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Cramer's 'Mad Money' Recap: Working on the Railroads

TheStreet.com Staff

The rail market is one unbelievable bull market right now, Jim Cramer told viewers on his "Mad Money" TV show Tuesday.

But when investors are playing a cycle, be it the aerospace cycle or the rail cycle, they shouldn't just buy direct plays -- they should also buy companies that touch the booming cycle, he said.

All Aboard Koppers

The four big rails are "flush with cash," Cramer said, and they are going to be buying a lot of equipment. There are only two plays on this, he said, the first of which is Koppers (KOP Quote).

Koppers is a stock Cramer first recommended a little over a year ago, and it is up about 46% since then. It is "an oblique play" on railroads, he said. It makes rail ties and rail splitters.

The "trick" with Koppers is that it's really a chemical company, Cramer said. Rails account for just 37% of the company. However, when you get a cycle, "impure" plays such as Koppers are great "because The Street doesn't notice them until they report great numbers," he said.

The Railway Tie Association expects that 21 million railroad ties will be sold this year -- a lot more than usual, Cramer explained. For the first two months of this year, the demand for railroad ties was up 23%, but supply was only up by 11%, he said. Low supply and high demand means higher prices.

Cramer called Koppers "a subtle way" to play the railroad boom and suggested that people get aboard the stock.

Answering a call about Greenbrier (GBX Quote), Cramer told the caller he had recommended the stock off of Stockpickr.com, in the hopes that he could "bust some shorts." However, then he saw the error of his way.

Cramer said that Greenbrier is in fact a rail car play, but it is not the one he wants people to own.

Rail Safe

Another way to play the rail cycle, he said, is with Trinity Industries (TRN Quote), the largest manufacturer of rail cars in the U.S.

Trinity is a "pure play" and the "one to own," Cramer said. It is kind of a confusing stock that tends to turn people off, but if people take a closer look at it they'll see Trinity is "all about the rails," he said.

Trinity, like Koppers, has also seen a nice jump since Cramer recommended it a while back. But he believes that it should still go higher. "If this doesn't go up with the rails, nothing does," Cramer said.

Because ethanol needs to be transported by rails, Trinity, which makes ethanol rail cars, will benefit, he said. And the company also makes wind towers, which makes it a play on "Green Day."

Cramer said he's been bullish on the rails since his "Mad Money" show started, and in the past couple of years, he's seen some "sweet moves" in companies such as CSX (CSX Quote) and Union Pacific (UNP Quote), which he owns for his charitable trust, Action Alerts PLUS.

Therefore, for people who want to play rails but think the actual rails have run up too much, Cramer suggested buying Trinity.

Private-Equity Plays

Continuing with his weeklong, private-equity target series, Cramer told viewers there is "way more" private-equity money that needs to be put to work. He named Darden Restaurants (DRI Quote) as his next pick for a prime private-equity takeout target.

Darden, he said, owns Red Lobster and the Olive Garden, which is one of Cramer's favorite places to eat. Displaying his love for Olive Garden's all-you-can-eat salad bar, Cramer carried out his segment while standing in a kiddie pool filled with lettuce and lobsters.

Private-equity firms like to buy companies with "massive" cash flow, "something Darden has from all of its core restaurants," he said. Private-equity firms also like companies that aren't managed well.

Darden, Cramer believes, has just enough problems to attract private-equity money, because the restaurant chain has slow growth and has been focusing on its smaller chains rather than on its "winners," Red Lobster and Olive Garden.

If Darden gets an offer, it could get taken out at a 20% premium, he said. And in case none of the private-equity guys takes an interest, Cramer said it's still a good company to own, because Darden is a broken stock, not a broken company.

Coke Not a Zero

Coca-Cola (KO Quote) CFO Gary Fayard joined Cramer on his show and stated that the reason Coke was able "to blow away" its numbers was international growth, which represented 9% for the company.

There was double-digit growth in the emerging markets and an 11% volume increase in the European volume, Fayard said. Plus, Coke Zero, he said, "is doing great." Japan is turning and is a "critical market" for Coke, Fayard continued.

When Cramer asked if it's too late for people to get in the stock, Fayard said no.

"We had a great start for the year, but if you look at the market we compete in ... it's growing faster than almost any other consumer area," Fayard said. "We still only have 20% share globally. There is still a lot of ways to grow in this industry for us."

Cramer called Coke a "great" stock and said he expects it to go "much higher."

To view Cramer's interview with Gary Fayard, please click here.

During the "Sudden Death" round, Cramer was bullish on Siemens (SI Quote) and bearish on Focus Media Holding (FMCN Quote).

Lightning Round

Cramer was bullish on Arch Coal (ACI Quote), Peabody Energy (BTU Quote), Avnet (AVT Quote), Allegheny Technologies (ATI Quote), Superior Offshore (DEEP Quote), BASF (BF Quote), Google (GOOG Quote), L-3 Communications (LLL Quote), Lockheed Martin (LMT Quote) and Northrop Grumman (NOC Quote).

Cramer was bearish on Exxon Mobil (XOM Quote), Applied Materials (AMAT Quote), BJ Services (BJS Quote), Travelzoo (TZOO Quote), Adobe Systems (ADBE Quote) and II-VI (IIVI Quote).

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.