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Cramer's 'Mad Money' Recap for July 2

Scott Rutt

07/02/08 - 07:47 PM EDT

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

"This sell-off is vicious, it's ugly, and it's all about worries of a global slowdown," Jim Cramer told viewers of his "Mad Money" TV show Wednesday.

In these tough times, Cramer said its time to start taking profits in the stocks that have gains and start hoarding cash to buy them back later at lower levels.

"If you haven't taken any gains, all of my new recommendations won't matter because you won't have the money to buy them," he said.

He then returned to his theme for the week: non-economically sensitive stocks that will benefit from this year's Medicare spending bill.

Cramer recommended Pediatrix Medical (PDX) as the next in his series, saying that any company set to get money from the federal government doesn't need to worry about slowing housing or European interest rates.

Pediatrix manages the largest network of neonatal specialists, along with 22% of the 1078 Neonatal Intensive Care Units (NICU) in the country. The stock is currently just 3 points of its 52-week low, but Cramer said that's because Wall Street just doesn't' understand Pediatrix' business.

While Pediatrix itself will not receive any money from Medicare, Cramer noted it does rely on the Medicare pay rate set for physicians to determine the benchmark it will use to charge for theirs. With a 1.1% physician pay increase already in this year's Medicare bill, it only stands to reason that Pediatrix will earn more as well, said Cramer.

Cramer: Natural Gas Rules

Cramer also noted the company's long-term growth prospects. Twelve percent of all births in the U.S. require NICU services, and that number is expected to increase with women having children later in life, the increased use of fertility drugs and the increased prevalence of diabetes in the U.S. population.

Cramer said Pediatrix has already had its sell-off, with shares falling from a high of $70 a share to just $48 a share today. The company now trades at just 17 times its earnings with a long-term growth rate of 13%. Cramer gave the stock a target of $62 a share, or a 28% gain of today's levels.

A Way to Stay in Natural Gas

Cramer warned that there will be more pain coming for his favorite sector, natural gas. He told investors that if they can't handle a 5% to 10% sell-off in the group, they may want to scale back now and buy some back at lower levels.

Stockpickr

Cramer then recommended Spectra Energy (SE) as a smaller natural gas play they may not be as volatile as some of the bigger stocks he's recommended previously.

Spectra is a natural gas transmission company that helps get natural gas where it needs to go, said Cramer. The company has 58,500 miles of gathering and processing pipes, along with 18,000 miles of transmission pipelines.

With over $3 billion worth of projects in the works, Cramer said Spectra is in a strong position. "Coal is so out of favor due to its emissions," he said, "that natural gas is the logical alternative." The company also sports a $600 million stock buyback program and a 3.5% dividend yield.

Cramer said Spectra is trading at a discount to its peers. He pegged the stock at $32.84 a share for a 17% gain, if its P/E multiple comes up to the industry average.

Am I Diversified?

Cramer reviewed the portfolios of callers to see if their portfolios have what it takes. The first caller's portfolio included Bucyrus (BUCY), Allscripts (MDRX), Target (TGT), Windstream (WIN) and AT&T (T).

Cramer noted both Windstream and AT&T are in telecommunications. He recommended selling AT&T and adding a consumer stock like Pepsi (PEP).

The second caller's top holdings included Caterpillar (CAT), Toyota (TM), Proctor & Gamble (PG), Exxon-Mobil (XOM) and AT&T (T).

Cramer called this portfolio diversified, saying it was "perfect."

The third caller had Nike (NKE), BEA Aerospace (BEAV), El Paso (EP), Sociedad Quimica (SQM) and Compagnie General de Gophysique-Veritas (CGV) as their top five stocks.

Cramer advised selling either El Paso or Veritas and adding a healthcare or consumer company to the portfolio.

Changes on the Wall of Shame

Cramer redeemed James Keyes, CEO of Blockbuster (BBI), from his "Wall of Shame" list of the worst CEOs. He commended Keyes for doing the right thing for his shareholders when he walking away from the bid to acquire Circuit City (CC).

Cramer replaced Keyes with Yahoo (YHOO) founder and CEO Jerry Yang. "This man has treated this company as his own," he said, calling Yang "truly shameful."

Sudden Death

Cramer was bullish on Charles Schwab Corp (SCHW) and Frontline (FRO).

He was bearish on Ship Finance International (SFL).

Lightning Round

Cramer was bullish on Harsco (HSC), Vectren (VVC), StanCorp Financial (SFG), Enersis (ENI) and CPFL Energia (CPL).

Cramer was bearish on CVRD (RIO), Goodrich (GR), Skyworks Solutions (SWKS), Valero Energy (VLO) and HealthSpring (HS).

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.

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