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Cramer's 'Mad Money' Recap: Four Ways to Play Iran

TheStreet.com Staff

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Recent geopolitical tensions with Iran have gotten Jim Cramer thinking about how people should prepare their portfolios for "doomsday." Cramer laid out his "Iran Awry Portfolio" on Monday's "Mad Money" TV show, complete with four investment ideas -- a mix of defense, oil, gold and cash plays -- to prepare viewers for the worst should troubles escalate in that nation.

The first stock Cramer wants people to get into in case things go awry in Iran is Abbott Laboratories (ABT Quote).

Because "higher oil prices breed recession," it's time to start getting into defensive stocks, Cramer said. Abbott recently hit its 52-week high, and it is the only drug stock that consistently beats it numbers, he said. Plus, not only is Abbott cheap, it's a grower.

"Abbott is a cradle-to-grave service, and it has a ton of [product] approvals coming up," Cramer said. "It could be the great insurance in case Iran does something stupid."

He called Abbott the "sleeper drug stock" that should do well even if there is "Armageddon."

Second, market players need an oil play that won't get cut off by Iran and that also has a high yield, Cramer said. For this he advised people buy Kinder Morgan Energy Partners (KMP Quote).

Kinder Morgan has a 6.3% yield, and a rush into Treasuries, which would likely happen if things went bad in Iran, will only increase this yield, Cramer said. In addition, the company has a big natural gas pipe, and "the distribution for natural gas should be boosted if Iran does something nutty," he pointed out.

What Cramer said he likes best of all is that Kinder Morgan distributes profits.

The third stock people should get into is Yamana Gold (AUY Quote), Cramer told his viewers.

People need a gold stock because gold "soars" on any military action, he explained. Yamana is the gold stock to buy because it can take advantage of the high price and pump out gold cheaply.

Cramer has been behind Yamana for a double now, but he said he's continuing to stand behind it and is putting it in the "Armageddon Portfolio" because it's still an improving situation from when he first recommended it.

Yamana is expanding gold production with no extra cost, and it has "unbelievable growth," Cramer said. Meanwhile, every other gold company is growth challenged, he said. "It is a welcome and necessary addition to the 'Iran Awry' Portfolio."

Cramer said he wants people to put 25% of their Doomsday Portfolio money in Abbott Labs, 25% in Kinder Morgan Energy Partners, 25% in Yamana Gold and the last 25% in cash.

"Cash, not cotton, will be king in an Iran debacle," he said. People want a lot of cash in their bank account so that they can "feast off the panic" everyone will be in, Cramer said.

Although he said he likes the three aforementioned stocks better than cash, he said market players will need cash to buy other stocks on the cheap when things go awry in Iran.

"Be sure to have your cash in a high-yielding account," Cramer stressed, one that yields a minimum of 5%.

MasterCard: Smart Move

Private equity firm Kohlberg Kravis Roberts is buying credit-card processing company First Data (FDC Quote) for $34 a share, Cramer told his viewers. But the "real beneficiary" in this deal is MasterCard (MA Quote), he said.

"If First Data is worth $34, then MasterCard should easily be worth $130 to $140 a share," Cramer said. "MasterCard is masquerading as a $106 stock."

Cramer asked viewers to think why a "smart outfit" such as KKR would buy First Data in the first place, especially since FDC is not well run. It's because KKR is placing a "secular bet on plastic and the processing of plastic worldwide," he explained, and the "ultimate plastic play is MasterCard."

MasterCard is involved in litigation that has kept the stock back, but Cramer doesn't believe it's a real problem. He said MasterCard is a stock the Street and the media doesn't get. "Sure it has run up, but it should never have been priced so low," Cramer said.

A lot of people in the media think MasterCard is a money lender, but it doesn't lend money, he said. "It is a transaction-payments play," Cramer said. "Its merchant processing business is an irreplaceable franchise," processing 40 million transactions a day.

Plus, MasterCard has "tremendous opportunity" in China and Latin America and is thus a play on the rest of the world, he said. Cramer called MasterCard the "technological leader in its field" with "true organic revenue and profit growth."

Mad Mail and Sudden Death

In the show's "Mad Mail" segment, a viewer wrote in to ask Cramer if he'd ever consider putting Microsoft (MSFT Quote) chief Steven Ballmer on his "CEO Hall of Shame."

Cramer told the mailer Microsoft is in a "challenged situation" and pointed out that right now, all PC companies are performing badly. He said he is against slamming Ballmer and believes the chief executive is "trying to do his best job possible."

Responding to another mailer, Cramer said he believes Florida Rock Industries (FRK Quote) is going to trade with Vulcan Materials (VMC Quote).

"And I think Vulcan Materials is going to keep going higher, because there are a lot of roads that need aggregate," he said.

During the show's "Sudden Death" round, Cramer was bullish on Celgene (CELG Quote), Alcoa (AA Quote) and Abbott Labs.

He was bearish on Nabi Biopharmaceuticals (NABI Quote) and Wyeth (WYE Quote).

Lightning Round

Cramer was bullish on Brocade Communications (BRCD Quote), Halliburton (HAL Quote), Transocean (RIG Quote), GlobalSantaFe (GSF Quote), Henry Schein (HSIC Quote), Cheesecake Factory (CAKE Quote), Diageo (DEO Quote), Gilead Sciences (GILD Quote), Genzyme (GENZ Quote), Celgene (CELG Quote), Amgen (AMGN Quote), Akamai Technologies (AKAM Quote), Gerdau (GGB Quote), Allergan (AGN Quote) and Global Sources (GSOL Quote).

Cramer was bearish on Helmerich & Payne (HP Quote), Constellation Brands (STZ Quote), LCA-Vision (LCAV Quote), Bemis (BMS Quote) and Sonoco (SON 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.