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Cramer's 'Mad Money' Recap: Caution Is King

TheStreet.com Staff

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"The watchword for this market is 'caution'," Jim Cramer told viewers of his "Mad Money" TV show Monday.

He cautioned viewers that the general direction of the market is lower, not higher, and that a buy-and-hold strategy will not work in this environment.

"We're no longer in a market where stocks are innocent until proven guilty," he said. Instead, the market is treating all stocks as guilty until they prove themselves innocent and worthy of investors' money.

Cramer said the market won't reach a bottom until there is at least one run on a bank, where customers start lining up to withdraw all of their money in true panic fashion. He predicted several runs on banks in the coming weeks and months.

In this tough market, he said, "Investors need to accept the negativity, but not the panic." He reiterated that investors' goals should be capital preservation, not capital appreciation.

"When you can't make more money, the goal should be to lose less money than the next guy," he said.

Cramer outlined four situations where he'd feel comfortable buying a stock. First, he'd buy a stock where the market is so oversold that it creates a short rally. In that case, he warned, investors must take profits quickly.

Second, he'd buy a stock when all of the negativity is over. "But we're not there yet with any stock," he cautioned.

Third, he would buy stocks of companies with good earnings and a catalyst to get the stock price moving. After scanning over 1,000 stocks over the weekend, he found a few that meet these criteria.

And finally, he feels comfortable with stocks that have a safe dividend of more 4% and double-digit earnings growth.

A Silver Lining

Using a baseball analogy, Cramer told viewers that if they can't hit home runs in the current market, they should try to at least make it to first base on a single.

He then recommended Genentech (DNA Quote) as a pitch investors should swing at.

"Other than agriculture, oil and gold stocks, biotech has been one of the strongest groups in the market," he said.

Biotech, he said, is not sensitive to economic uncertainties and is loved by both Republicans and Democrats, which is essential for an election year. Of the major biotech players, he said Genentech has the biggest potential for earnings increases this year.

Although Gilead (GILD Quote) had been the sector's biggest performer, Genentech is now both cheaper than Gilead and has more upside potential, he said.

According to Cramer, the company has an analyst meeting Friday, at which time it could preannounce earnings, raise guidance, or make other stock-lifting announcements. "Any good news will matter," he said.

Cramer foresees Genentech's earnings between $4.10 and $4.20 a share. Giving the company a 24 multiple, he predicted a price target of $100 a share over the next 12 months.

That would constitute a 28% premium over its current price. "Not a home run," he said, "but not bad in a horrible market."

Down on Radio Stocks

Cramer once again voiced his outrage at the continued opposition to the proposed merger between Sirius Satellite (SIRI Quote) and XM Satellite Radio (XMSR Quote).

He blamed terrestrial radio and the National Association of Broadcasters for blocking a deal that would benefit both shareholders and consumers.

"Terrestrial radio is an industry that's falling apart," said Cramer, noting that the average market cap for terrestrial radio companies has declined 80% over the past five years.

He cited Cumulus Media (CMLS Quote), which tried to take itself private at $11.75 a share. The stock now trades at just $5.25 a share.

He also noted Clear Channel (CCU Quote), a terrestrial radio company which he said is trying to go private, but is losing so much money that a deal can't be completed.

Cramer called terrestrial radio "a desperate industry that's going backwards, not forward." He once again urged viewers to contact their representatives in Congress and voice their support for satellite radio.

Acquisitions Matter

Cramer welcomed Mark Miller, president and CEO of medical waste processor Stericycle (SRCL Quote) back to the show to discuss the company's outlook.

Stericycle is up 44% since Cramer recommended the company in January 2007, and is up 24% since Miller's last appearance on the show.

Miller said his company operates on a solid business model because it is not driven by economic factors. He also said the company's acquisition pipeline is strong, with lots of room for growth in his industry.

Cramer reminded viewers that 44% is great return for a horrible market, and recommended buying the stock.

Lightning Round

Cramer was bearish on Coach (COH Quote), Zoltek (ZOLT Quote),

Mittal Steel (MT Quote) and Priceline.com (PCLN 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.