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Cramer's 'Mad Money' Recap: YaBay? eBayhoo?

TheStreet.com Staff

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

"Tonight I want to propose something radical and dramatic -- that two quickly declining companies come together to form something worth owning," Jim Cramer told viewers of his "Mad Money" TV show Wednesday.

"I want to merge Yahoo! (YHOO - Cramer's Take - Stockpickr) with eBay (EBAY - Cramer's Take - Stockpickr)."

Although Cramer wouldn't want to be in either of the stocks alone and said that unfortunately he owns Yahoo! for his charitable trust, Action Alerts PLUS, together these two look good, he said.

Though Google (GOOG - Cramer's Take - Stockpickr) has growth that is accelerating, few other Internet companies have managed to pull this off, he said. "Once the growth goes, you have to do something to get that sizzle back, because on Wall Street growth is everything."

Yahoo! and eBay both need to take drastic action and merge, Cramer said. These two stocks are never thought about as a combination, but that's "ridiculous." Both are slowing at alarming levels and have little room to grow, he added. On Tuesday, Merrill Lynch downgraded them both.

However, Cramer said he doesn't expect them to go down because Yahoo! and eBay are propping their stocks up with massive buybacks.

Even though he considers them both great businesses, Cramer believes that Yahoo! and eBay have hit a wall and won't go anywhere unless they wed. The two are running out of places to grow, and a union, he feels, could help.

Each company has components that the other lacks, Cramer explained. With Yahoo!'s users, eBay's Skype and Paypal networks could expand.

Steel Yourself

Time and time again, Cramer told viewers, he sees a "lucrative pattern" in companies that are getting taken over: First the leaks start, then people start buying call options, and then the stock runs and the deal happens anyway.

And in the case that a takeover doesn't occur, these stocks don't go down, he said.

Right now Cramer sees this pattern going on with Cleveland Cliffs (CLF - Cramer's Take - Stockpickr). CLF has half the total iron-ore capacity in North America, but more importantly it is rumored to be in talks with CVRD (RIO - Cramer's Take - Stockpickr). Cramer said he got this stock idea from Stockpickr.com.

Other than RIO buying CLF, he said he could also see Rio Tinto (RTP - Cramer's Take - Stockpickr) or even BHP Billiton (BHP - Cramer's Take - Stockpickr) as promising candidates to take over CLF. In addition, Cramer believes that steel companies are equally interested in buying CLF.

Cramer said there is no way he sees CLF staying independent and that if market players get in ahead, they could stand to profit with the stock. Using the recent SSBA-Ipsco deal to estimate CLF's takeover price, he said he conservatively believes that CLF is worth $88 a share, $5 up from where it is here.

And even if none of the big fish bites on this one, CLF has good prospects to buy it in the $80s, Cramer said.

CLF has forged itself into an invaluable asset in the iron sector and is "situated as a prime takeover candidate," he said. "Even if it doesn't get bought, it should still go higher."

Even up here, CLF is "completely undervalued," Cramer continued. The stock has little analyst coverage and is expanding internationally.

Am I Diversified?

During Cramer's "Am I Diversified?" game, the first player called out the following five stocks: Idearc (IAR - Cramer's Take - Stockpickr), Chevron (CVX - Cramer's Take - Stockpickr), Qwest Communications (Q - Cramer's Take - Stockpickr), General Mills (GIS - Cramer's Take - Stockpickr) and Vodafone (VOD - Cramer's Take - Stockpickr).

Cramer called a three-way pair with IAR, Q and VOD. He recommended getting rid of two of these and getting into a financial play and healthcare stock.

Cramer's next caller asked if he was diversified with these five plays: Aecom Technology (ACM - Cramer's Take - Stockpickr), McDermott International (MDR - Cramer's Take - Stockpickr), 3M (MMM - Cramer's Take - Stockpickr), Schlumberger (SLB - Cramer's Take - Stockpickr) and AT&T (T - Cramer's Take - Stockpickr).

Here, Cramer called ACM and MDR a pair. He suggested getting rid of ACM and picking up a financial, such as Goldman Sachs (GS - Cramer's Take - Stockpickr), which he owns for his charitable trust, Action Alerts PLUS, instead.

The Lease One Could Do

Cramer welcomed John McMahon, CEO of aircraft leasing company Genesis Lease (GLS - Cramer's Take - Stockpickr), to the show and asked him why an airline would rather lease an airplane than buy one from Boeing (BA - Cramer's Take - Stockpickr).

Airlines would rather lease because not everyone in the airline industry can afford to buy planes, McMahon said. Leasing aircrafts makes more sense because the airline industry is a cash flow business, he said.

Further, McMahon said GLS gets its planes from a "variety of sources." GLS has "a pipeline of opportunities mostly with airlines where we're effectively acquiring aircraft they contracted to buy from Boeing and Airbus, but they need to turn to a leasing company to enable them to do that," the chief executive continued.

"The demand for aircraft is staggering," McMahon said.

Cramer told viewers he would rather own GLS than any airline stock -- save GOL Linhas Areas (GOL - Cramer's Take - Stockpickr).

To view Cramer's interview with John McMahon, please click here.

During the "Sudden Death" round, Cramer was bearish on Ness Technologies (NSTC - Cramer's Take - Stockpickr) and Charter Communications (CHTR - Cramer's Take - Stockpickr).

Lightning Round

Cramer was bullish on Yamana Gold (AUY - Cramer's Take - Stockpickr), Viacom (VIAB - Cramer's Take - Stockpickr), Total System Services (TSS - Cramer's Take - Stockpickr), Celgene (CELG - Cramer's Take - Stockpickr), ConAgra Foods (CAG - Cramer's Take - Stockpickr), Sappi (SPP - Cramer's Take - Stockpickr), Volvo (VOLV - Cramer's Take - Stockpickr), Southern Copper (PCU - Cramer's Take - Stockpickr) and Freeport-McMoRan (FCX - Cramer's Take - Stockpickr).

Cramer was bearish on Electronic Arts (ERTS - Cramer's Take - Stockpickr), Finisar (FNSR - Cramer's Take - Stockpickr), JDS Uniphase (JDSU - Cramer's Take - Stockpickr), Washington Group International (WNG - Cramer's Take - Stockpickr) and Build-A-Bear Workshop (BBW - Cramer's Take - Stockpickr).

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

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