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Cramer's 'Mad Money' Recap: Qwest for Contract Gold

TheStreet.com Staff

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

The U.S. government is looking to award the largest telecommunications contract ever, Jim Cramer told viewers of his "Mad Money" TV show Thursday. But how do you play the sector with a $20 billion deal on the line?

AT&T (T Quote), Verizon (VZ Quote), Sprint Nextel (S Quote) and Qwest (Q Quote) are all vying for this contract, he said. And even though this contract -- reported last week by the Washington Post -- is super secret, it can still make people some mad money.

Out of the four, Cramer said he likes AT&T and Verizon but doesn't believe a $20 billion contract would "make or break" either company. The two are so gigantic, with so much going for them that he believes this contract would probably send their stocks up only 50 to 60 cents if either of the companies were to win.

On the other hand, the contract would be a big deal for Sprint, Cramer said. But although the company had a good quarter, Motorola (MOT Quote), Sprint's supplier, said Wednesday that things are not so hot.

Therefore, Sprint, AT&T and Verizon are in the "Don'tBuy camp" here, he said, which leaves Qwest. The one that makes the most sense and that people should buy here is Qwest, Cramer said. "In fact, I think you'll see a gigantic move as the permanence of Qwest ... is no longer in doubt."

Such a large contract award should move the needle on Qwest, he said, but even if Qwest doesn't win the deal, it's still likely that the company will beat its numbers. Plus, it has $400 million of free cash flow, with a "growing broadband penetration," and it is a company that can go from bad to good, Cramer said.

Even so, in the case that Qwest gets the deal and doesn't go up big, Cramer believes it's very likely the company could get acquired in the near future.

Pico Water Capacity

While Cramer was visiting the McCombs School of Business at the University of Texas at Austin earlier this week as part of the show's "Back to School" tour, a student asked him for a play on the scarcity of water.

In response to that question, Cramer named a small, speculative stock: Pico Holdings (PICO Quote).

However, Cramer urged people to do their homework before buying the stock and advised viewers to use limit orders if they decide to buy. Pico is the first real play on the scarcity of water that Cramer said he is willing to mention on the show.

Pico is not a water utility, and it doesn't plan on entering the "not-so-friendly-to-Cramer" water utility market, he said. The company instead engages in two enterprises Cramer likes: First, it gathers water in the middle of desert and sells it, surely for a big premium, and second, it has a water pipeline, which Cramer finds "interesting."

Pico's 35-mile-long pipeline is under construction. Oil pipelines have been "extremely profitable" for oil companies, and Cramer sees similar potential for Pico and its water pipeline, especially as soon as water prices rise.

But because this company is small, it's also risky, Cramer pointed out. There is very little research on it, with only one analyst covering it, he said. But this shouldn't last for long, because "water is becoming too hot for it to stay under the radar."

Cramer clarified that he is not giving Pico a buy. He's giving it to people so that they can do their own homework and decide for themselves whether to buy it.

Sell Block

In the show's "Sell Block" segment, Cramer said people have to give up on and get out of Blockbuster (BBI Quote) now that its CEO John Antioco is leaving.

"Without him at the helm, I am much more comfortable taking the big profits we have," he said.

Moving on, Cramer said it's time to "schnitzel" out of GSI Commerce (GSIC Quote) and take some of it off the table, because it is up 28% since he recommended it.

Last on the list, Cramer advised people to sell Nokia (NOK Quote) even though analysts believe Motorola's bad news is good for Nokia and have gone positive on it.

What's bad for Motorola is bad for Nokia, as well, Cramer said.

On Countrywide's Side

Cramer welcomed Angelo Mozilo, Countrywide Financial's (CFC Quote) chairman and CEO, to the show and asked him why he stopped writing "bad loans" while everyone else was still giving them.

"I had mentioned a year ago that I was deeply concerned about New Century (NEWC Quote) and Ameriquest" in terms of the quality of their loans and the companies' margins, Mozilo responded. "Their business model forced them to do that. They had a bad business model."

Further, while people who never should have been allowed to take out loans for houses are not out, Mozilo said, his concern is that the first-time buyers, such as young families and minorities, will be closed out because liquidity is being taken away. Without them, the entire housing market will get impacted, he said.

However, because a lot of Countrywide's competition has been cleared out "overnight" by the subprime mortgage shakeout, Mozilo said the company's beginning to see a flow of new customers coming in. At the end of the day, even though it has been a "painful" ride, Mozilo said Countrywide will be in a "dominant" position.

Cramer said that if people think like he does and believe that there will be an interest rate cut in May from the Fed, it's time to pick up a survivor such as Countrywide.

To view Cramer's interview with Angelo Mozilo, please click here.

Lightning Round

Cramer was bullish on FedEx (FDX Quote), Bear Stearns (BSC Quote), Flow International (FLOW Quote), XTO Energy (XTO Quote), Dean Foods (DF Quote), Clearwire (CLWR Quote), SBA Communications (SBAC Quote), Crown Castle(CCI Quote), Nastech Pharmaceutical (NSTK Quote) and Chipotle Mexican Grill (CMG Quote).

Cramer was bearish on Usana Health Sciences (USNA Quote), Cabot Oil & Gas (COG Quote), People's Bank (PBCT Quote), Empire Resorts (NYNY Quote), Fuel Tech (FTEK Quote), Applebee's (APPB Quote) and Acadia Pharmaceuticals (ACAD Quote).

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

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