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Cramer's 'Mad Money' Recap: Annaly's Safe House

TheStreet.com Staff

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

"I've got the stock that's the antidote to the toxin of subprime working-class lending," Jim Cramer told viewers of his "Mad Money" TV show Thursday.

"The stock that says you will make money as the price of your house goes down ... is Annaly Capital Management (NLY Quote)," he said.

Michael Farrell, Annaly's chief executive, is the only CEO who saw the subprime-mortgage crisis coming and positioned his company to flourish. Cramer said he hasn't always been right about Annaly. "I doubted the company before, and I shouldn't have," he said.

When he first met Farrell, Cramer said, Farrell had a really good track record, so Cramer recommended the stock on his former TV show, "Kudlow and Cramer." However, the stock sunk and the dividend got cut. While Cramer was licking his wounds, Annaly changed its approach and decided to cut back on its residential mortgage exposure, he said.

"When you buy a mortgage or invest in a pool of mortgages, you're basically investing in risk ," Cramer explained. There are two types of mortgage risk: the less-speculative interest-rate risk and the more-"scary" credit risk.

Companies that play in credit risk have gotten "killed" during this crisis, Cramer went on to say.

"The media constantly gets these two types [of mortgage risks] confused and thinks everyone is in the credit-risk game," he said.

Because the press doesn't always get it, Annaly gets lumped with all the other mortgage lenders, which is why Cramer believes right now is a "great opportunity" to get into Annaly.

Paper Money

Cramer's pick on the paper trade is Sappi (SPP Quote). It is the "big winner" from the new antisubsidy and antidumping tariffs the U.S. has imposed on coated free paper from China, Cramer told viewers.

Most companies that make coated free paper, the glossy paper found in magazines and yearbooks, are private, he said. Further, Cramer said he believes "the tariffs could make a real short-term difference for SPP's earnings ."

However, he stressed that Sappi is a trade idea, not an investment idea. Over the long term, Cramer believes, this South African paper company won't be able to compete against its Chinese competitors.

Sell Block

Cramer dedicated his "Sell Block" segment to Vonage (VG Quote).

Michael Snyder recently stepped down as Vonage's CEO, and Jeffrey Citron has taken his place. However, because Citron was "banned from the securities industry in 2003," Cramer believes he "should not be allowed to be the CEO of a public company." This new appointment is just one more reason to sell Vonage, Cramer said.

Cramer also put Johnson & Johnson (JNJ Quote) in the sell block, saying he likes the company but that he got it wrong.

J&J used to be best of breed, but the truth is there are very few blue-chips left, and this drugmaker is not one of them, he said. Not only are its drugs starting to come off patent, but J&J's Invega drug has been a "huge disappointment."

In addition, Cramer advised viewers to sell Friedman Billings Ramsey (FBR Quote), which he believes is "trying to create money from nothing."

"Its problem is that it's the opposite of Annaly" and has exposure to some bad subprime lending, he said. Moreover, while people might be inclined to buy the IPO of its FBR Capital Markets unit, Cramer warned investors against it. On some metrics, Cramer said, the subsidiary is also worth nothing.

Salesforce Call

Marc Benioff, Salesforce.com's (CRM Quote) chairman and CEO, joined Cramer on the show by phone and said his company is "trying to recreate the software industry by delivering a set of Internet services that replace traditional enterprise software."

The focus on this end of software, Benioff said, is one of the reasons the company has become "the fastest-growing software company" of its size in the world. Salesforce has recently signed contracts with Merrill Lynch(MER Quote), Dell(DELL Quote) and Cisco(CSCO Quote), each of which chose Saleforce's new model over Oracle's (ORCL Quote) and Microsoft's (MSFT Quote), he said.

Cramer commented that a lot of companies that have gone up against Microsoft and Oracle have faltered, and he asked Benioff why Salesforce.com would be different. "The companies that win in our industry are the ones that change the game," Benioff replied.

"They have to change the game in two ways -- the technology model and the business model -- and that's what we're about," he said. "That's why we've won so many of these very important customers around the world."

Cramer said he's not going either way on Salesforce and urged viewers to reach their own decisions on the stock.

To view Cramer's interview with Marc Benioff, please click here.

During the show's "Sudden Death" round, Cramer was bullish on Las Vegas Sands (LVS Quote) and Mueller Water (MWA Quote). He was bearish on BB&T (BBT Quote) and Valero Energy (VLO Quote).

Lightning Round

Cramer was bullish on Mattel (MAT Quote), Hasbro (HAS Quote), CVS (CVS Quote), Express Scripts (ESRX Quote), Rochester Medical (ROCM Quote), Zimmer (ZMH Quote), Allergan (AGN Quote), Color Kinetics (CLRK Quote), Bank of Nova Scotia (BNS Quote), Medco Health (MHS Quote), Yamana Gold (AUY Quote), International Securities Exchange (ISE Quote), IntercontinentalExchange (ICE Quote) and Intuitive Surgical (ISRG Quote).

Cramer was bearish on US Gold (UXG Quote), J2 Global Communications (JCOM Quote), Mannatech (MTEX Quote) and Smith & Wesson (SWHC 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.