Four Stocks to Buy If the Fed Gets a Clue

Apache Corporation (APA Quote - Cramer on APA - Stock Picks): At $108, this high-quality, leading independent exploration and production company trades for only 11 times consensus 2008 earnings estimates and 5.6 times cash flow.

Apache generally delivers around 8% to 10% unit growth through a combination of acquisitions and exploration, yet trades at a significant price/earnings and cash-flow discount to its peer group. On comparable valuations, the shares would be $140.

The company has significant new projects coming on line in Australia, Argentina and Egypt over the next couple of years. These projects assure the company's production growth goals. Apache has significant exposure to the repricing of the global natural gas markets, especially in Australia and Asia.

New development and the unwinding of large, below-market long-term contracts give Apache the opportunity to reap market prices for natural gas on a large chunk of production.

Vishay InterTechnology (VSH Quote - Cramer on VSH - Stock Picks). This leading electronic-components company makes the nuts and bolts of the technology era. It produces such staples as resistors, capacitors, diodes, rectifiers and discrete semiconductors.

Despite a solid long-term growth record and exposure to "all things digital," the company trades for only 10 times earnings and 5 times cash flow at $11.50 per share.

Strong growth in digital consumer electronics, telecommunications, computers and instruments should continue to drive healthy revenue gains. The company has been a bit expense-heavy vs. industry standards as a result of prior acquisitions, but it has a margin expansion plan that would help drive double-digit earnings gains for the next few years.

If the stock market refuses to award this company a fair valuation, it would be a perfect candidate for private equity. A 14 P/E ratio gets me a 40% trade.

The economy and the stock market are at a critical inflection point here, with enough crosscurrents to drive things either way. In my opinion, the Fed needs to write another recession insurance policy, and it needs to do it soon. An intermeeting rate cut would be perfect, but I don't expect these backward-looking, overly cautious bureaucrats to deliver such an unexpected move.

I do expect another rate cut in January; let's hope it's 50 basis points. The Fed needs to forget about fighting inflation for the time being. Although no Fed official can see it, deflation is the real risk to the economy right now.

It's kind of ironic -- where is the Easy Al Fed when we really need it?

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