Cramer's 'Mad Money' Recap: Russia's TV Bonanza

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

---

The rise of capitalism in Russia has fueled the rapid growth of TV, Jim Cramer told viewers of his "Mad Money" TV show Wednesday.

Russian TV is where America was 40 years ago, he said, as the explosive growth of advertising is propelling the expansion of television programming and viewership.

Cramer: One Way to Play 'Beat the Street'

The best way to play that market is CTC Media (CTCM Quote), the fourth largest television broadcaster in Russia, according to Cramer.

CTC Media, he says, owns 32 TV stations and is aggressively growing through acquisitions, taking advantage of cost savings along the way. The broadcasting company commands 11.8% of the national audience in Russia, and many of its stations enjoy strong ratings.

Cramer notes CTC Media's current valuation as another reason to own the company. CTC has a 30% long-term growth rate, but trades at just 18 times expected 2008 earnings.

"The Russian stocks are coming," he said, "and CTC Media is another great way to play the capitalist revolution."

A Market Over-Reaction

Cramer went out on a limb and recommended Merck (MRK Quote), as the next stock in his series of "catch-up" stocks that lag against their peers.

Merck recently suffered huge losses, to the tune of $31 billion of its marketcap, after negative reports surfaced regarding its anti-cholesterol drug Vytorin, which it co-marketed with Schering-Plough(MRK Quote).

"I believe Merck's been beaten down way too much," said Cramer. Just days after the negative study was released, Merck saw only modest dips in the prescription rates for Vytorin, indicating that the market may have overreacted to the news, he noted.

Calling the Vytorin fiasco "just a speed bump for Merck," Cramer said the company's $31 billion loss of marketcap "absurd."

But now that the damage has been done, Cramer said the earnings estimates for Merck "are just too low."

He said drug stocks are the ones you want to own in a recessionary environment, and with Merck's 3.7% dividend yield, it's just too attractive to pass up.

Merck estimates it will take in $4.6 billion in sales this year and has several blockbuster drugs in its pipeline. The company now trades at just 11 times forward earnings.

He is impressed with the company's stock buyback program, which still has $5.1 billion left with which to purchase its shares. "Just two months ago, they were buying back shares at $59."

Cramer's called Merck his No. 1 pick in the Dow Jones Industrial Average and a quality company that trades at a huge discount.

Going Strong

Cramer welcomed Zan Guerry Chairman and CEO of Chattem (CHTT Quote) to talk about the company's recent upside surprise.

Guerry said his company's strength has come from all of its brands moving in the right direction. He cited Icy Hot, Gold Bond, Cortizone and Act mouthwash as brands that are performing exceptionally well. He also said earlier concerns with the company's Icy Hot brand have been resolved.

Guerry credited some of Chattem's success to the company's many new products. He said the company is generating up to $5 a share of free cash flow and has $100 million for additional acquisitions.

Cramer called Chattem a solid company with great brands, great management and a solid strategy.

Mad Mail

In this segment, Cramer told a viewer that he has mixed feelings on LSB Industries (LXU Quote). While accounting irregularities always equals sell, the investigation was already priced into the stock at $14 a share, he said.