Mad Money Recap

Return to Article

Cramer's 'Mad Money' Recap: Stocks With Great Earnings Visibility

TheStreet.com Staff

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

A company with great visibility can give market players a good picture right now of what it's going to earn years from now, Jim Cramer told viewers of his "Mad Money" TV show Monday.

Visibility is a good thing to have, especially in this time period, when the market is flooded with uncertainty, because stocks with this quality are more likely to recover first, he said. People want to invest in stocks they have conviction in during this "horrible, ugly" environment, Cramer added.

Cramer identified three stocks with five years of great visibility.

The first one is First Solar (FSLR Quote), a stock "that's already making viewers a fortune," he said.

The stock, which has jumped 387% since Cramer recommended it on March 11, declined today, giving people an opportunity to get in.

He said he likes First Solar because it uses a different technology and doesn't rely on silicon wafers. Silicon is expensive and in short supply, whereas First Solar has a much cheaper way to generate solar power than other companies, Cramer explained.

Cramer said the reason he said he's talking about First Solar today is its incredible visibility. The company, Cramer said, has locked in profits with contracts worth "huge amounts of money."

In addition, the company, which should enjoy tremendous growth over the next five years, is expected to announce its first utility customers in the U.S. in 2008, a catalyst that should boost the stock.

Medco Health Solutions

The second company with "bedrock earnings visibility" people can count on in this unpredictable environment is Medco Health Solutions (MHS Quote), another stock that's down in price right now, Cramer said.

This pharmacy benefit manager, he told viewers, benefits when big drug companies come off patent and go generic. Over the next five years, $77 billion worth of drug sales are scheduled to come off patent, Cramer explained.

Because Medco Health does an enormous amount of drug buying, generic versions will send its cost down significantly and increase its profit margins tremendously.

During the next five years, there is a $6 billion window of profit opportunity for the company, and the best part about it is that people can see this now, he said.

If this stock comes down from $98.42 to the low $90s, Cramer said he wouldn't be surprised if the company started buying stock back. "It has the kind of visibility investors should kill for," he said.

Moreover, Medco Health is a defensive stock and should be OK to buy in this erratic market, Cramer added. He said people should buy it slowly.

Transocean

The third and last company that embodies great visibility is Transocean (RIG Quote), a contract driller, which Cramer owns for his charitable trust, Action Alerts PLUS, he said.

Cramer called Transocean "a principal beneficiary" of high oil rates and said it can get great prices for its deepwater rigs. The company, he said, has locked in high rates for years to come, with long-term contracts going out until 2010 and 2012.

Every time oil goes down, the stock gets hammered, but it shouldn't because its contracts are "ironclad," Cramer said.

Further, Transocean just completed its acquisition of its biggest competitor, GlobalSantaFe, he added. This "truly anticompetitive merger" should increase Transocean's bargaining power, enabling it to get better prices, he said.

Because of the limited supply of oil, there is an enormous backlog to building these rigs and it takes years to do so. Transocean, Cramer said, can get $600,000-a-day rental rates. He said its pricing power should stay strong over the next five years.

The worst thing to say about Transocean is that it has boring profits, he said.

All three companies -- First Solar, Medco Health and Transocean -- have five-year plans that ensure great earnings visibility. However, all three are all getting killed in the market, and investors should consider buying them now, Cramer advised.

BioMarin Pharmaceutical

BioMarin Pharmaceutical (BMRN Quote) recently received FDA approval for Kuvan, which is used for the treatment of phenylketonuria (PKU).

To explain to viewers the importance of this drug, Cramer called on BioMarin CEO Jean-Jacques Bienaime.

Kuvan, Bienaime said, is important for patients because it's the first and only FDA approved drug for PKU, which if untreated can cause neurological problems, including mental retardation.

Bienaime said he is confident Kuvan will be covered by most insurance companies. Some carriers might require a co-payment, but the maximum should be around $50 a month or $600 a year, he said.

Cramer called BioMarin a great speculative stock for those who are looking for a longer term horizon.

Lightning Round

Cramer was bullish on Baidu (BIDU Quote), Bristol-Myers Squibb (BMY Quote), Focus Media (FMCN Quote), Honeywell (HON Quote), Boeing (BA Quote), Moog (MOG-A Quote), MasterCard (MA Quote), Genesis Lease (GLS Quote) and ConocoPhillips (COP Quote).

Cramer was bearish on Rite Aid (RAd Quote) and JetBlue Airways (JBLU Quote).

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

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