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Cramer's 'Mad Money' Recap: H&R Block's Turnaround

TheStreet.com Staff

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

"When a company is getting ready to crush its competition, it's time to invest," Jim Cramer told viewers of his "Mad Money" TV show Wednesday.

He says H&R Block (HRB Quote) is in a position to do that against its faltering competitor Jackson Hewitt (JTX Quote).

Hewitt announced what Cramer called awful earnings on March 4, after which the stock has declined more than 61%. "Hewitt's loss is Block's gain," said Cramer, likening the situation to that of Western Union (WU Quote) capitalizing on the demise of Moneygram (MGI Quote).

Cramer, who once hated H&R Block, says he now likes the company. He noted the company's pending sale of its OptionOne franchise as a catalyst for the stock.

Once the deal is completed, Cramer said Block will be leaner, meaner and much easier for Wall Street to understand and appreciate. He also gave a thumbs up to the company's new management team headed by chairman Richard Breeden, who was the former chairman of the Securities Exchange Commission.

Cramer says Block should perform well in a recession. He noted the company did well in a similar economic environment in 2001, when the stock rose 45% between April and November.

H&R Block currently trades at just 12.9 times 2009 estimates, and Cramer said the stock is a buy at $19 to $20 a share.

Timber!

Cramer went out on a limb to recommend lumber company Weyerhaeuser (WY Quote) as a stock that should be in investors' portfolios.

According to Cramer, Weyerhaeuser's stock has been under pressure recently due to concerns over housing exposure. "But that's just wrong," he said.

He says investing in the company would be a play on the recovery of the housing market, along with a safe 3.8% dividend yield to boot.

Cramer suggested valuing the company on its assets and not on its current earnings. The company currently controls over 6.4 million acres of timberland, with another 15 million acres in Canada.

It also recently sold its containerboard packaging and recycling business to International Paper (IP Quote) for $6 billion and plans to use the proceeds to pay down debt.

Another positive is the Tree Bill currently under consideration in Congress. If the bill passes, Cramer says Weyerhaeuser can realize sizeable tax savings.

According to Cramer, the company only looks expensive at 26 times 2009 earnings estimates. He feels the company could earn as much as $4 a share by 2010, making it worth as much as $81 a share. He recommended buying Weyerhaeuser below $60 a share.

Dealing With the Recall

Cramer again welcomed Zan Guerry, chairman and CEO of Chattem (CHTT Quote) to the show to discuss the company's recall of its "Icy Hot" products.

Guerry called the decline in his company's stock price, which has fallen more than $11 since the Feb. 8 announcement of the recall, an overreaction. He said the company's other brands are still doing well, despite the negative news. He also said his company has never seen any problems with the Icy Hot products when used properly.

When asked about light sales of the company's "Gold Bond" products this past February, Guerry explained that warm weather was to blame for the decline in sales and he's already seeing a bounce back in sales.

Cramer still likes the stock, but recommends waiting for Chattem to pull back 10% before buying any.

Am I Diversified?

Cramer played "Am I Diversified" with callers to see if their portfolios make the grade. The first caller's portfolio included CVRD (RIO Quote), AmericaMovil (AMX Quote), Intel (INTC Quote), BP (BP Quote) and Western Union (WU Quote).

Cramer blessed this portfolio as diversified, saying it was "perfect."

The second caller's holdings included Dish Network (DISH Quote), Heartland Express (HTLD Quote), ISIS Pharmaceuticals (ISIS Quote), Goldcorp (GG Quote) and Novartis (NVS Quote).

Cramer said "no, no" to the two drug companies and suggested adding a defense contractor.

The third caller's portfolio consisted of Yamana Gold (AUY Quote), CSX (CSX Quote), Cisco (CSCO Quote), Genetech (DNA Quote) and cash.

Cramer called this portfolio a thing of beauty and congratulated the caller on her cash reserve.

The final caller's top positions included AT&T (T Quote), CitiGroup (C Quote), Manitowoc (MTW Quote), Conoco-Phillips (COP Quote) and Precision Castparts (PCP Quote).

Cramer said he was worried about CitiGroup and could not bless this portfolio.

Financials to Stay Away From

As a final note, Cramer warned viewers to steer clear of what he now calls the "Four Horsemen of the Apocalypse." They include: UBS (UBS Quote), Merrill Lynch (MER Quote), CitiGroup (C Quote) and Washington Mutual (WM Quote).

Lightning Round

In the Lightning Round, Cramer was bullish on Mattel (MAT Quote), AT&T (T Quote), America Movil (AMX Quote), Genentech (DNA Quote), Caterpillar (CAT Quote), CVRD (RIO Quote) and Freeport-McMoRan (FCX Quote).

Cramer was bearish on Marvel Enterprises (MVL Quote), Vishay Intertechnology (VSH Quote), Newell Rubbermaid Inc (NWL Quote), The Blackstone Group (BX Quote), Fortress Investments (FIG Quote), Alliance Data (ADS Quote), Millennium Pharmaceuticals (MLNM Quote), Cummins (CMI Quote), National City (NCC Quote) and Rite Aid (RAD 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.