Mad Money Recap

Return to Article

Cramer's 'Mad Money' Recap: Primed for Private Equity

TheStreet.com Staff

The Quiz! The Quiz! Are you a loyal "Mad Money" viewer? Take TheStreet.com's latest "Mad Money" culture quiz to see how much of the show you caught last week or just to immerse yourself in Cramer's nonfinancial madness.

Private-equity firms are making "crate loads of money," and Jim Cramer wants other people to get in on the action, too, he told viewers on his "Mad Money" TV show Monday.

Private-equity firms take public companies private. When they buy a company, it's just like any acquisition, Cramer said. "They pay a premium," and if people are in the stock before it gets taken private, then they will get paid that premium, as well.

It doesn't matter what happened yesterday, he said, because that won't make people any money. Instead, market players should aim at figuring out what the private-equity folks are going to buy tomorrow.

About a month ago, Cramer said, Goldman Sachs(GS - Cramer's Take - Stockpickr) came out with a "terrific" report related to which stocks could be taken private.

With the help of that report, along with his own research, Cramer said he is going to run a multipart series this week in which he will feature six potential private-equity targets. These are six stocks that he believes "could be taken out at any moment."

Private-equity firms buy companies that they believe are undervalued, Cramer explained. The difference between private equity today and 10 years ago is that the firms have a lot of money at their disposal now, he said. "They're doing leveraged buyouts left and right."

When looking for a target, private-equity firms generally look for "poorly run companies that generate a lot of cash," Cramer said. They look for opportunities to "increase margins or grow sales" better than current management.

A Cyclical Classic

Cramer kicked off his private equity target series with Actuant (ATU - Cramer's Take - Stockpickr), a company involved in tool supplies and engineered solutions

This is the first stock that, ahead of a possible private-equity buyout, market players should consider getting into to get paid "a huge premium," he said.

Actuant, Cramer said, is "your classic cyclical stock." It is a "magnificent" cash-flow generator, which has been trading at the low end of its range, he went on. "It's a broken stock but not a broken company."

Although there are a lot of shorts here, Cramer believes that they are wrong and that it would be a good idea to go long Actuant. It's not expensive, and the company's fundamentals have already started to turn, he said, calling Actuant "a solid industrial stock" worth owning beyond its private-equity potential.

Further, Cramer said he believes that if Actuant goes private, the stock could get up to a 13-point hike in its price, on the high end.

Discover This!

Discovery Holding (DISCA - Cramer's Take - Stockpickr), Cramer told viewers, is "becoming a money-making machine." He believes that people should buy it after doing their own homework on the stock.

Discovery is in the "sweet spot," which is cable. "It could be bought or sold or cut up into little pieces," he said. Plus, "people want cable properties."

It has two things that Cramer said he loves. First, the company has David Zaslav, "a man who knows how to consolidate."

Second, Cramer said, he likes Discovery's actual properties. "They can be amortized over and over," which means they can show the same show "endlessly," Cramer said.

Zaslav came in and started throwing away all of Discovery's money-losing programs, he continued. And now the company is selling its retail stores so that it can focus on its strength, which is creative and unique programming.

Discovery is a play on digital cable and high-growth TV, Cramer said. In addition, he believes that the stock has a big catalyst. Discovery owns two-thirds of Discovery Communications, and if it can get its hands on the other third, Cramer said he could see the stock going up to $25 on that alone. Discovery closed at $20.93 Friday.

People should buy this one because of its "cut-throat elimination" of its unprofitable ventures, the growth of digital and high-def cable, and the fact that it's a possible takeover target for other cable companies, which are always looking for more cable properties, Cramer said.

"If you liked making money off of Viacom (VIAB - Cramer's Take - Stockpickr), then you'll love Discovery," he said.

David Hannah, the CEO of Reliance Steel & Aluminum (RS - Cramer's Take - Stockpickr), joined Cramer on his show and said that in addition to increased Chinese demand, worldwide growth and rationalization in the industry, the steel industry has gotten much better for Reliance in a more direct way.

"It's been the consolidation at our mill supplier level."

There's been a lot more discipline in their pricing structure, Hannah said, and one of the beneficiaries of that has been Reliance.

The mills are "run with a different attitude and run for the benefit of shareholders," he said.

Cramer said he likes Reliance and Allegheny Technologies (ATI - Cramer's Take - Stockpickr). "The steel industry is still a cheap place to be," he said.

To view Cramer's interview with David Hannah, please click here.

During his "Sudden Death" round, Cramer was bullish on Honeywell (HON - Cramer's Take - Stockpickr).

Lightning Round

Cramer was bullish on Syneron Medical (ELOS - Cramer's Take - Stockpickr), FuelCell Energy (FCEL - Cramer's Take - Stockpickr), Avnet (AVT - Cramer's Take - Stockpickr), Chemed (CHE - Cramer's Take - Stockpickr), Time Warner (TWX - Cramer's Take - Stockpickr), Comcast (CMCSA - Cramer's Take - Stockpickr), Gorman-Rupp (GRC - Cramer's Take - Stockpickr), Onyx Pharmaceuticals (ONXX - Cramer's Take - Stockpickr), General Dynamics (GD - Cramer's Take - Stockpickr), Lockheed Martin (LMT - Cramer's Take - Stockpickr), Ceradyne (CRDN - Cramer's Take - Stockpickr), Hercules Offshore (HERO - Cramer's Take - Stockpickr), Hornbeck Offshore (HOS - Cramer's Take - Stockpickr), News Corp (NWS - Cramer's Take - Stockpickr), Six Flags (SIX - Cramer's Take - Stockpickr), Electronic Arts (ERTS - Cramer's Take - Stockpickr) Goldman Sachs (GS - Cramer's Take - Stockpickr) and Expedia (EXPE - Cramer's Take - Stockpickr).

Cramer was bearish on Palomar Medical Technologies (PMTI - Cramer's Take - Stockpickr), Headwaters (HW - Cramer's Take - Stockpickr), Ecolab (ECL - Cramer's Take - Stockpickr), Plexus (PLXS - Cramer's Take - Stockpickr), Novastar Financial (NFI - Cramer's Take - Stockpickr), Pentair (PNR - Cramer's Take - Stockpickr), Simcere Pharmaceutical (SCR - Cramer's Take - Stockpickr), Take-Two Interactive(TTWO - Cramer's Take - Stockpickr), Wells Fargo (WFC - Cramer's Take - Stockpickr) and Travelzoo (TZOO - Cramer's Take - Stockpickr).

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.