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Cramer's 'Mad Money' Recap: 'Fallen Angels' Prepare for Flight

TheStreet.com Staff

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

"Every once in a while, the market does something so stupid it takes your breath away," Jim Cramer told viewers of his "Mad Money" TV show Monday.

And when it does this, it can create a fallen angel.

A fallen angel, he explained, is a stock that deserves to trade at a higher multiple than it does.

Therefore, Cramer said he was dedicating the show to explaining how certain fallen angels have gotten to where they are, why he believes people should buy them, and what should bring them back up.

He named VF Corp. (VFC Quote) as his first fallen angel.

VF recently announced the sale of its "horrible" intimate apparel business for $350 million, Cramer said. He considers this a great move, as the company not only had "razor-thin margins," but now that the intimate-clothing division is gone, VF is free to "let its other higher margin businesses shine."

However, VF became a fallen angel because it said it wasn't happy with its fourth quarter even before it reported, citing a difficult retail market, Cramer said.

Consequently, market-players didn't care about the company's good news and "threw it down the pit."

The stock quickly took a 7% hit, even though it's getting out of its worst business, he said. But Cramer believes that VFC should miss its quarter by only 3 cents.

"The fallen angel will get its wings back," he said. In fact, Cramer said the stock should go back to where it was before this fiasco -- right after it reports on Feb. 6 -- and continue to climb higher.

Cramer would be a "serious buyer" of VF ahead of its earnings report.

Flight Time

Amgen (AMGN Quote) is another stock that has taken a hit for the wrong reasons, Cramer said.

Last week it got its wings ripped off because of headlines that said its Aranesp drug was fatal to some patients, Cramer said. But the bad headlines, which caused the stock to fall, were actually off base, he said.

The patients who died had terminal cancer and had given up on chemotherapy and radiation treatment, Cramer explained. They weren't expected to get better.

While Amgen fell in part because of the negative headlines, it also fell because it gave low guidance, Cramer said.

Amgen is notorious for being conservative with guidance, he said. Therefore, if history repeats itself, he believes that people should see an upside surprise here.

The fact that Amgen is selling like a traditional slow-growth pharma company is "crazy," Cramer said.

Forget the headline risk, because with steady earnings growth and with a new colon cancer drug and new osteoporosis drug in its pipeline, the stock has only good news ahead of it, he said.

Quest Is Cheap

Lastly, Cramer named Quest Diagnostics (DGX Quote), which he owns for his charitable trust, Action Alerts PLUS, as an angel that has fallen from grace.

Quest fell on news of its split with Oxford Health, he said. However, the news shouldn't have affected the stock because it was already known and should have already been built into Quest's price, he said.

Though losing Oxford wasn't great news for Quest, Cramer believes that it's time to get into the stock now.

Last week, it reported a better-than-expected quarter and has become dirt-cheap based on its own bad guidance, Cramer said. Quest is assuming it will lose all of its UnitedHealth (UNH Quote) business, as UNH owns Oxford. (Cramer owns UnitedHealth for his charitable trust.)

But this shouldn't happen, he said. Based on this assumption, Quest, is low-balling what its shares should earn.

Quest's guidance, estimates and bar all have been set too low, Cramer said. But the fact that it should pull off better-than-expected earnings will send the stock higher.

Cramer welcomed Jones Soda's (JSDA Quote) Chairman and CEO Peter van Stolk to the show. Cramer asked him if the stock's ramp should continue now that it has left Target (TGT Quote) and embarked on a different distribution method. (Jones' exclusive two-year canned soda contract with Target expired on Dec. 31.)

"Yes, it can," Stolk said. "Target is a great retailer, and we will continue to work with them.

Stolk said that Jones is trying to distinguish itself from other market-players by being a soda that is made with cane sugar, rather than with high-fructose corn syrup.

"Corn is for cars, and sugar is for sodas," he said.

As Jones has had a "monster move," Cramer advised people to let the stock come in before buying it.

To view Cramer's interview with Peter van Stolk, please click here.

During his "Sudden Death" round, Cramer was bullish on China Mobile and Brunswick (BC Quote). He was bearish on Comtech (COGO Quote).

Lightning Round

Cramer was bullish on Guidance Software (GUID Quote), Hewlett-Packard (HPQ Quote), Akamai Technologies (AKAM Quote), Allegheny Technologies (ATI Quote), Arris (ARRS Quote), Starwood Hotels & Resorts (HOT Quote), Hilton Hotels (HLT Quote), China Mobile (CHL Quote), PetroChina (PTR Quote), Penn National Gaming (PENN Quote) and DuPont (DD Quote).

Cramer was bearish on Buffalo Wild Wings (BWLD Quote), ATMI (ATMI Quote), WebEx Communications (WEBX Quote), Methanex (MEOH Quote), Harmonic (HLIT Quote), China Automotive Systems (CAAS Quote), BASF (BF Quote), Turkcell Iletisim (TKC Quote) and iRobot (IRBT 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.