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Cramer's 'Mad Money' Recap: Best Little Stocks in Texas

TheStreet.com Staff

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

"Everything's bigger in Texas, so I knew I had to come here with four big stocks based in Texas," Jim Cramer told his live student audience at the McCombs School of Business at the University of Texas at Austin as part of his "Back to School" tour on his "Mad Money" TV show Tuesday.

These best-of-breed Texas stocks are all "trading at a discount" and have been "dissed by the Wall Street moneymen," he said. "I would buy them right here, right now."

The first of Cramer's Texan picks was J.C. Penney (JCP), which he called "the best, most consistent retailer in the country."

J.C. Penney recently admitted that it has to alter its product mix, and since then it has taken almost a 10% hit, Cramer went on to say. "It has been hammered," he said. "It's ridiculous."

Pick No. 2 was Transocean (RIG), which he owns for his charitable trust, Action Alerts PLUS.

"RIG's a driller, and it's my favorite," Cramer said. The company has very little exposure to the weak markets of the Gulf of Mexico and Canada drilling, he said. "RIG is the biggest in the game and among the cheapest."

Another name from the oil sector and also a part of Cramer's Texas-based stock list was XTO Energy (XTO). He called XTO a "great" company that not only knows how to get the most out of its reserves, but also has proven that it knows how to trade oil as well.

"I would buy it aggressively," Cramer said.

The final and his favorite of the four was Temple-Inland (TIN), he said. This company has finally realized that it needs to break up its operations and is going for it, Cramer said. "I see 27 points of upside here."

Ask Me Anything

Next, in a question-and-answer session, Cramer opened the floor to students who were invited to ask him anything they wished.

Responding to his first question, Cramer said Cisco (CSCO) is a stock that was at $18 and moved to $29.

Although he agrees that people shouldn't be greedy, Cramer said investors should not walk away from a "best in show" stock such as Cisco.

He advised the student to buy Cisco and hope it goes to $25 to buy more. "I think Cisco is best of breed, and networking is still in bull market mode," Cramer said.

When another student asked about Dell (DELL), Cramer said he wish he could recommend it. But even though he considers Dell a good company, he said it's not a great stock and can't encourage people to buy it.

Heinz Anticipation

Cramer invited William Johnson, the president and CEO of Heinz (HNZ) and a distinguished alumni of the McCombs School of Business, to the show and asked him if he's right to recommend Heinz as the "ultimate defensive play" or if he should expect the Chinese and Japanese to enter the market and start putting their own bottles of ketchup on dinner tables.

"No, we have our bottles on their tables," Johnson responded.

When Cramer asked why so many people get scared when a big shareholder like Nelson Peltz shows up to a company uninvited, Johnson said one reason is because no one wants a boss.

"Instead we have lots of bosses, including consumers who buy our products," Johnson went on to say. "It's a normal resistance, but it's a mistake because these guys do bring value."

Johnson also said that "innovation is the theme of the company," and Heinz spends a lot of time trying to understand trends.

Cramer called Heinz an "ideal weak-dollar play" and said it's the stock that "defines the most defensive business possible."

To view Cramer's interview with William Johnson, please click here.

Perfect Pitch

Cramer invited students from the business school's MBA Investment Fund to come out and pitch him their favorite stocks.

The first student tried to sell Schlumberger (SLB) as a value pick. Even though the group was down big today, the student said he was not fearful because of "great macroeconomic trends" in favor of Schlumberger and the still-high price of oil.

Cramer said the student was right and that he believes Schlumberger is taking share and is best of breed. Although the stock is not cheap, Cramer said that sometimes you have to pay a premium for the best. "I would buy it aggressively," Cramer said.

The next student pitched Broadcom (BRCM), saying she likes the stock for the following three reasons: It has a "diverse and very impressive product portfolio," accelerated revenue growth, and "improved inventory management."

Further, the student believed that people should not be worried about options backdating because the company has cleaned up its balance sheet and is ready to go.

Cramer said he would put Broadcom on his watch list and buy it in August because right now he doesn't like tech.

When the last student tried to sell him Wal-Mart (WMT), Cramer asked the student if he wasn't scared of the appearance of a Wal-Mart store.

The student said no, and pointed out an amazing new store that recently opened in the area. "I think they have it down," the student said, referring to the retailer, and "management is finally getting focused on what they need to do."

Although the student said the stock is not going to go "gangbusters," he believes that in 12 to 18 months, people are going to be happy with it.

Cramer said that after hearing this, he'll go to three Wal-Marts in the next 72 hours and do his own homework before making a decision.

After all, even though Cramer has been bearish on Wal-Mart, "maintaining an open mind is everything in this business," he said.

Lightning Round

Cramer was bullish on Lockheed Martin (LMT), Reliance Steel (RS), Freeport-McMoRan (FCX), Jacobs Engineering (JEC), Foster Wheeler (FWLT), Transocean (RIG) and GlobalSantaFe (GSF).

Cramer was bearish on Riverbed Technology (RVBD), United States Steel (X), Southwest Airlines (LUV), Advanced Micro Devices (AMD), GameStop (GME) and Diamond Offshore (DO).

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.