Cramer's 'Mad Money' Recap: Take Charge of Your Portfolio (Final)

On Closer Inspection

In Thursday's "Sell Block" segment, Cramer said not all earnings beats are created equal. He said the press makes it impossible to tell the good quarters from the bad ones, reporting rosy headlines in both cases. The only way to really tell what's going on, he said, is to dive into the earnings and conference calls.

That's why after initially being excited about the "earnings beats" from both Johnson & Johnson (JNJ Quote) and Yum! Brands (YUM Quote), Cramer said he's now forced to put both companies in the Sell Block.

Cramer said there's a lot more to a good quarter than just earnings per share. In the case of Johnson & Johnson, the earnings were made by lowering R&D spending and getting a favorable tax rate. "That's not how we want to see companies make their numbers," said Cramer. Even worse, company management said their business was negatively impacted by the economy.

Cramer said that last comment was horrible news for a stock that's supposed to be a defensive play in a weak economy. Investors count on the company to deliver stable growth, no matter what. A 14% decline in the company's pharmaceutical division is not what investors want to hear, he maintained.

In the case of Yum! Brands, the press reported a 12-cent-a-share beat on strong sales in the U.S. and China. But Cramer said favorable tax rates and lower food costs were the real story, not a pickup in sales. In fact, outside of China, sales were bleak, he said, with same store sales down 6% at KFC and down 2% at Taco Bell.

Cramer said investors looking for real growth in a drug stock should consider Abbott Labs (ABT Quote), a stock which he owns for his charitable trust, Action Alerts PLUS. In restaurants, Cramer said McDonald's (MCD Quote) is the real deal, and the better investment.

Night-Vision Tech

Continuing on his homeland security theme, Cramer said the next stock that should be on every investors' shopping list is FLIR Systems (FLIR Quote), one of the premier makers of infrared cameras and night-vision technology.

Cramer said thermal imaging is no longer a niche market, but rather a $5.9 billion business. FLIR is a well-diversified company which derives 53% of its sales from government systems, 17% from commercial applications and the remaining 30% from infrared maintenance systems, a segment which the company commands a 40% market share.

FLIR Systems' sales grew 50% last year, said Cramer, and with 38% of its sales now coming from overseas, the company is rapidly becoming a global powerhouse. With many new cameras in development that are smaller and use less power, Cramer said the possibilities for FLIR are endless.

FLIR trades at just 18.8 times its earnings, but has a 19% long-term growth rate. Cramer said he's use any dips in the market as a good entry point to buy into the company.