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Cramer's 'Mad Money' Recap: Financial Stocks to Avoid

TheStreet.com Staff

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American International Group (AIG Quote) and Capital One Financial (COF Quote) are two financial names that aren't transparent enough to own, Jim Cramer told viewers of his "Mad Money" TV show Thursday.

With these stocks, people don't know the assets or liabilities, he said, and that's no good. Before the Fed announced a modest quarter-point cut, Cramer said he had hesitated to put these two in the "sell block," but now the risk reward is "too darn bad" to own AIG or Capital One.

That said, he did like AIG and Capital One at one time, he said. Cramer called Capital One "the premier credit card company" and said AIG has phenomenal properties and is a terrific insurance business. However, what disturbs him about these companies is that investors don't know the state of their business. "That is disturbing in this environment," Cramer said.

With Capital One, market players have no idea what the company's loan status is or how it's doing geographically. While he's no fan of CIT (CIT Quote), Cramer said CIT shows people all of this information and allows them to make the decision of owning the stock or not. Capital One, on the other hand, has not opened up its books.

In addition, Capital One recently said in regulatory filings that the delinquency rate in its credit cards has increased dramatically, Cramer said. The company spent a fortune buying back stock when it was expensive and now, at a time when capital is hard to come by, it's in need of every bit of capital it can get its hand on.

Moreover, with "virtually no yield support" and a series of bad numbers on the way, Cramer said he has no choice but to tell people to get rid of the stock.

AIG, he continued, has been adamant that it hasn't been affected by the recent slew of bad loans, but to say it is not enough. According to Cramer, the company needs to show it by disclosing its information.

Further, he doesn't believe the company has the yield necessary to carry it through the market's current environment, he said. AIG and Capital One must be avoided here.

Getting Serious About Oil Exploration

"I believe 2008 is going to be the year for natural gas," Cramer told viewers. "It's leaner, meaner and cleaner than coal."

One of his natural gas picks which represents great value is Anadarko Petroleum (APC Quote).

There are two types of oil and gas companies, Cramer said: the ones with growth and the ones with no growth. He puts Anadarko in the growth category.

Cramer said Anadarko gets a lot of its production from deepwater discoveries and has raised its production guidance, Cramer said. "I love the fact that they are drilling."

With that said, he welcomed Anadarko CEO James Hackett to the show and asked him why the issue of natural gas hasn't been at the front and center of the presidential debate.

Hackett agreed that it's a shame that natural gas doesn't get the praise and support it deserves.

Anadarko has demonstrated its belief in natural gas by its ambitious drilling program. In fact, the company's two acquisitions last year were driven toward the idea of alleviating some of the difficulty in operating internationally, Hackett said.

Additionally, he said, Anadarko loves the idea of picking up some more domestic resources especially at a time when environmental concerns are getting larger.

"We are very active in the deep waters of the Gulf of Mexico," Hackett said. Because the state and federal regulations for drilling there are getting tougher, it's a challenge in his business for companies to drill there, he said.

Hackett believes that those who do drill there and do it well "are people that ought to be encouraged."

"You can have your bonds, but I have a hero and he's making you money," Cramer said of Hackett. "Forget bonds. Buy stocks. Buy Anadarko."

The Next Baidu

For investors that want to seek shelter in a foreign stock, Cramer recommended Mercadolibre (MELI Quote).

This company, he said, processes ecommerce transactions, which have been a good business domestically and is an even better business in Latin America, where it's based.

Moreover, Cramer believes Mercadolibre is similar to Baidu (BIDU Quote) and Google (GOOG Quote).

The stock has gone up, but it should go higher, he said, just like Google and Baidu continued to after they had runs. Mercadolibre "is the same kind of story and the same kind of stock," Cramer said, although it has more in common with Baidu.

Further, its estimates are low-balled and it's an unknown story right now, he said. However, investors could probably get a better price if they wait for a pullback. But with this kind of stock, Cramer said he wouldn't wait too long to pull the trigger.

Sudden Death Round

During the "Sudden Death" round, Cramer was bullish on PetroChina (PTR Quote).

He was bearish on E*Trade (ETFC Quote) and China Petroleum (SNP Quote).

Mad Mail

In his "Mad Mail" segment, Cramer said he recommends both Disney (DIS Quote) and McDonald's (MCD Quote), which he owns for his charitable trust, Action Alerts PLUS, as stocks parents could buy for their children.

Responding to another mailer who wondered about the recent fluctuating price of oil. Cramer said investors should not pay attention to futures but to the trend -- and the trend shows the price of oil is rising.

Lightning Round

Cramer was bullish on Cynosure (CYNO Quote), Lawson Software (LWSN Quote), Oracle (ORCL Quote), Microsoft (MSFT Quote), Hologic (HOLX Quote), Deutsche Telekom (DT Quote), Verizon (VZ Quote), AT&T (T Quote), Textron (TXT Quote), Baker Hughes (BHI Quote), Halliburton (HAL Quote) and Diamond Offshore (DO Quote).

Cramer was bearish on Toyota Motor (TM Quote), Spartan Motors (SPAR Quote) and Phillips-Van Heusen (PVH Quote).

Want more Cramer? Check out Jim's rules and commandments by clicking here.

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