Cramer's 'Mad Money' Recap: Hog Wild for Hormel

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

---

"It's time to fall in love with the pork," Jim Cramer told viewers of his "Mad Money" TV show Wednesday.

With the help of "Bessie," the pot-belly pig, Cramer said pork manufacturers such as Hormel (HRL Quote) and Smithfield Food (SFD Quote) are the perfect stocks for our current economic situation.

According to Cramer, there are two reasons to love the pork industry. First, a glut of hogs in the U.S. is making pork products increasingly less expensive. The pork industry is currently experiencing a 5.4% increase in hog production while Canada is importing more hogs and fewer hogs are exported to China.

The second reason to love the pork industry is what Cramer calls the "beef trade-down." With the U.S. economy slowing and the price of beef rising due to increased feed prices, he speculates that consumers will trade in their expensive steaks for less expensive pork products.

Of the two pork producers, Cramer crowned Hormel as the top pork play even though he noted 60% of the company's sales come from pork-based products.

Last quarter, Hormel beat Wall Street's earnings estimates by 6 cents a share, with profits up in all of their business units. Cramer also likes the company's balance sheet, stock buyback program and strong insider buying.

According to Cramer, Hormel could see $7 a share of upside if the price of pork continues to decline compared to only $3 a share of downside risk should pork prices rise. "That makes Hormel a great risk-reward proposition," says Cramer.

A Sweet Dividend Play

Cramer took to the high seas to recommend Carnival (CCL Quote) cruise lines as another quality stock with a high-dividend.

Due to the recent decline in the company's stock price, Carnival now yields 4.2%. "Carnival is simply a dividend play," he said.

Cramer noted the company's strong fundamentals as another reason to own the stock. Carnival trades at just 11 times its earnings, but has a 14.5% long-term growth rate. "This stock is priced for disaster," said Cramer.

While many analysts predict a slowing U.S. economy will be bad news for cruise lines, Cramer points out that over 40% on Carnival's business comes from overseas.

He also predicted that a slowing U.S. economy will help Carnival because consumers will trade in longer, more expensive vacations for shorter, less expensive Caribbean cruises.

According to Cramer, Carnival should rise to a 16 multiple and a stock price of $55, or a 40% premium over its current level.

A Cheap Green Play

Cramer welcomed Randall Stuewe, chairman and CEO of Darling International (DAR Quote) to the show to introduce viewers to his business.

Stuewe noted coverage for his company is still building. He detailed how Darling collects food waste and converts it into either animal feed or feed stock for bio-fuel.

While he did not see his company as the answer to the country's energy needs, he said it could "make a dent" in the alternative fuel market and sees it complementing petroleum-based fuels.