Cramer's 'Mad Money' Recap: Pooh-Poohing Private Equity

TheStreet.com Staff

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

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"I am putting the private-equity stocks in the sell block," Jim Cramer told viewers of his "Mad Money" TV show Thursday.

That means don't buy Blackstone(BX) on its weakness, nor the planned Apollo or KKR IPOs.

"This is a business I know well," since being a hedge fund manager isn't very different from being a private-equity manager, Cramer said. "I can't have you owning these stocks. ... They seem like they could be the next big thing, but the truth is they're the last big thing."

These companies are too expensive, said Cramer, but more than that, it's just not the right time. "Now you're really getting in at the end, not the beginning, of this trend," Cramer said.

He said that even if these companies are great, with great managers and great track records, "buying them now may be close to a top. It's the wrong time."

One reason not to buy, Cramer said, is that especially if the Democrats get someone in the White House in 2008, they're going to "tax the heck out of" private equity and try to "squeeze them dry."

Another reason is that there are "too many people with too much money trying to get a piece of the action."

Cramer's third reason for not being a buyer of private equity is that the Street tends to take companies public at the end of a cycle. "Coming public means they're selling, not buying," Cramer said.

"Don't bet against these guys," he said. "Just don't buy when they're selling."

More $80 to $120

While many people were panicking when the market sold off earlier this week, Cramer said that "Cramericans" went to work buying things.

"I'm trying to recall a little nostalgia for that down day," he said, "that spawned maybe one of the greatest rallies I have ever seen, up 284 [on the Dow]."

But not everyone caught the rally, Cramer said.

"This rally only reinforces everything I've been saying all week," he said. "Our strategy is simple. We want to stick with what is working. We want to buy the winners!"

And the winners, he said, are the $80-to-$120 stocks he's been talking about on "Mad Money" this week.

According to Cramer's theory, when a stock goes to $80 in a bull market, there's a good chance it'll go to $100. From there, it's usually smooth sailing to $120. And once a stock hits $100, Cramer said, the only way it goes back down is if it splits.

"Everyone's got an inner value investor, a real curmudgeon that objects to ideas like this one," he said, and there's a good reason for that, because following his $80-to-$120 strategy is the laziest way to approach the market. "But it works!" he added. "And we're gonna keep doing it."

Apache on the Up and Up

"Tonight's addition to this august assemblage of stocks," Cramer said, is Apache(APA), an independent oil and gas exploration company that has been on the rise. "People have been buying Apache. It's a winner," Cramer said, and "people will keep buying it."

Oil is one of the sectors leading the market right now, he said, and Apache is "exactly what we're looking for."

But Cramer said that just because he says it will go to $120 is not a good enough reason for people to buy it. They need to do their homework, too.

Apache has incredibly low production costs and thrives in areas where its peers have difficulty, Cramer said. It has a great business model of buying discarded products from other companies on the cheap and turning them around.

In addition, the stock is cheap, trading at 10 times earnings. It "has a long way to go before its valuation comes near what the market gives its competitors," he said. "This stock is mispriced!"

The company increased its product guidance in June, and the majority of its reserves are in the U.S., Cramer said.

Apache has a "terrific track record," Cramer said. "I would buy APA before it gets away from you."

Go Soros One Better

"Everyone wants to invest like George Soros," Cramer told his viewers. At least, that's what he gathers from the fact that the George Soros portfolio is stockpickr.com's most popular.

But Cramer said he doesn't want to invest like Soros. "I want to be better than Soros!" he said.

For example, Soros owns Bon-Ton(BONT), but Cramer wouldn't, because it's "too dicey. ... Maybe it's a long-term Soros pick, because short term it really stinks."

Soros also owns CVS(CVS), which Cramer said he likes after its great Caremark deal, "but I have preferred over and over again Rite Aid(RAD)."

And Soros own Qualcomm(QCOM), but Cramer prefers Texas Instruments(TXN).

The one Soros stock that Cramer said he really thinks people should be in is diagnostics company Gen-Probe(GPRO).

"On 'Mad Money,'" he said, "we're delighted by diagnostics." He owns two diagnostics companies -- Inverness Medical Innovations(IMA) and Hologic (HOLX) -- for his charitable trust, Action Alerts PLUS.

As for Gen-Probe, Cramer said it is "instant growth."

It is one of the two major providers of blood-screening tests, with 40% of market share. It also is in an "enviable position with 58% of the market for chlamydia and gonorrhea tests."

In addition, the company has its future all worked out, with alliances with General Electric(GE), 3M(MMM) and Millipore(MIL).

"Don't invest like George Soros," Cramer said. "Invest better than George Soros. Go buy some Gen-Probe."

Mad Mail

In his "Mad Mail" segment, Cramer agreed with one viewer that Manitowoc(MTW) is "absolutely" a stock that should be considered for Cramer's $80-to-$120 theory.

Cramer told another viewer that he offered up Costco(COST) as an alternative to Casey's(CASY) because Costco is a big gasoline station in addition to being a retailer.

Another viewer wrote in to ask if he should worry about Rite Aid after the recent Medicaid ruling. Cramer said he's not worried and that he's still very excited about Rite Aid. "Let the good times roll," he said.

In response to another viewer, Cramer said that with Cemex(CX), "you're trapped by the housing cycle, but that's OK. CX is growing like a weed. I like the stock."

Lightning Round

Cramer was bullish on EMC(EMC), Wal-Mart (WMT), Cisco Systems (CSCO), Acadia Pharmaceuticals(ACAD), Omniture (OMTR), TOP Tankers(TOPT), Frontline(FRO), Advanced Micro Devices(AMD), Cal Dive International(DVR), Hercules Offshore(HERO), Transocean(RIG), Global Santa Fe(GSF), Schlumberger (SLB), Southern Copper(PCU) and Freeport McMoRan Copper & Gold(FCX).

Cramer was bearish on Target(TGT), Juniper Networks(JNPR), XM Satellite Radio(XMSR), Sirius Satellite Radio(SIRI) and Diageo (DEO).

Sudden Death

In his "Sudden Death" round, Cramer was bullish on Kinetic Concepts(KCI), Chicago Mercantile Exchange(CME) and Waters(WAT).

Want more Cramer? Check out Jim's rules and commandments for investing from his latest book by clicking here.

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

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