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Cramer's 'Mad Money' Recap: Stake Out AeroVironment

TheStreet.com Staff

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

To make a lot of money in not a lot of time, market players need to get into the next hot initial public offering, Jim Cramer told viewers of his "Mad Money" TV show Friday.

AeroVironment, which is expected to go public next week and trade under the symbol AVAV, is the next hot IPO, according to Cramer.

The company makes small unmanned aircraft used for surveillance, he said. Even though AeroVironment may have the risk of competition, it's the only company that makes a plane weighing less than a pound.

That's what gives AeroVironment an edge, Cramer said.

The Pentagon has been "pouring money" into it, as the small, quiet planes AeroVironment makes are used by the army "to spy what's happening 'over the hill,'" he said.

Moreover, as the aircraft are combat-tested in Iraq and Afghanistan, the company has real sales and real profits, Cramer said.

Plus, AeroVironment's applications are not only military-based, but the aircraft is also used for scientific and preventative reasons in the case of volcanoes and forests, he continued.

Though people may be worried that a stock like this might take a hit with the Democrats in control, Cramer told viewers that AeroVironment has deep military contracts and an unbelievably optimistic backlog.

Plus, because it's the only game in town right now with its virtually weightless plane, the company is in a good position, he said.

Although AeroVironment should come public between $14 and $16, "it won't be possible to get in at this price unless your broker gets you in," Cramer said. Therefore, he advised buying AeroVironment under $20 a share, buying it "with discretion" between $20 and $25 a share and selling it at $25.

Goldman Sachs is acting as AeroVironment's main underwriter, and Cramer said he doubts it would be bringing AeroVironment into the market unless Goldman believed that the company's next couple of quarters are "in the bag."

Southern Comfort

"If you're a conservative investor who doesn't like risk, you have to figure out if you want upside or if you just want income," Cramer told his viewers.

For those people who don't want mad money but want just a low, steady source of income to save for their retirement, he offered two bond replacement stocks: Consolidated Edison (ED Quote) and Southern Co. (SO Quote).

Bonds, Cramer said, are not exciting and are called fixed income for a reason: because you know how much you will get paid with them.

However, if market players find stocks with high dividends in a low-risk sector, they can get the same income as a bond with the upside potential of stocks, he said.

Cramer encouraged low-risk investors to look at Con Ed and Southern and to consider buying them over government-issued Treasury bonds.

People should think about getting into these stocks instead because investors tend to pay more taxes on bond income than on dividends, he said. Not only are the after-tax yields offered by Con Ed and Southern better than the income from bonds, but both companies also have growth, Cramer said.

In addition, the bond will never increase its coupon rate, whereas it's possible that the stocks will go up.

Game Plan: Listen and Learn

In his game plan, Cramer warned viewers that next week is going to be difficult to make money because of all the earnings reports that are set to come out.

Therefore, instead of acting, he advised people to listen next week.

For Monday, Cramer told market players that the key quarter to look out for will be that of Texas Instruments (TXN Quote). This will be the "crystal ball into the world of technology."

A good quarter should turn around the gloom in tech, but that scenario is unlikely, he said.

On Tuesday, listen to what Coach (COH Quote) has to say, because it should guide viewers about to what to do with other high-end, luxury stocks, Cramer said.

He also recommended looking at United Technologies' (UTX Quote) earnings release.

Cramer believes that on Wednesday, investors should be able to discern the real strength of the economy by examining Norfolk Southern (NSC Quote). And for a window into high-growth, high-multiple stocks, he suggested looking at F5 Networks (FFIV Quote).

For Thursday, Cramer advised listening to AT&T (T Quote), Legg Mason (LM Quote) and Microsoft (MSFT Quote).

Next week, focus on finding out about the economy from the bottom up by seeing how businesses are really doing, Cramer said. Don't act -- just listen.

Hot Tamales

Cramer welcomed Steve Ells, Chipotle Mexican Grill's (CMG Quote) chairman and chief executive, to the show and asked him if the company can keep up its "fabulous" performance.

"We sure hope it can keep up," Ells responded. It has been able to do so well, he believes, because although Chipotle is a fast-food restaurant, it doesn't act that way in some key ways: food, service and atmosphere. "And customers are going crazy for it all over the country," Ells said.

"We are opening up 95 to 105 new stores because we can find great real estate and managers for that number," he continued.

Responding to Cramer's question regarding rising food costs, Ells said the good news is that Chipotle will see no immediate effect of this.

Therefore, Chipotle has some time to figure out what it's going to do, the CEO said. "We're going to keep our eye on it."

Lightning Round

Cramer was bullish on Covance (CVD Quote), Continental Airlines (CAL Quote), Rite Aid (RAD Quote), International Flavors & Fragrances (IFF Quote), JPMorgan (JPM Quote), Capital One Financial (COF Quote), Level 3 Communications (LVLT Quote), Best Buy (BBY Quote), AT&T (T Quote) and Toyota Motor (TM Quote).

Cramer was bearish on JetBlue Airways (JBLU Quote), Bare Escentuals (BARE Quote), Sky Financial (SKYF Quote), Western Refining (WNR Quote), Electronic Arts (ERTS Quote), Corning (GLW Quote) and FairPoint Communications (FRP 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 from his popular book by clicking here.

1 What would best describe your stance heading into the coming week of trading? Bullish Bearish Neutral 2 Which of these sectors do you think is set to move up in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities 3 Which of these sectors do you think is set to move down in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities View the results without voting