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Cramer's 'Mad Money' Recap: The Pizza Connection

TheStreet.com Staff

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

"Execution is something professional money managers always want to see in a stock," Jim Cramer told viewers of his "Mad Money" TV show Wednesday.

However, it can be tricky to compare companies with good execution vs. those with bad execution, he said. The best demonstration of execution is almost always in restaurants and retail, where execution is everything, he added.

Consider Domino's Pizza (DPZ Quote) and Papa John's International (PZZA Quote), Cramer said. "They're both in the same business, but one blows up and one gives us good execution."

Domino's was crying about how hard the environment is, while Papa John's did not complain and instead, on Nov. 6, beat its earnings estimates and raised its forecast, he said. Meanwhile, Domino's announced less than stellar estimates.

Both pizza companies have long-term growth rates, but Papa John's has a higher multiple because of numbers that are bankable, Cramer explained. It also has better visibility, which is "a multiple enhancer."

The multiple for Domino's, on the other hand, can't be as good because Domino's complained about the environment and didn't deliver good numbers, he said.

To determine the stock price of a company, investors must find out what the earnings will be and multiply them by the multiple, Cramer told viewers. In the case of Domino's vs. Papa John's, even if the earnings stay the same, Papa John's higher multiple means its stock deserves a higher price.

Good execution is a key to a company's stock price going higher, and here it is evident that Papa John's is the winner, Cramer said.

Taking Control of Your Own Destiny

The Street is hunting for good execution all the time, because it tends to trust management that consistently delivers, Cramer told viewers.

Another comparison Cramer used to show the importance of good execution is CVS Caremark (CVS Quote), which Cramer owns for his charitable trust, Action Alerts PLUS, and Walgreen (WAG Quote).

Not too long ago, there was a consensus that Walgreen was infallible and CVS was just a respectable, second-place competitor, Cramer said. But then, he noted, CVS realized that there was extra money to be made by drugs that come off patent. He said the retailer bought Caremark and acquired all the "very visible profits" that will come from the company through 2012.

The move illustrates how CVS took control of its own destiny and gained an edge over its competition, Cramer said. Meanwhile, Walgreen was content to sit back and take what came in.

CVS realized it wanted growth from drugs going generic, and ultimately its execution translated into better numbers. Now, CVS has better stores and has become the "top dog," he said.

Am I Diversified?

During the "Am I Diversified?" round, the first player called out the following five plays: Intuitive Surgical (ISRG Quote), Precision Castparts (PCP Quote), Google (GOOG Quote), Cisco (CSCO Quote) and Procter & Gamble (PG Quote).

"I say hallelujah," was Cramer's response. "I would buy every single one of those stocks."

The second caller asked if he was diversified with these five stocks: Ford (F Quote), Hovnanian (HOV Quote), Celgene (CELG Quote), E*Trade (ETFC Quote) and ValueClick (VCLK Quote).

While Cramer called the portfolio "perfectly diversified," he said the caller was in the house of pain. He suggested the player keep Celgene and maybe ValueClick, but sell the others.

"This is a tough portfolio and I don't want you to stand still," Cramer said.

The next player's portfolio was made up of the following five holdings: JPMorgan (JPM Quote), Johnson & Johnson (JNJ Quote), Exxon Mobil (XOM Quote), Altria (MO Quote) and Caterpillar (CAT Quote), the latter two of which Cramer owns for his charitable trust.

Cramer told the player he had a "picture perfect" portfolio.

The final caller said she owned these five names: Yamana Gold (AUY Quote), BPZ Resources (BZP Quote), Triple-S Management (GTS Quote), Intel (INTC Quote) and NightHawk (NHWK Quote).

Cramer saluted the portfolio and told the caller she was diversified.

Mad Mail

During the "Mad Mail" segment, Cramer told an emailer that while he doesn't like the fact that Shaw Group (SGR Quote) CEO J. Bernhard is selling shares of the company, he likes Shaw Group, and the stock was up three points today.

Lightning Round

Cramer was bullish on Guess? (GES Quote), J. Crew (JCG Quote), Molson Coors Brewing (TAP Quote), Thompson Creek (TC Quote), Intel (INTC Quote), Schering-Plough (SGP Quote), Magna (MGA Quote), Johnson Controls (JCI Quote), MEMC Electronic Materials (WFR Quote), First Solar (FSLR Quote), Copart (CPRT Quote), Koppers Holdings (KOP Quote), Oshkosh Truck (OSK Quote) and Goldman Sachs (GS Quote).

Cramer was bearish on American Apparel (APP Quote), Anheuser-Busch (BUD Quote), Advanced Micro Devices (AMD Quote), Pacific Ethanol (PEIX Quote), Spartan Motors (SPAR Quote) and Force Protection (FRPT 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.