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Cramer's 'Mad Money' Recap: Bonds and the Big Banks

TheStreet.com Staff

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Keep an eye on the big banks next week, Jim Cramer told viewers of his "Mad Money" TV show Friday during his "Game Plan" segment.

Lehman Brothers (LEH) is reporting on Tuesday, and "I'd love to load the boat up," here, he said.

In addition, Bear Stearns (BSC) and Goldman Sachs (GS), which Cramer owns for his charitable trust, Action Alerts PLUS, are "premium franchises," which report Thursday, Cramer said. "I want to own these."

In health care, Cramer highlighted Gilead Sciences (GILD), Hologic (HOLX), which he owns for his charitable trust, Action Alerts PLUS, and MedcoHealth Solutions (MHS). "I could sing the praises of all of these," he said.

Moreover, Cisco Systems (CSCO), Level 3 Communications (LVLT) and Ciena (CIEN) will all speak the Bear conference next week and "should be great," Cramer said.

Also, Chicago Bridge & Iron (CBI) and Allegheny Technologies (ATI) are set to speak at the JP Morgan materials conference next week and should be good as well, he said.

However, "despite all this good news for individual stocks, there is a piece of paper that controls every one of these," Cramer said. "I can give you the stocks, but there's a trick to it this week," and it's called "the 4 1/2's of 5/17."

This is the name for the "bellwether bond," also known as the 10-year Treasury, he explained. "I need you to think of this paper as if it were a stock." It started at $100 this week and then traded down to $95. Last night it was at $94, Cramer said.

The thing to remember is that when bond prices go down, bond yields, or profits, go up, he said. Therefore, if the yields, continue to rise next week, Cramer believes that stocks will falter.

However, if bond prices go up -- if the 10-year Treasury trades at $96 or $97, from $95 -- "you're going to want to buy every stock I mentioned," he said.

Soda Ash Friday

"It always pays to be patient," Cramer told viewers. Earlier this week Cramer said he heard about FMC (FMC), when chemical analyst Frank Mitch was talking up the stock on CNBC's "Street Signs."

Mitch, he said, talked about the possibility that the Chinese might get rid of the tax rebate they give to their soda ash exporters. This could mean great news for FMC because it means less competition, Cramer explained.

After Mitch made his statement, FMC spiked to about $86 on the rumor and the recommendation. "You never want to buy the spike," he said. "You have to exercise patience, which is why I waited till today to recommend it." But now is the right time to take advantage of FMC's pullback and buy the stock, Cramer said.

Among the uses of soda ash are making glass, water softener for laundry, developing and making film and cleaning swimming pools. "It's all over the place," and better yet, soda ash is in tight supply, Cramer said.

FMC has a big advantage over most Chinese soda ash producers because the Chinese use a much more expensive synthetic process to make theirs, he said. Moreover, the company is part of cartel, which means it has tight control over the pricing of its product.

Apart from FMC's chemical division, which should benefit from recent Chinese trade policy changes, the company's most profitable segment is its agricultural chemicals -- "an incredibly strong business" -- Cramer said.

Mining India

Sterlite Industries, which will soon start trading in the U.S. under the symbol SLT, is a speculative stock people should consider getting into, Cramer told viewers.

It's India's largest mining company and already trades there, he said. Although Cramer said he's liked India for a while, he's run out of names to talk about. There are only so many way people can play outsourcing before it gets stale. "SLT lets us play a new sector in India-mining," he said.

"Sterlite has steroidal growth," Cramer continued. Plus, it has China right next door ready to gobble up resources.

The mining company is primarily producing copper with a 42% market share, but it also has some zinc and aluminum exposure. But what really makes this stock so attractive, Cramer said, is "unfair competition." SLT is part of India's zinc duopoly, and Cramerica loves a duopoly.

Further, it's a state-run entity that has gone private. Privatized equities are often the best deals for investors because "democratically elected governments don't want to disappoint the electorate that they dumping the stock on," Cramer said. "They don't want the deal to blow up in their voters' faces, so they're all priced below what they should be."

SLT trades at a discount to other miners right now, but that should vanish once the company starts trading in America, Cramer said. He advised people to buy the stock at or under $14 and sell it at $20.

It's Automatic

Cramer welcomed Automatic Data Processing (ADP) CEO Gary Butler onto the show asked about the company's $6 buyback

"We spun off a brokerage business, which was about a $2 billion subsidiary and a stand-alone equity, and we think that will do quite well," Butler said. "But that leaves us with a much faster growth business, which is very focused and which we think will give us a tremendous return on management."

"We operate in a huge market where there is $80 billion of opportunity between the U.S. and globally, so we think the appreciation for our shareholders will be much stronger," he continued.

Further, ADP had somewhere around $2.7 billon in cash on its balance sheet during the last quarter. "Over the last two years we've spent $2 billion a year on share buybacks and dividends, and hopefully we will be able to stay that course in the year ahead," Butler said.

When Cramer asked why ADP doesn't go private, Butler said he's into returning value to long-term shareholders, not to private equity firms. "When you have a company that grew EPS 25% last year and will be over 20% this year ... and you can continue to grow the share price, I think we can deliver more long-term value by staying the course," Butler said.

Lightning Round

Cramer was bullish on Aecom Technology (ACM), Medarex (MEDX), Acadia Pharmaceuticals (ACAD), Nastech Pharmaceutical (NSTK), Hain Celestial Group (HAIN), Downey Financial (DSL) and Peabody Energy (BTU).

Cramer was bearish on Perficient (PRFT), CB Richard Ellis Group (CBG), McAfee (MFE), TFS Financial (TFSL), Optium (OPTM), Akamai Technologies (AKAM) and Limelight (LLNW).

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.