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Jim Cramer's Mad Money Recap

Cramer's 'Mad Money' Recap: Don't Give Up on the Market

Scott Rutt

07/24/12 - 07:52 PM EDT
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NEW YORK ( TheStreet) -- Investors can afford to take some short-term pain in order to make longer-term gains, Jim Cramer told "Mad Money" viewers Tuesday.

Don't leave the stock market just because of a few down days. "Sometimes the markets need to come down," Cramer explained, but that doesn't mean there aren't ways to make money.

Case in point, Apple (AAPL), a stock Cramer owns for his charitable trust, Action Alerts PLUS , and that has fallen 5% on what's been widely reported as a "disappointing" quarter. Cramer said Apple is a special situation that must be owned ahead of what will truly be a strong second half of the year.

Cramer also made the case for high-yielding dividend stocks. He said these stocks yield far more than U.S. Treasuries. While they may lose a little of their value in the short term, they won't lose a lot thanks to their yields.

Stocks including ConocoPhillips (COP), Encana (ECA) and Kinder Morgan Energy Partners (KMP) in the oil patch are all terrific examples, he said.

Other high-yielders include Pfizer (PFE) and Johnson & Johnson (JNJ) in the drug sector, tobacco giant Altria (MO) and phone companies Verizon (VZ) and AT&T (T).

Cramer also recommended consumer staple stocks H. J. Heinz (HNZ), Pepsico (PEP) and ConAgra (CAG), along with utilities such as Duke Energy (DUK).

In the natural gas arena, Cramer said U.S. drillers have finally curbed supply, adding "that's what a bottom looks like." As demand builds, the natural gas stocks can only head higher.

Cramer admitted that now is a "defensive moment" in the markets, one when investors may not make many gains until the latest European news can be digested. But that doesn't mean investors need to sit still and it certainly doesn't mean they can't lose a lot less than the other guys.

Off the Charts

In the "Off The Charts" segment, Cramer went head to head with colleague Tim Collins over the chart of Monsanto (MON), the seed and fertilizer giant most poised to benefit from the record-setting drought in the U.S.

While shares of Monsanto are sitting just off their 52-week highs, Collins said the daily chart displays a wedge formation that is bullish for the stock. He felt any pullback should be bought aggressively as the stock has solid support at the $81 level.

But the good news gets even better on Monsanto's weekly chart because it also displays a longer-term edge formation. Collins said shares are at the top of the current channel and are preparing for a breakout to the upside, something the RSI momentum indicator also confirmed.

But Collins didn't stop there. He noted that ever since the drought began, shares of Monsanto have been strongly correlated to the price of corn, which has been very strong as supplies dwindle. Also bullish is Monsanto's monthly chart, which displays a reverse head-and-shoulders formation, signaling a long-term breakout is coming.

Cramer said the charts and the fundamentals agree and buying Monsanto makes a lot of sense.

Battle of the Toymakers

In the battle of the toymakers, who comes out ahead? Cramer pitted the stocks of Hasbro (HAS) versus Mattel (MAT) to find out. He said that while these companies seem similar on the surface, under the hood there is a clear winner.

Mattel is currently the world's number one toymaker with brands including Barbie, Hot Wheels and American Girl. Hasbro comes in at a solid number two with lucrative toy deals for many of the Marvel Comics series. Both companies have similar valuations -- Hasbro trades at 11.3 times earnings while Mattel trades at 12.7 times -- and similar dividends -- 3.6% for Mattel and 4.1% for Hasbro.

Cramer said while it was close, Mattel comes out the winner thanks to its consistent earnings stemming from its girl-oriented franchises. Boys, it turns out, are not a reliable source of earnings, said Cramer, and Hasbro is up against tough comparisons from last year's Transformers movie.

Mattel is also a pure play on toys, noted Cramer, while Hasbro has more exposure to games and puzzles, a segment with increasing competition from console gaming and the Web.

While both companies delivered upside surprises when they last reported, Mattel's core businesses were strong while Hasbro came in light on revenue. Hasbro also has more exposure to Europe.

But while Mattel is the better investment, Cramer said the stock has also had a big run and currently trades just off its 52-week high. He told viewers that Mattel should only be bought on a pullback.

Lightning Round

Here's what Cramer had to say about callers' stocks during the "Lightning Round":

Ford Motor (F): "This is one tough stock to own."

Pitney Bowes (PBI): "There's just nothing good happening there."

Costco (COST): "It's had an amazing run. I don't mind taking it off the table."

Kirby (KEX): "It was a great trade but it's similar to many oil and gas stocks. The turn hasn't happened yet."

Tesla Motors (TSLA): "No. It's very expensive. I have enough problems with blue-chip stocks. I can't afford to speculate."

Travelzoo (TZOO): "No. All these stocks are really high and this is the last one of the group I'd like to own."

Executive Decision

In the "Executive Decision" segment, Cramer sat down with David Wenner, president and CEO of B&G Foods (BGS), a company that delivered an earnings beat of 2 cents a share on lighter than expected revenue. Shares of B&G currently yield 3.9%.

Wenner said B&G's conservative guidance during its conference call came from the fact that no one is really sure what's going on with the American consumer. He said the packaged-food business has been soft for three quarters in a row, leaving the industry to ask, "Where are the consumers and what are they eating?"

However, given the overall weakness, Wenner said he's humbled that B&G is seeing half the declines of other competitors, and the company continues to innovate and build its business. "I'm happy with what we've done," said Wenner.

Part of B&G's success has been its Ortega line of Mexican food products. Wenner noted that making tacos at home is a better value than going out and it's something that kids like to eat. Consumers took full advantage of a recent coupon offer, confirming that they're looking for value at every turn.

Finally, when asked about acquisitions, Wenner said that B&G is ready for another acquisition, both financially and organizationally. He said B&G's recent acquisition of Mrs. Dash and the Static Guard brands are now fully integrated and he's looking forward to what comes next.

Cramer said B&G has an excellent track record, a great dividend and some growth, everything he's looking for in a tough market.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer sounded off against the politicians of the world who are standing in the way of growth, the exact thing needed to dig the world out of the hole they've created.

Cramer said it's easy for companies to blame the politicians for their problems, but in this case they may be right. The politicians could care less about corporate earnings. Ironically, it's impossible for countries, including the U.S., to cut spending and tax their way to prosperity, said Cramer. Only growth will save the day.

While the U.S. economy is bad and Europe's is horrible, it's the Chinese, of all people, who seem to be the only ones trying to spur growth. That's why Cramer expects the Chinese economy to turn positive first, taking the rest of the world along for the ride.

--Written by Scott Rutt in Washington, D.C.

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To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.


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