Mad Money Recap

Return to Article

Cramer's 'Mad Money' Recap: Rite Aid Goes Wrong

TheStreet.com Staff

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

"I made a mistake when I named Rite Aid (RAD Quote - Cramer on RAD - Stock Picks) one of my speculative stocks of the year," Jim Cramer told viewers of his "Mad Money" TV show Thursday. "But when I saw it wasn't working, I got out."

When investors can't believe how bad things are at a company, it's usually inevitable that things will get even worse, he said. Therefore, Rite Aid's bad quarter today was no surprise.

Cramer has repeatedly asked the retailer's CEO, Mary Sammons, to come on the show, and she did so on Thursday -- even though the stock was off big. The fact that she's not ducking out now, he said, shows great character.

"I believe that what we're doing is going to really reward Rite Aid shareholders," Sammons said. Acquiring Brooks and Eckerd stores is a good thing for the company, and the long-term integration is going to be good, she added.

Sammons said Rite Aid is early on in the process of absorbing the acquisitions. Rite Aid had predicted that they would have a loss because of integration costs, she said, but what they didn't expect is how bad the economic conditions have been lately.

"We have the right things going on for the company, and we are going to reward shareholders that are with us on this for the long run," she assured.

When Cramer asked the chairman how worried people should be about Rite Aid's balance sheet, Sammons said the company expects its sales to improve as it completes its integration. Their revolving facility has no restriction, she said. "We're not worried." Rite Aid is in a great place to execute its plan, she continued.

Further, Sammons said that Rite Aid is not a "quarter-by-quarter story." It is a longer-term play, and she said she's confident shareholders will be excited to see what happens in the future.

Cramer said his normal rule is that he needs to a see another quarter before getting in, but he's going to let viewers decide whether or not to get in on Rite Aid.

Study Hard

What should people do with a stock they don't know? Do their homework, Cramer told viewers.

Investors should go through analyst research on the stock, the company's SEC filings and listen or read through the company's conference calls, he said, after which they should compare the company to its peers. Then, and only then, can people decide if the stock is buy or a sell.

Recently, Cramer said he came across two stocks he wasn't too familiar with: Moog (MOGA Quote - Cramer on MOGA - Stock Picks) and Hill International (HINT Quote - Cramer on HINT - Stock Picks).

When Cramer compared Moog's business to the competition, he said he liked it. Moog makes supersonic fighters, commercial transports and business jets.

However, its industrial division, which Cramer found accounts for 46% of Moog's sales, lacked the visibility it needs to carry the stock higher, he said. When he read its conference call, the company talked about uncertainty regarding its industrial business.

Upon doing further homework, Cramer saw that only 4% of its business was in the medical sector, so the business also was less diverse than he thought.

Although Cramer liked Moog initially because it was cheaper than other aerospace companies, the additional information he got on the company makes him "hesitant to endorse the stock."

There are better aerospace and defense plays in the market, like Raytheon (RTN Quote - Cramer on RTN - Stock Picks) and Eaton (ETN Quote - Cramer on ETN - Stock Picks), Cramer said.

Hill International is a project-management and claims-consulting company that works in the construction industry. It is the 17th-largest in its sector, which, Cramer said, means there are 16 other companies in the industry he might be more interested in.

On the other hand, Cramer said that Hill has $100 million in cash and, through acquisitions, the company could move to 12th-largest. "That could be worth owning," Cramer said.

The company also has good international exposure, Cramer continued. He called Hill a speculative junior growth company and pointed out that it has yet to pick up any analyst coverage.

At this point, however, Cramer said he wouldn't like to own it. He'd rather be in names like Foster Wheeler (FWLT Quote - Cramer on FWLT - Stock Picks) or Shaw Group (SGR Quote - Cramer on SGR - Stock Picks), he said.

"Maybe you like these stocks, maybe not, but you can't buy something before you know everything about it," Cramer advised. Therefore, people should follow his lead and do their homework and then decide whether to pull the trigger.

Sell Block

During his "Sell Block" segment, Cramer told viewers he believes Goldman Sachs (GS Quote - Cramer on GS - Stock Picks), which he owns for his charitable trust, Action Alerts PLUS, is grossly misunderstood and shouldn't be lumped with other banks.

Before the company's quarter, he advised people to hold Goldman and not buy any on fear that the shorts would bring the stock down. However, on Thursday, Cramer let Goldman loose from the sell block and endorsed it as a buy.

He recommended people forget about private equity and instead concentrate on what he called "the biggest investment wave ever": the sovereign investment wave, where foreigners invest in U.S. companies. This, Cramer said, is the wave of the future.

Private equity will be nothing next to sovereign investment, and Cramer believes Goldman is going to grow because of this, he said. Goldman, Cramer said, has an advantage over the other brokers in getting sovereign investors as clients.

For one, Goldman's prime brokerage business outshines the other players. Second, it's the only bank that seems to offer its clients real stability, he said. Goldman is the only finance stock that's doing well, while all the other banks are plagued with problems.

Goldman is a buy, Cramer said.

Healthy Medco

Cramer asked Medco Health (MHS Quote - Cramer on MHS - Stock Picks) CEO David Snow if he's being too aggressive in recommending the company.

Absolutely not, Snow said. Medco is very focused on improving its clinical outcomes, he said. It builds therapeutic resource centers and makes sure its physicians are specialized.

Further, Medco Health can tell patients if a certain drug might be better for a specific illness, Snow continued. This generates not only better generic dispensing rates for the company, but also boosts profitability.

Moreover, if UnitedHealth (UNH Quote - Cramer on UNH - Stock Picks) were to leave the company, Snow said he's made it very clear to investors that Medco Health would not change its guidance.

"This is an easy call for me," Cramer said. Medco Health is a high-visibility company that is not dependent on whether or not the Fed gets it right. It is a buy, he said.

Lightning Round

Cramer was bullish on Synchronoss Technologies (SNCR Quote - Cramer on SNCR - Stock Picks), Monsanto (MON Quote - Cramer on MON - Stock Picks), DuPont (DD Quote - Cramer on DD - Stock Picks),

Accenture (ACN Quote - Cramer on ACN - Stock Picks), Harris (HRS Quote - Cramer on HRS - Stock Picks), Yamana Gold (AUY Quote - Cramer on AUY - Stock Picks) and eBay (EBAY Quote - Cramer on EBAY - Stock Picks).

Cramer was bearish on Patterson (PDCO Quote - Cramer on PDCO - Stock Picks), Coach (COH Quote - Cramer on COH - Stock Picks), Savvis (SVVS Quote - Cramer on SVVS - Stock Picks) and Apex Silver Mines (SIL Quote - Cramer on SIL - Stock Picks).

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.