Cramer's 'Mad Money' Recap: Collecting on Debt

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In this game you need to be ruthless, so take a look at debt collection, Jim Cramer said Thursday on his "Mad Money" TV show.

There have been plenty of stories about how a rash of new bankruptcy filings hit right before the new bankruptcy laws went into effect, Cramer said, and that's good news for Portfolio Recovery Associates(PRAA Quote).

While the company doesn't actually repossess your car, it's the new face of the repo man in a metaphorical sense, he said. And it likes to buy debt from credit card companies for pennies on the dollar and then collect.

The company also focuses on homeowners because they are likely to stop paying credit card debt before they stop paying their mortgages, he said.

Portfolio Recovery had 29% earnings growth last year, and it has a proprietary computer system that allows it to determine what debt is worth going after and what debt portfolios it should forget about, according to Cramer.

He told a caller that people falling into debt is a long-term story, so the stock will probably stay a strong play.

He told another caller that while debt collectors will profit from all the new bankruptcies, credit cards won't make money off of the trend. For example, he said, Capital One Financial(COF Quote) had an okay quarter but not a blowout. However, he was reluctant to recommend selling the company because it's cheap.