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Cramer's 'Mad Money' Recap: Oil Drill Team

TheStreet.com Staff

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

Today there was a "lovely decline" in the oil-services stocks, incredibly enough because it was a nice day outside, Jim Cramer told viewers of his "Mad Money" TV show Monday.

Right now there is an opportunity in the oil patch because market-players "are not looking at the right things," he said. People are looking at the weather and inventory numbers, but that makes no sense because inventories and weather are both fleeting.

"If you're trying to determine a company's future earnings per share, you can't look at it on its own," Cramer said. "Base your decisions on how its customers are doing."

Right now, these stocks are "edgeless," he said, and looking at their earnings is not helpful because oil stocks are disappointing. In fact, the only "major integrated oil" Cramer said he's been recommending is BP (BP), and that's based on its yield, not its earnings.

"The real money in the oil patch is with drilling," he said, adding that he believes a select few of the drillers are the only "safe and profitable places to be."

Cramer said he believes this because he listens. Recently, Exxon Mobil (XOM) upped its oil production and admitted to being too conservative, at an analyst meeting. Because of that, Cramer said he'll be watching ConocoPhillips (COP) and Chevron (CVX).

Exxon needs to drill deep in the ocean, and Cramer expects to hear the same from both Conoco and Chevron. Therefore, he wants investors to buy deepwater drillers -- not just any oil driller -- ahead of analyst meetings.

There are only five names worth owning in 2007, according to Cramer. In ascending order, the first oil play he named was Schlumberger (SLB), which he called "undervalued."

Second, Cramer said he likes National Oilwell Varco (NOV). Big oil companies need to drill deep, and NOV is the only company that develops the rigs they need to dig deep, he said. "It has years of backlog that should keep its estimates high."

No. 3 is GlobalSantaFe (GSF), which has an "aggressive buyback," Cramer said.

The second-best oil driller Cramer said he likes is Halliburton (HAL), which he owns for his charitable trust, Action Alerts PLUS.

People might not like that Halliburton is moving its headquarters to Dubai, but this is the "single most patriotic thing," Cramer believes the company can do because it's losing business to Schlumberger, and the move to Dubai might help it regain some of its market share.

Further, he believes that the stock is about to "jump up fast" as it's involved in a tender offer because of its spinoff of KBR (KBR). This is the one event Cramer said he was counting on. It's a good idea to hold on to Halliburton even after the spinoff, he said.

Cramer's "single best" oil-driller play, he said, is Transocean (RIG), which he owns for his charitable trust as well.

"How can you not own a rig stock that's called RIG!" he exclaimed, adding that he likes the stock for three reasons.

First, Transocean's day rates are "skyrocketing," Cramer said. Second, because "consolidation is imminent" in the sector, he believes that RIG could merge with another company or be bought out. And finally, as it's options-expiration week, Cramer said this should drive the stock's price down.

"This stock is going to end at $75 at the end of the week, which is when people should pick it up -- on Friday afternoon," he said. Transocean closed at $76.62 Monday.

Editor's note: Watch these picks. Click here to see a Stockpickr portfolio of the group.

The Next Intuitive

Hansen Medical (HNSN) is a small-cap medical delivery stock that "could be the next Intuitive Surgical(ISRG)," a company that is up 1,124% since coming public in 2000, Cramer told his viewers.

However, he urged people to buy Hansen with "tight limit orders," and to not buy it before doing a couple of days of homework.

Right now, the hottest part of the market is nonpharma health care because subprime can't touch it, Cramer said. Hansen Medical is "losing money hand over fist" and has "no revenues to speak of." Still, Cramer believes it will be huge.

The company makes robotic catheters that are easy to maneuver, Cramer said, and it has a "big target market." The one drawback here is that Hansen's machine hasn't been approved yet, but Cramer believes that it should be approved in Europe during the first half of the year and in the U.S. in the second half.

Hansen's only competitor is Stereotaxis (STXS), and while Cramer said he'd prefer a monopoly, he can live with a duopoly, especially because Hansen's machine is cheaper. The best part of this story, he said, is that it was founded by Intuitive Surgical.

"Mad Mail"

In his "Mad Mail" segment, Cramer told a writer to the show that he believes people should own regular Altria (MO) (a stock he owns for his Action Alerts PLUS charitable trust) shares, rather than the new MO-issued shares.

However, Cramer advised viewers not to take any action yet because he plans to run a segment on this topic soon.

Cramer advised a viewer who had sold Celgene (CELG) to buy it back.

Lightning Round

Cramer was bullish on Denny's (DENN), Blockbuster (BBI), Dynegy (DYN), Companhia Vale do Rio Doce (RIO), NYSE Group (NYX), Yahoo! (YHOO), eBay (EBAY), Big Lots (BIG) and BEA Systems (BEAS).

Cramer was bearish on USG (USG), Heelys (HYLS), News Corp. (NWS) and Quiksilver (ZQK).

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.