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Cramer's 'Mad Money' Recap: Citigroup Should Split

TheStreet.com Staff

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

It's time to break things up at Citigroup (C Quote) and bring out some share value, Jim Cramer told viewers of his "Mad Money" TV show Monday.

Though Citigroup has been the one-stop shop for anything financial, Cramer believes that if it would lose CEO Chuck Prince and break itself up into five core businesses -- a U.S. business, an international business, a global markets business, a transaction services business, and an alternative management and investment business -- it would go from trading at $54 to $63.

Cramer said he's run Citigroup's numbers and feels that some of its components deserve a real premium to its comps, such as Citigroup's overseas and global markets businesses. For example, Cramer believes the company's international business is fabulous, and he gave it a 40% premium.

Global markets companies such as Morgan Stanley (MS Quote), Lehman Brothers (LEH Quote) and Goldman Sachs (GS Quote), which Cramer owns for his charitable trust, Action Alerts PLUS, are way too cheap, he said. Each deserves a premium, and Cramer is giving Citigroup a 20% premium, too.

Cramer said he likes this stock so much that he's bought it for his charitable trust, believing it could pay to wait until Citigroup's board comes to its senses and breaks itself up.

However, he reminded viewers that while it's likely that the breakup will happen, it's by no means inevitable. "I'm not making any promises," Cramer said. If market players buy the stock, they should understand they are taking a calculated risk with it.

Rite Aid Ready for the Big Leagues

Now that Rite Aid (RAD Quote) has closed its acquisition of Eckerd and Brooks stores, Cramer believes the drug store chain could be within "striking distance" of Walgreen (WAG Quote).

With the close of the transaction, Cramer said Rite Aid has the opportunity to cut stores that are not working and to keep its best stores. However, Cramer said that he doesn't know what the final store count will be yet and that this information will influence whether he stays positive on the stock.

Although viewers who got in Rite Aid on his recommendation have had a "big run," Cramer said that if the deal works, the stock could go even higher. But Cramer said he has many questions for the company, such as: "Has Rite Aid taken on too much high coupon debt? Has it bit off more than it can chew? And how are the fundamentals?"

With this in mind, Cramer brought on Mary Sammons, the CEO of Rite Aid, and asked her if he is being too bullish in thinking the savings from the deal could be far more substantial than people realize.

"The only synergies we've put out there are the ones that we're highly confident of getting," Sammons said. "We believe there are even greater margin and revenue opportunities not included in our forecast."

When Cramer inquired about Rite Aid's 9% interest rate on its bond deal, Sammons said that the weighted average interest rate of all of Rite Aid's debt after the acquisition is only slightly higher than it was before.

"And if you really think about our debt, we've shown that we can manage it," she added.

Also, Sammons said that the free cash flow that Rite Aid generates for the new stores will be invested in the business and pay down debt.

"This is and remains a great story," Cramer said of Rite Aid, adding that he believes it should go to $8 or $9.

To view Cramer's interview with Mary Sammons, please click here.

Colgate Over Crest

Recently, Latin America discovered Chinese-made toothpaste tainted with diethylene glycol, or DEG, a chemical used in antifreeze, which, according to the Food and Drug Administration, "does not belong in toothpaste, even in small concentrations."

This should mean a massive loss of confidence in Chinese products, Cramer said, and the stock he believes will benefit here is Colgate-Palmolive (CL Quote).

In most of the countries that have taken action against Chinese toothpaste, Colgate has room to expand, Cramer explained. He prefers Colgate to Procter & Gamble (PG Quote), maker of Crest, because Colgate has a bigger international presence than PG -- and because Cramer believes that PG is tapped out.

Plus, Colgate is a "leaner, meaner" company than PG and has "been more selective about its acquisitions," Cramer said. Colgate has restructured itself and is cutting costs. In addition, it is funding its own growth and innovating itself, he said.

Additionally, Cramer believes that Colgate could pick up some of PG's market share "as the lumbering giant tries to get into gear" and that it should now benefit from the "China Syndrome."

"Brush your portfolio up with Colgate," he advised.

In his "Mad Mail" segment, Cramer told a mailer to book gains and sell aQuantive (AQNT Quote) now that the digital marketing company has been taken over.

Moreover, Cramer told another viewer that Raser Technologies (RZ Quote) is too speculative for him. Instead, he suggested Corning (GLW Quote), which Cramer owns for his charitable trust, Action Alerts PLUS.

During his "Sudden Death" round, Cramer was bullish on Haynes International (HAYN Quote), Merit Medical Systems (MMSI Quote), Cepheid (CPHD Quote) and Dynegy (DYN Quote).

Lightning Round

Cramer was bullish on Penwest Pharmaceuticals (PPCO Quote), Gildan Activewear (GIL Quote), GOL Linhas Areas Inteligentes (GOL Quote), Chesapeake Energy (CHK Quote), Fannie Mae (FNM Quote), Celgene (CELG Quote), Gilead Sciences (GILD Quote), Fuel Tech (FTEK Quote), Herbalife (HLF Quote), Crocs (CROX Quote), Genesis Lease (GLS Quote), Boeing (BA Quote), Tesco (TESO Quote), Halliburton (HAL Quote), Input/Output (IO Quote), Trinity Industries (TRN Quote) and Marathon Oil (MRO Quote).

Cramer was bearish on AirTran Holdings (AAI Quote), Mylan Laboratories (MYL Quote), Usana Health Sciences (USNA Quote) and JetBlue Airways (JBLU Quote).

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

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