Cramer's 'Mad Money' Recap: Don't Overlook Big Pharma

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"Big Pharma is cheap, but for all the wrong reasons," Jim Cramer told viewers during a special third-anniversary edition of his "Mad Money" TV show Friday.

In front of a rousing studio audience, Cramer called the drug stocks one of the worst-performing sectors out there.

Cramer blamed much of the sector's problems on fears that the Democrats will take the White House in November. But he said drugs would not be adversely affected if that were to happen. Instead, he said, investors should be more worried about the impact on oil and energy stocks if the Democrats win.

Cramer cited both Schering-Plough SGP, a stock he owns for his charitable trust, Action Alerts PLUS, and Merck MRK as his favorites in the sector even though both stocks have been down 28% year-to-date.

He called Schering "one of the cheapest drug stocks out there based on its growth rate," and he touted the company's Zetia and Vytorin drugs as blockbusters in the making. As for Merck, Cramer liked both the company's cholesterol drugs and the promise of its HPV vaccine.

Cramer then took questions from the audience and told a viewer that while he likes Teva TEVA, he will never recommend the generic drug makers because it's just too easy for competitors to enter the market.

Cashing in on Direct Selling

Repeating his mantra "There is always a bull market somewhere," he told viewers that direct selling is one of those markets and Tupperware TUP is one of the best direct-sales companies.

Direct sellers do well as the economy slows, and Cramer said he likes Tupperware for both its 2.5% yield and the fact that 85% of the company's business is overseas.

He said Herbalife HLF would be his second choice in this sector. Since Cramer interviewed Herbalife's CEO on Nov. 7, the company's stock has risen a quick $10 a share. While this makes Herbalife too high to recommend, Cramer still likes the stock on any weakness.

Finally, Cramer noted the once-hated Avon AVP as another strong player in the direct-selling market. He said that about 75% of Avon's sales come from overseas, and the company has exposure in the bull markets in Brazil and China. He recommended buying half a position in Avon now and waiting for any weakness to purchase the other half.

Am I Nuts?

Cramer played "Am I Nuts" with audience members to help them sort out their stock situations.

The first audience member asked about a position in Marta Stewart Omnimedia MSO. Cramer, while fond of Martha Stewart personally, recommended selling her company's stock.

The second audience member asked about her large position in alternative energy stocks. Cramer recommended against loading up a portfolio with any one sector and encouraged the viewer to diversify.

Questions from the audience

Cramer opened up the floor and took more questions from his live studio audience. When one viewer asked about investing for his family, Cramer advised determining each member's risk tolerance before picking stocks for their portfolios.