Cramer's 'Mad Money' Recap: Stay Diversified (Final)
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NEW YORK (
) -- "You need to stay in the game," Jim Cramer told the viewers of his
TV show Wednesday, as he once again preached the lesson of diversification to those investors chasing only the hottest stocks in the market.
Investors that own stocks in the red hot gold, minerals, manufacturing or agriculture sectors got clobbered today, as the markets appeared to be rotating out of these groups and taking their profits elsewhere.
That why Cramer said investors simply cannot own only these momentum names. He said a diversified portfolio needs to include growth stocks, gold stocks and dividend stocks.
Cramer said while the high fliers got hammered, one hated sector, the banks, picked up the slack. He said stocks like
PNC Financial
(PNC) - Get Report
and
Wells Fargo
(WFC) - Get Report
, along with two stocks Cramer owns for his charitable trust,
Action Alerts PLUS,
Bank of America
(BAC) - Get Report
and
JPMorgan Chase
(JPM) - Get Report
, were all higher today as the promise of dividends and stock buybacks gets larger.
Also on the upside today, the consumer stocks. Cramer noted
Procter & Gamble
(PG) - Get Report
, another Action Alerts PLUS name, along with
Clorox
(CLX) - Get Report
and
Kimberly Clark
(KMB) - Get Report
were up on the day.
Cramer said he's not sure how long this sector rotation will last, but until it does investors cannot own the growth stocks without also being diversified in other sectors as well.
Move to Dividend Stocks
"The bond apocalypse is upon us," Cramer told viewers. He said with bond prices beginning to free fall, the loss of principal will become more than the interest gained. "Bonds can hurt you," said Cramer, as he advocated better alternatives.
High-yielding dividend stocks is the place investors need to be, said Cramer. Almost 40% of the total return in the
S&P 500
has been in the form of dividends, leaving a lot of money on the table for investors who are not participating. That's why Cramer said investors need to move their money, even retirement savings, out of bonds and into dividend stocks.
To illustrate his point, Cramer returned to his dividend portfolio from March 7, a group of five stocks up an average of 15.9% since their debut. Add dividends however, and that gain grows to 19.7% during a time when the
S&P 500
was up just 11.9% and U.S. treasuries paid a paltry 4.2%.
Cramer said a 4% yield is the minimum benchmark investors should be looking for. After the break, Cramer picked out his favorite dividend stocks for a new diversified dividend portfolio.
Stocking Up on Dividend Stocks
Cramer's new diversified dividend portfolio to replace bonds consisted of five stocks, each in different sectors. For energy, Cramer said he still likes
Linn Energy
(LINE)
with its 7.1% yield, but for this portfolio
Kinder Morgan Energy Partners
(KMP)
, with its 6.3% yield wins the prize.
For a telco stock, Cramer said
Winstream
(WIN) - Get Report
and
Frontier Communications
(FTR) - Get Report
were his runners up, but
Verizon
(VZ) - Get Report
, with its 5.9% yield and four year track record of dividend boosts, is his favorite.
In the utility group, New York based
ConEd
(ED) - Get Report
came in a close second to
UIL Holdings
(UIL)
, a New England based utility with a 5.8% yield.
Moving to his REIT stock, Cramer said
Healthcare REIT
(HCN)
and
EastGroup Properties
(EGP) - Get Report
were in the running, with EastGroup coming out on top. EastGroup has a 5.1% yield and a record of 123 consecutive dividend raises.
Finally, as his consumer stock pick, Cramer chose tobacco giant
Altria
(MO) - Get Report
, with its 6.2% yield. Cramer said Altria has two decades of dividend boosts under its belt, making it worthy of a slot in his bond-replacement portfolio.
Growing Human Genome Market
In the "Executive Decision" segment, Cramer sat down with Greg Lucier, chairman and CEO of
Life Technologies
(LIFE) - Get Report
, a medical research equipment maker.
Lucier showed off his company's new personal genome machine, a product that can read a large chunk of the human genome in just hours.
Lucier said that the market for this equipment is in the tens of billions of dollars as everything from people to animals to plants will be sequenced in the future for medicines and research. He said that while Life Technologies makes money selling its machines, it also makes money on the consumables each machine uses to operate.
Lucier also cast doubt over concerns that Life Technologies' new products will make obsolete its older technologies. He said that his company's older equipment is being used heavily in diagnostic labs and is growing in the mid dingle digits.
When asked about Life Technologies' success overseas, Lucier said that 40% of company sales now come from overseas, with China in particular representing $200 million a year in revenue.
On the domestic front, Lucier noted that while his company has benefited from increased government spending in the past, it is pivoting into other areas. He said the coming food safety bill will mandate more food testing, a business that Life Technologies competes almost unopposed in.
Cramer called Life Technologies a winner, and recommended the stock.
Lightning Round
Cramer was bullish on
MIPS Technologies
( MIPS),
SPDR Gold Shares
(GLD) - Get Report
,
JPMorgan Chase
(JPM) - Get Report
,
Wells Fargo
(WFC) - Get Report
and
Bank of America
(BAC) - Get Report
.
He was bearish on
Lockheed Martin
(LMT) - Get Report
.
Closing Comments
Cramer said the estimate boost from
Home Depot
(HD) - Get Report
is bigger than people realize. He said that Home Depot can't grow unless homeowners are putting money in their homes, and that only happens when homes are increasing in value.
Home Depot cited plumbing and electrical as two bright spots. Cramer said these big ticket remodels are a signal that despite the naysayers, the housing market is beginning to rebound.
--Written by Scott Rutt in Washington, D.C.
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At the time of publication, Cramer was long PNC Financial, Wells Fargo, Procter & Gamble.
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