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Cramer's 'Mad Money' Recap: Takeover Tonic (Final)

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NEW YORK (TheStreet) -- "A little speculation goes a long way," Jim Cramer told the viewers of his "Mad Money" TV show Wednesday, as he commented on the rumors that U.S. Steel (X) may be the target of a takeover bid at close to $60 a share.

Cramer said while he doesn't recommend stocks based on takeover speculation and prefers to use good old fashioned fundamental analysis, today's takeover rumors were welcome news on a sharply negative Wall Street.

Cramer explained that takeovers require confidence and changes market sentiment. He said with takeovers happening, ETFs don't look as attractive as individual stocks, as they can't offer the upside surprises. He said takeovers also create fear in the short sellers who can't afford to have their cheap stocks taken sharply higher.

With merger activity for 2010 already surpassing that of 2009, Cramer said it's clear that things are looking up, and merger mania may be returning to Wall Street. He said in addition to the recent Potash (POT) deal, there have been countless smaller deals, all of which have ben done largely in cash, and at hefty premiums.

Take a peek at the 52-week high, and Cramer said you'll find not only great companies like Dominion Resources (D) and Progress Energy (PGN), along with other Cramer favs McDonald's (MCD) and Altria (MO), two stocks which he owns for his charitable trust, Action Alerts PLUS, but also plenty of smaller companies that look just like those already receiving takeover bids. These are the companies that just got a whole lot more interesting, said Cramer.

He also there are also plenty of other companies that look just like ones already receiving takeover bids.

"The sellers will be proven wrong," said Cramer, "the markets are finally starting to see the light."

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