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Cramer's 'Mad Money' Recap: Dow Drops the Ball

TheStreet.com Staff

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

"Dow Jones must make their index look more like the market," Jim Cramer told viewers of his "Mad Money" TV show Monday.

Cramer took issue with Dow Jones' re-indexing of the Dow Jones Industrial Average by dropping both Altria (MO Quote), a company which he owns for his charitable trust Action Alerts PLUS, and Honeywell (HON Quote), and adding Bank of America (BAC Quote) and Chevron (CVX Quote) to the index.

There are three big themes in the economy that Cramer said the DJIA needs to emphasize. The first is the importance of the natural resource sector as a growing part of our economy. The second is the strength of companies that sell beyond the US border to the rest of the world. And third, the decline in both the size and the worth of the financial sector.

"None of these themes were reflected in today's choices," Cramer noted.

Cramer said it was a horrible move to remove Honeywell from the average. The company, he said, is finally starting to turn itself around and is a good representative of U.S. manufacturing.

Cramer also mocked the inclusion of Chevron as an oil play. He would have chosen another stock from his charitable trust, ConocoPhillips (COP Quote), which he says is better run and has more natural gas exposure.

He also would have considered adding Freeport-McMoran (FCX Quote), another stock Cramer owns for Action Alerts Plus, or Schlumberger (SLB Quote) as better representatives of the oil industry.

Cramer reserved special outrage for the inclusion of Bank of America. "We shouldn't be adding a financial, we should be removing one," he said.

Cramer suggested getting rid of American International Group (AIG Quote), which he declared is "a travesty masquerading as an insurance company." Cramer even went as far as adding AIG CEO, Martin Sullivan, to his Wall of Shame. "This guy gives incompetence a bad name," he added.

Cramer made a few other suggestions for the Dow as well. Why not dump Pfizer (PFE Quote)? he asked. The average already includes both Johnson & Johnson (JNJ Quote) and Merck (MRK Quote).

The index also includes both AT&T (T Quote) and Verizon (VZ Quote), which represent both of the remaining large telecom companies. Cramer suggested adding Cisco (CSCO Quote) as a more diversified technology company, and even Google (GOOG Quote), as a company now getting 43% of its sales overseas.

Playing Defense

In truth, Cramer said, the White House asked Congress for $515 billion in defense spending for this year, a 7.5% increase over last year's budget.

"The defense contractors are in bull-market mode," Cramer said. He continues to recommend Raytheon (RTN Quote), a stock which he owns for Action Alerts Plus. Raytheon, he said, has the highest international sales among all of the defense contractors, which makes it especially attractive.

Raytheon, Cramer points out, is also not getting the love it deserves on Wall Street. "The analysts can't like every stock," he noted, "but this is one that should not be ignored." He recommended waiting for any weakness in the stock, then pulling the trigger.

Mac Attack

"When analysts abandon good companyies with great stocks for bad reasons, you want to buy," Cramer said He cited McDonald's (MCD Quote) as a recent example of this trend.

On Jan. 28, McDonald's reported better-than-expected quarterly results, but also announced worse-than-expected same-store sales numbers for December. Afterward this announcement, Bear Stearns downgraded the stock, causing the shares to fall as low as $50.10.

But Cramer warned: "You just can't trade off a single month's data, especially for a restaurant stock." It's simply not indicative of the company's overall performance, he argued. This past Friday, McDonald's released its January same-store sales, and it turns out they were up 5.7% driven by strong international sales.

"No one ever made a dime panicking," Cramer reminded viewers. In hindsight, buying after the downgrade was the right thing to do, he said. The case for the downgrade was based solely on slowing U.S. sales, but McDonald's is a true international company. Cramer would still be a buyer of McDonald's, even at its current level.

Sudden Death

In Sudden Death, Cramer was bullish on Hologic (HOLX Quote), Jacobs Engineering (JEC Quote) and Chicago Bridge & Iron (CBI Quote).

Lightning Round

Here's what Jim Cramer had to say about some of the stocks that callers offered up during the "Mad Money Lightning Round" Monday evening:

Gamestop (GME Quote): "GameStop is good, but not great here. We need to wait another 8 months for this one."

NYSE Euronext (NYX Quote): "The quarter was awful. We have to give the new CEO a chance. I'd be a buyer under $63/share."

Arch Coal (ACI Quote): "Arch Coal is a winner, as is

Peabody Energy (BTU Quote)"

First Solar (FSLR Quote): "First Solar is going to do great, oil is going back up. I would buy more."

National Oilwell Varco (NOV Quote): "I think this one is in great shape, we can't get enough oil rigs."

Level 3 Communications (LVLT Quote): "LVLT reported a good quarter, but I want to see one more good quarter first."

Sherwin-Williams (SHW Quote): "That's an up stock, it's come down 20 points, that one's a winner."

Navteq (NVT Quote): "I say GPS has peaked, I don't want to be into this one. "

Activision (ATVI Quote): "I think this one's played out, I'm in the don't buy camp."

Bear Stearns (BSC Quote): "I think you stick with Bear, I think this Justice Dept thing will be cleared up."

Verizon (VZ Quote): "This stock has been hammered, I recommend Verizon."

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.