Try Jim Cramer's Action Alerts PLUS
CLICK HERE NOW
Mad Money Recap
Return to Article

Cramer's 'Mad Money Recap': Hot Chilean Stocks

TheStreet.com Staff

05/15/08 - 07:49 PM EDT

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

"Even with their economy cooling, Chile still has a hotter economy than we do," Jim Cramer told viewers of his "Mad Money" TV show Thursday.

Cramer returned south of the border to once again tout Chile as his favorite South American country.

Cramer said than even with the economy slowing, Chile still posted GDP growth of 3.5% for 2007. The country's economy is driven largely by the copper market, where it accounts for nearly one-third of global copper production.

"This is a stealth play in China," said Cramer, who explained that as China grows, so will Chile. That's why he continued to recommend that 20% of investors' portfolios remain overseas.

Cramer again recommended Banco Santander SAN as one of his favorite Chilean stocks. Santander has the highest credit rating of any South American company and is also the largest, most efficient and most profitable of all the Chilean banks, he said.

Santander had asset growth in 2007 of 23% and posted a 25% return on equity. The stock is up 20%, including dividend payments, since Cramer last recommended the company back on Oct. 11, 2007.

"You won't find this growth in any U.S. bank," Cramer told viewers. He noted Washington Mutual WM was down 70% in the same period, CitiGroup C, down 49%, and Wachovia WB, down 44%.

Cramer also liked Banco Santander because of the highly regulated nature of the Chilean banking system. He explained that with such high barriers to entry, existing banks are protected from new entries into the market. This explains why the top five largest banks in Chile control up to 80% of the banking market in that country.

Cramer: Two Hot Rig Stocks

Finally, Cramer said he was fond of Santander's 4.5% dividend yield and the fact that it trades at just eleven times its earnings. With 13% income growth year over year, Cramer said Banco Santander is a steal.

A Red Hot Utility

Cramer also recommended Chilean utility company Enersis ENI as a safer, more conservative Chilean play.

Stockpickr

Much like his recommendation of CPFL Energia CPL in Brazil, Cramer said Enersis is a high-growth foreign utility.

Enersis' revenues are split equally between its power generation and distribution businesses. Cramer noted that with two-thirds of the company's power derived from hydro-electric sources, Enersis is also an environmental play as Chile works toward energy independence.

Cramer said Enersis is a growth story. As Chile continues its stable economic expansion, the country's need for power will fuel automatic growth for Enersis. The company plans to invest up to $5 billion into its infrastructure by 2021, which signaled to Cramer a strong, multi-year move for the stock.

Cramer said with its 2.1% dividend yield and the stock trading at just 19 times its earnings, Enersis is trading at a discount to the global utility average. He said this $17 stock should be trading in the mid $20s.

Bad Speculative Plays

In the "Sell Block" segment, Cramer put out a warning on IndyMac Bancorp IMB and Standard Pacific SPF.

He advised investors not to be enticed by low-dollar speculations, saying such speculative moves can wipe out entire investments overnight.

Cramer said investors often get lured in by single-digit valuations and don't give much thought on how much they can lose. It could be "everything," he said, citing the recent example of Thornburg Mortgage TMA, as just another in a long line of companies that decline sharply, with little chance of ever recovering.

"Stocks don't get down to these prices because they're doing well," Cramer reminded investors.

In the case of IndyMac, Cramer noted the bank has a bad loan ratio of 6.5%, yet wrote off only $132 million of losses this quarter. The company continues to raise additional capital, diluting existing shares by the day. He also noted that 40% of the banks loans are in California, one of the worst markets in the country.

Cramer said Standard Pacific is also on the verge of imploding and is only kept alive by continued waivers allowing it to cease repaying its growing debts. "These stocks are too risky. Don't think they're cheap," said Cramer.

Mad Mail

Cramer reiterated his buy on Yamana Gold AUY as one of his favorite gold stocks.

Final Notes

In a final note, Cramer reiterated his buys on Transocean RIG and National Oilwell Varco NOV on the news that Petrobras PBR is calling for additional offshore oil rigs.

Lightning Round

Cramer was bullish on Merck MRK, Schering-Plough SGP, Temple-Inland TIN and Vaalco Energy EGY.

Cramer was bearish on Whole Foods WFMI, CONSOL Energy CNX, Abiomed ABMD, Chindex International CHDX, PG&E PCG, Focus Media FMCN and Central Garden & Pet CENT. ---

Jim Cramer writes about all the stock trades in his charitable trust for TheStreet.com in Action Alerts Plus. Recent stocks he's traded in this account include Schering-PloughSPG, Yamana GoldAUY and Inverness MedicalIMA.

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.