Cramer's 'Mad Money' Recap: Ole King Coal

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Coal Callin'

"Coal is hot, getting hotter. I need you in Peabody (BTU Quote) coal," said Jim Cramer Thursday on his "Mad Money" TV show.

Cramer is a fan of coal because as the prices of natural gas and oil increase, coal, a cheaper alternative for electricity production, takes market share.

Most coal stocks, however, are not good investments because they either have primarily high-sulfur coal, have sold too much future coal production at current prices (which won't allow them to profit as much as the price of coal increases), or they don't have large enough reserves.

However, Peabody has 50 years' worth of proven coal reserves, much of which isn't locked in at current prices, said Cramer. It also has "ultralow" sulfur coal and is a best-of-breed play in the coal sector, Cramer added.

Cramer was bearish on Foundation Coal (FCL Quote), Consol Energy (CNX Quote), Arch Coal (ACI Quote) and Massey Energy (MEE Quote). Cramer said most of FCL's coal was high sulfur, and it doesn't have very much coal.

Consol also has mostly high-sulfur coal, he said, and ACI has low-sulfur coal but can't capture the upside because most its coal is locked in at current prices. Cramer is also uncomfortable with ACI's debt.

Cramer said Massey was OK, but it wasn't best of breed.

A caller asked for names of companies that supply the coal industry. Cramer mentioned Joy Global(JOYG Quote), Terex (TEX Quote) and Bucyrus (BUCY Quote) as good plays.

The Sum of All Parts and JAH Love

Cramer had Marketwatch.com senior columnist Herb Greenberg on the show to ask if he'd changed his bearish tune on Johnson Controls (JCI Quote) now that JCI is buying York International (YRK Quote). Greenberg said no.

"All they're doing, really, is they're going to further obfuscate what was already going on: a deterioration of earnings quality."

Cramer argued that Johnson Controls had done a good thing by moving to emphasize its more profitable controls business and deemphasize its struggling auto business. "It takes itself out of the 11-to-12 multiple [category] of Lear (LEA Quote) and goes to a 20 [multiple] ... The way you understand that is you pay more for it."