Cramer's 'Mad Money' Recap: Primed for Private Equity

When looking for a target, private-equity firms generally look for "poorly run companies that generate a lot of cash," Cramer said. They look for opportunities to "increase margins or grow sales" better than current management.

A Cyclical Classic

Cramer kicked off his private equity target series with Actuant (ATU - Cramer's Take - Stockpickr), a company involved in tool supplies and engineered solutions

This is the first stock that, ahead of a possible private-equity buyout, market players should consider getting into to get paid "a huge premium," he said.

Actuant, Cramer said, is "your classic cyclical stock." It is a "magnificent" cash-flow generator, which has been trading at the low end of its range, he went on. "It's a broken stock but not a broken company."

Although there are a lot of shorts here, Cramer believes that they are wrong and that it would be a good idea to go long Actuant. It's not expensive, and the company's fundamentals have already started to turn, he said, calling Actuant "a solid industrial stock" worth owning beyond its private-equity potential.

Further, Cramer said he believes that if Actuant goes private, the stock could get up to a 13-point hike in its price, on the high end.

Discover This!

Discovery Holding (DISCA - Cramer's Take - Stockpickr), Cramer told viewers, is "becoming a money-making machine." He believes that people should buy it after doing their own homework on the stock.