'Mad Money' Recap: Mortgage-Mess Defense

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Jim Cramer, in his "Mad Money" show Monday, said that more than 7 million "teaser" mortgages are likely to be defaulted.

Investors should keep an eye out for the mortgage meltdown's ripple effects and protect their portfolios from the House of Pain.

"Stay defensive," he insisted, as he predicted more problems to come for banks, brokers and funds.

Cramer said to avoid the companies related to lending and homebuilding, such as Thornburg Mortgage (TMA), Washington Mutual (WM) , Lehman Brothers (LEH), KB Home (KBH) and Beazer Homes USA (BZH).

Cramer said to look to the companies focused on staples, soft goods and drugs. He recommended Procter & Gamble (PG), Coca-Cola (KO) and Colgate (CL).

The Fed's betting that the mortgage mess will subside, Cramer said. However, Cramer believes that the Fed should cut rates.

Swearing by Schering

One stock Cramer recommended was Schering-Plough (SGP), which develops and markets medical therapies and treatments worldwide.

Its brands include Coppertone, Dr. Scholl's, Solarcaine and Tinactin. Schering-Plough's net sales for the second quarter of 2007 totaled $3.2 billion, up 13% from last year. Seven out of 10 of its largest-selling products posted double-digit sales for the second quarter, Cramer said.

The stock is getting knocked down now, but Cramer still believes it's a buy and is naturally far removed from the "mortgage madness." Cramer noted that Schering-Plough CEO Fred Hassan was one of his transformational CEOs back in May.

The company's operating margin is well below the sector's averages, and it recently issued a secondary offering. However, investors should wait for the stock to come in some pricewise before buying, Cramer stressed.