thyself

As long as people know what they are looking for and the type of money they're trying to make, they can make more rational decisions as to which stocks they should get into, Cramer told his viewers.

Among the factors people should consider when trading are their age, wealth and what they are planning on using their money for, he said. The answers to these questions should affect an individual's investments.

All of these factors are discussed in Cramer's new book, Jim Cramer's Mad Money: Watch TV, Get Rich, which hit bookstores today.

Getting back to discussing the merits of stents, Cramer said Johnson & Johnson should not take a big hit if stents are not approved. But at the same time, he said it won't go up very much if they are approved.

If market players want to get in the stent game but are not comfortable getting in a pure-stents play like Boston Scientific, Cramer advised getting into Johnson & Johnson. He believes this stock should go up regardless of what the panel decides, but it will not go up as much as Boston Scientific if stents are approved.

Even though Cramer said he would have probably bought Boston Scientific here if he was still working at his hedge fund, he understands Johnson & Johnson's stability could make it the preferable choice for most home-gamers as it's more comfortable to get into a stock with less downside.

However, "to know which stock picks are for you, you need to figure out what you're comfortable with and what your aims are," he reiterated. "I can't tell you if you should take the Boston Scientific end or the Johnson & Johnson end."

A Good Apparel Fit

Speculating on a potential takeover is a way to make some extra money in the market, and right now Cramer believes outdoor apparel maker Timberland (TBL Quote) is a takeover target worth an investment.

In fact, Cramer believes VF Corp. (VFC Quote) "might very well try to buy the company."

When VF Corp.'s CEO Mackey McDonald was a guest on Cramer's "Mad Money" show last week, Cramer asked him if he would consider buying Timberland. And although the chief executive was not at liberty to give a straightforward answer, he didn't say no and he didn't rule it out.

Over the past few years, VF Corp. has made many acquisitions, and in all likelihood, it should continue to do so, Cramer said. When VF Corp. bought each brand, the company integrated it into its outdoor coalition.

It should be able to get Timberland into more stores as it has "tremendous bargaining power," Cramer said, adding he believes VF could do a lot more for Timberland than Timberland could do for itself.

Moreover, Timberland has hired Goldman Sachs to find a buyer for the company.

Even if it doesn't get a bid, it's OK, said Cramer, because while Timberland's fundamentals could be stronger, they are all right. And although it is having trouble with its brands in the U.S., its sales are up in Asia. Plus, it is sitting on a lot of cash and has a good buyback program, he said.

"VF could do some great things here and I don't see any reason for it not to buy Timberland," he said, adding VF could use the growth and has already made similar company purchases.

Mad Mail & Sudden Death

In his "Mad Mail" segment, Cramer told one letter writer that Rite Aid (RAD Quote) has been his favorite speculation. Cramer agreed with the viewer that perhaps the reason the stock's going higher is because the drugstore chain's stores are generally located in areas more easily accessible by foot, unlike Wal-Mart (WMT Quote).

When asked about the New York Stock Exchange (NYX Quote) vs. the Nymex (NMX Quote), Cramer said he prefers the NYSE and recommended letting the Nymex come in a little before buying it.

In his "Sudden Death" round, Cramer was bullish on Boeing (BA Quote). He was bearish on Toll Brothers (TOL Quote), Saifun Semiconductors (SFUN Quote) and Textron (TXT Quote).

Lightning Round

Cramer was bullish on Gilead Sciences (GILD Quote), MEMC Electronic Materials (WFR Quote), Archer Daniels Midland (ADM Quote), Allegheny Technologies (ATI Quote), Cisco (CSCO Quote), Microsoft (MSFT Quote), Lowe's (LOW Quote), Level 3 Communications (LVLT Quote), KBR (KBR Quote), MasterCard (MA Quote) and ConocoPhillips (COP Quote).

Cramer was bearish on Titanium Metals (TIE Quote), Nortel Networks (NT Quote), Alcatel (ALA Quote), Finisar (FNSR Quote), Savient Pharmaceuticals (SVNT Quote), American Express (AXP Quote), Swift Energy (SFY Quote) and VeraSun Energy (VSE Quote).

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

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