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Cramer's 'Mad Money' Recap: Jan. 8

Scott Rutt

01/08/09 - 08:26 PM EST

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

Jim Cramer recommended Caterpillar (CAT Quote) as the fourth of his "Top 5 Dow Stocks" on his "Mad Money" TV show Thursday. But, he said, this stock should not be bought right now.

Cramer said his thesis on Caterpillar is simple: If President-elect Barack Obama's stimulus package passes, Cat will get orders. Since the plan was first announced, Caterpillar shares have been on fire, and Cramer said the stock and the estimates are currently too high to pull the trigger.

Caterpillar will likely have a disappointing first quarter, but Cramer said the reason to own Cat is for the second half of 2009, when he predicts the housing market will bottom. Until then, he said, Caterpillar's juicy dividend yield will pay investors to wait.

Historically, Caterpillar has been a great stock to own when its yield crosses over 4%. In October, 1990, shares rose 44% in 5 months after hitting the 4% yield level. In October, 2000 the yield again hit 4%, prompting the shares to jump 65% in the following six months. And finally, it occurred again 2002, with shares rising 135%, said Cramer.

Cramer said he sees Caterpillar hitting $55 a share by the end of the year, but not before going lower first. He told investors to hold off buying shares now until the stock reaches $40 a share.

Cramer: Charts Say Buy Every Weakness

Weathering the Rough Times

Cramer recommended Illinois Tool Works as another great American manufacturing company worth owning during a recession. He talked with chairman and CEO David Speer to find out how Illinois Tool is weathering the recession.

Stockpickr

Cramer last recommend Illinois Tool Works on Dec. 4 at $31.77 a share and recommended the company purchase rival Manitowoc (MTW Quote) after a bidding war for Enodis left Manitowoc shares so low that Illinois Tool could purchase both companies for what it bid for just the one. Since then, ITW shares are up 16.5%, but there has been no takeover.

Speer called the current economic environment difficult, especially for the housing and auto sectors. He said he doesn't expect a turnaround in 2009, believing instead a recovery will likely come in 2010.

When asked how Obama's stimulus package would affect the company, Speer said there are some things in the plan that would have an impact. He said the company's commercial construction business, along with its bridge businesses and industrial packaging business, would likely pick up, however he doesn't see an impact until 2010.

When asked about a possible takeover of Manitowoc, Speer said the company has the discipline to know when a valuation has changed and when to walk away, which is what the company did with Enodis.

Sell Block

In this segment, Cramer revisited a basket of speculative tech stocks he recommended on Dec. 12, and said it's time to sell all of the names.

Cramer's basket included Ciena (CIEN Quote), Skyworks Solutions , Tellabs (TLAB Quote) and AMD (AMD Quote) --- a group which collectively is up an average of 22.5%.

Individually, Ciena shares rose 42%, Skyworks up 20%, Tellabs up 14% and AMD up just under 13%. Cramer said this "field bet" worked due to the fact many of the tech names had been beaten down hard by tax-loss selling and forced hedge-fund selling in November and December and couldn't possibly go any lower.

In today's environment however, Cramer said it would be foolish not to take the profits and run, or at least play with the house's money going forward. The tech sector remains weak, he said, and the downside risk for these names are mounting.

BankingMyWay

Keys to Wealth

Cramer welcomed author and fellow CNBC TV host Donny Deutsch to the show to discuss his new book "The Big Idea."

The book, a tribute to the entrepreneurial spirit, comes highly recommended by Cramer.

Deutsch said "the wealthiest people in the world make it themselves." He said his book highlights dozens of "everyday people" who followed their dreams and made them came true.

Lightning Round

In the Lightning Round, Cramer was bullish on Dryships (DRYS Quote), HJ Heinz (HNZ Quote) and MasTec (MTZ Quote).

Cramer was bearish on Las Vegas Sands (LVS Quote), Halliburton (HAL Quote), CSX Corp (CSX Quote) and Endo Pharmaceuticals .

Check out the latest edition of "Cramer's Take on Top-Searched Stocks" on Stockpickr.

P/>Want more Cramer? Check out Jim's rules and commandments for investing by clicking here.

Read more of Cramer's Mad Money Lightning Round insights.

For "Mad Money" performance statistics and other links, check out Mad Money stats

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