Mad Money Recap
Cramer's 'Mad Money' Recap: June 30
TheStreet.com Staff
06/30/08 - 07:52 PM EDT
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"We need stocks that aren't economically sensitive," Jim Cramer told viewers of his "Mad Money" TV show Monday. That's why he predicted the next big move in stocks will come from the Medicare spending bill now working its way through Congress. Cramer noted that the U.S. government will spend upwards of $454 billion on Medicare this year, up from just $371 billion in 2006. This means a windfall for many companies poised to take advantage of the huge government handouts that are about to take place, he said. According to Cramer, investors who took advantage of last year's Medicare bill, which only allocated six months worth of Medicare spending, were rewarded handsomely. He noted that long-term care hospitals benefited from last year's bill, with stocks such as Kindred Healthcare (KND Quote), where was up 16% in the weeks that followed. In-patient rehabilitation facilities also benefited. For example, Healthsouth (HLS Quote), rallied 16% after the bill was announced. On the downside, Cramer noted companies such as the oxygen-and-dialysis providers nose-dived after funding for their operations were left out of the bill at the last minute. He called the Medicare bill "low-hanging medical fruit" and told investors to "profit right along side of the profiteers."
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A Boost for Dialysis Providers
Cramer said Fresenius (FMS Quote) is poised to benefit from this year's Medicare spending bill. He said dialysis is one area Congress is expected to increase funding, and Fresenius will be the primary benefactor.
A Beleaguered Industry
"If you own a house, and that house has a mortgage, you don't really own it, the bank does," Cramer told viewers. He used the analogy to drive home the point that while the stocks of both General Motors (GM Quote) and Ford (F Quote) look cheap in the single digits, it's the bond holders, not the stock holders, who really control the company. Cramer said that both GM and Ford have simply borrowed more than they can repay, leaving the bondholders in control of their destiny. He said that despite their huge assets, GM has a negative book value and Ford's book value is barely zero. Cramer compared the fate of both companies to that of Bethlehem Steel in the 1980's. Then, Bethlehem Steel was one of the largest companies in the world. But over time, its pension, healthcare and bond obligations crushed the company until one day, it simply canceled its common stock. "The bondholders are in control," said Cramer, "not the shareholders." Cramer said he wouldn't own either company and extended the warning to shares of many of the ailing bank stocks as well. He called all of them far more speculative than he would ever recommend on "Mad Money." "No matter how low they are," he cautioned, "they can still go to zero."A Juicy Dividend
Cramer welcomed Glen Post, chairman and CEO of CenturyTel (CTL Quote) to the show to discuss his company's recent decision to increase its dividend ten-fold to return more money to its shareholders. Post said that after years of buying back shares, CenturyTel still had significant free cash flow and felt the increase would help bridge the gap between its share price and the true value of the company. He said that CenturyTel has a high-quality fiber network in place and is bringing broadband Internet services to over 85% of their customers today. He expects to see broadband services continue to be strong and expects CenturyTel to continue to prosper. Cramer commended Post for returning value to shareholders and told viewers to just start buying.Sudden Death
Cramer was bullish on Nike (NKE Quote) and Research In Motion (RIMM Quote). He was bearish on Corning (GLW Quote).