Cramer's 'Mad Money' Recap: Avoid These High-Drama Stocks!
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NEW YORK (TheStreet) -- Drama belongs on Broadway, not on Wall Street. Jim Cramer told his "Mad Money" viewers Wednesday they'd better avoid stocks steeped in high drama and stick with those boring names that simply make you money.
Case in point, Research In Motion (RIMM), the beloved BlackBerry maker that's seen the love affair with its users wither and die. Cramer said after years of under-investing in new technology and a string of service outages, RIM is now in a tailspin from which few companies ever recover. The possibility of a takeover is promising, but who would want to buy a company that's now losing money? "Never speculate on a takeover when the fundamentals are in decline," Cramer concluded.Another high-drama stock is Facebook (FB), which hit a new low again today. Cramer said the bulls call Facebook a long-term win, a stock investors can just buy and forget about. But is that really a smart move? Cramer said investors need to wait for at least a full quarter of results from the company or for the lockup period to expire to really know how low this stock can go. Finally, there's Morgan Stanley (MS). Cramer said this stock is a constant battle between the bulls and the bears. Is the company's balance sheet OK? Are ratings cuts looming based on European exposure? Cramer said with so many betting against this firm, it's simply too hard to call. Instead of these high-drama names, investors should consider Verizon (VZ), a wireless company that sells all types of handsets, not just one. They should also consider Apple (AAPL), a stock which Cramer owns for his charitable trust, Action Alerts PLUS. He said Apple offers a low multiple and high growth as well as products that continue to dazzle. In the banking sector, Cramer gave the nod to Wells Fargo (WFC), a far safer and less dramatic alternative to Morgan Stanley.
Executive DecisionIn the "Executive Decision" segment, Cramer sat down with David Wenner, president and CEO of B&G Foods (BGS), a stock that's up 95% since Cramer first recommended it in October 2010. Shares of B&G rose 83% last year and currently sport a 4.6% dividend yield. Wenner said B&G is all about acquiring great consumer brands and making them better. The company currently manages brands like Ortega Mexican foods and Mrs. Dash and McCormick seasonings. When asked whether the company has purchased too many great brands recently, Wenner said B&G is up to the challenge and the company's balance sheet remains in great shape. Wenner noted that B&G's acquisitions are always accretive to earnings. When asked about one recent acquisition in particular, Wenner admitted that the purchase of the Static Guard brand is a departure for B&G, which has been solely a food company. Wenner said that while he has no interest in competing directly with juggernauts like Procter & Gamble (PG), in the case of Static Guard the product is first in its category and has many synergies with B&G's other brands. Finally, as for exposure to rising commodity costs, Wenner said B&G is in a rare position of not having a lot of commodity exposure, and the company hedges its bets when necessary. Cramer continued his recommendation of B&G Foods as a great, non-European stock for investors' portfolios.
Dividend ProtectionIn a turbulent market, investors need dividend protection, Cramer said, unveiling a new group of "Dividend Royalty" stocks that fit that bill perfectly. He reminded viewers that nearly 40% of all the gains from the Standard & Poor's 500 come from reinvested dividends, which makes a strong, diversified dividend portfolio one that's worthwhile to have. Dividends beat out U.S. Treasury bonds both in yield and in their tax treatment and offer the possibility of being increased over time. Cramer said he chose these five names from a list of companies that have raised their dividend every year since 1980. After accounting for diversification, these stocks rose to the top of the list. 1. ConEd (ED). Cramer said this electric utility sports a 4.0% dividend yield and has the added bonus of being in the transmission and distribution business, not the power generation business, leaving it off the EPA's radar. 2. Sherwin-Williams (SHW). This paint purveyor has a 1.2% dividend yield, but is increasing that yield at a 20% compound rate. Given the turn in housing, Sherwin-Williams should be poised for growth. 3. Abbott Labs (ABT). This Action Alerts PLUS holding has a 3.3% yield and is growing its dividend at a 14% annual clip. Given that the company is splitting itself up later this year, Cramer says Abbott gives investors multiple ways to win. 4. Pepsico (PEP). This long-time Cramer favorite has a dividend yield of 3.1% and is growing that yield 12% a year. Pepsi is a turnaround story, said Cramer, and has little European exposure. 5. Target (TGT). Cramer said this domestic retailer is benefiting from a return in housing and falling gas prices. Target has a 2.1% dividend yield and is growing its payout 11% annually.
Lightning RoundHere's what Cramer had to say about caller's stocks during the "Lightning Round": Qualcomm (QCOM): "Qualcomm is a great play off Apple but people want dividends and no Europe and Qualcomm is not there." Ctrip.com International (CTRP): "I don't like China. I'm not recommending anything in China. Sell, sell, sell." Hartford Financial Services (HIG): "It's very cheap but I'm going with American International Group (AIG)." Ship Finance International (SFL): "It's too dangerous." Anheuser-Busch InBev (BUD): "I like Bud here. Exactly the kind of stock I like here." Midstates Petroleum (MPO): "Too dangerous. I think oil prices stop here but if not that stock goes lower." Amarin (AMRN): "That's a nice speculative stock. Biotech has no economic exposure." Wolverine World Wide (WWW): "There's a show bull market but I can't say 'buy, buy, buy' without a pullback."
Am I Diversified?In the "Am I Diversified?" segment, Cramer spoke with callers and responded to tweets sent via Twitter to @JimCramer to see if investors' portfolios have what it takes for today's markets. The first portfolio included: Energy Transfer Partners (ETP), Devon Energy (DVN), Panera Bread (PNRA), AIG (AIG) and Lam Research (LRCX). Cramer said that while Devon and Energy Transfer are different, they trade together, which means that Devon should be sold in favor of a food stock like Pepsico. The second portfolio's top holdings included: Apple (AAPL), Abbott Labs (ABT), Cisco (CSCO), MetLife (MET) and Sempra Energy (SRE). Cramer said that Apple and Cisco were too similar and he recommended selling Cisco and adding a stock like Walt Disney (DIS). The third portfolio had: Abbott Labs (ABT), American Electric Power (AEP), Main Street Financial (MAIN), MarkWest Energy (MWE) and Sandridge Mississippian Trust (SDT) as its top five stocks. Cramer said that while this portfolio has a ton of yield, it's too levered to energy. He suggested selling Sandridge and again adding a stock like Walt Disney.
No Huddle OffenseIn his "No Huddle Offense" segment, Cramer dove into the paradox that has become falling oil prices. With the price of oil down from over $120 a barrel to just over $100 a barrel, shouldn't stocks from restaurants to retailers be rallying? What about hotel and travel stocks, casinos and even home builders selling homes in communities with longer commutes to work? Cramer said that falling oil prices should make all of these stocks head higher, but there's a problem. While oil prices are plummeting, gasoline prices are holding firm. Cramer said oil refining has become a terrible business and many companies are simply shutting down refineries rather than investing the billions of dollars needed to modernize them to meet EPA standards. Cramer said the only way to get gas prices down is to use less gas, and that only happens by converting to natural gas. A simple incentive to convert heavy trucks to natural gas could cut oil imports by 25%, said Cramer, not to mention the savings from incentivizing building owners to convert from oil to gas for heating. Cramer said that consumers should demand politicians get behind a move to use more natural gas and get North America energy-independent. --Written by Scott Rutt in Washington, D.C.
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