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Rate Cut Mea Culpa and Hats Off to Cramer

Cramer called for relief, and now that we've got it, here's my quick take on the stocks to buy now.

The other day Jim Cramer and I were standing outdoors in Manhattan's Financial District to record some videos for TheStreet.com TV. I was throwing out some ideas, but my very first one was rejected. I wanted to argue with Jim about the need for a rate cut. He made a face that seemed to say, "Oh, please. Not another rate cut story."

Cramer had been everywhere pounding for an emergency rate cut. The last thing he wanted to do was talk about it again. The reality is, it's a boring topic. People want to hear about stocks, not about the arcane federal machinery that starts to move when the

Federal Reserve

injects more liquidity into the system.

And thank God that Jim didn't want to do yet another video on the rate cut. Because I'd be sitting here now with egg all over my face, hoping people would forget about that moment when I would've been pounding the table, screaming at the top of my lungs at Jim, "The economy is fine! We don't need a rate cut," and now here we are -- just two days later -- with a 50 basis-point rate cut from the Fed. If that had happened, I would certainly be embarrassed now. But Cramer was calling it, so let's see what it means.

First off, you must own the financial stocks that two of the greatest investors -- Warren Buffett and Eddie Lampert -- have been buying.

  • Bank of America (BAC) - Get Bank of America Corp Report -- a 5.4% dividend; $1.5 trillion in assets and growing. The stock trades at a price-to-earnings ratio of 9; and Buffett just bought 9 million shares.
  • USB (USB) - Get U.S. Bancorp Report -- a 5.2% dividend; Buffett added to his position; it has minimal exposure to subprime mortgages.
  • Wells Fargo (WFC) - Get Wells Fargo & Company Report -- Buffett added to his position; it offers a 3.7% dividend.
  • Citigroup (C) - Get Citigroup Inc. Report -- Lampert added to his position; the largest bank since the creation of banking; a 4.7% dividend; a catalyst to move 5 points if Chuck ("Purple Rain") Prince leaves.

Let's also pick up some tech since they all sold off too much, given that most of tech has no exposure to subprime-mortgage issues.

  • EMC (EMC) -- It owns an $18 billion stake in VMware (VMW) - Get VMware, Inc. Class A Report. EMC trades for roughly 6 times cash flows if you back that out. This is a $25 stock by year-end.
  • Tessera Technologies (TSRA) -- Why do you think the iPhone is so small? Tessera owns the patents on chip minitiarization, and its stock trades for 9 times cash flows. Oh yeah, it also has $240 million in cash in the bank and no debt. Thanks to RealMoney columnist Sramana Mitra for opening up my eyes to this one.
  • Apple (AAPL) - Get Apple Inc. (AAPL) Report -- Since we're glorifying the iPhone here, let's not forget Apple, which is 30 points down since the mess started. Poor Apple!
  • SanDisk (SNDK) -- Just about everything on your desktop and every gadget is moving to flash. Buy in America and forget Samsung. SanDisk is where it's at.
  • Yahoo! (YHOO) -- It doesn't matter whether Yahoo! is good or bad. At some point people will pile in by virtue of insider Sue Decker's $1 million purchase of stock, and this will be that time.
  • ChoicePoint (CPS) - Get Cooper-Standard Holdings Inc. Report -- The stock trades at 9 times cash flows. Forget about privacy -- this company knows everything about you and sells it to whoever pays the highest. And that's valuable. It just announced a $300 million buyback.
  • Time Warner (TWX) -- While not exactly a tech play, you've got to consider the effect of insider Dick Parsons buying $1 million worth of stock on the open market. The company is worth at least $25 a share in a breakup.
  • Procter & Gamble (PG) - Get Procter & Gamble Company Report -- While not a tech play, consider its $30 billion buyback.

We also need to look at health care now. Hey, people are living longer and maybe even more so now that we've got the relief of lower rates.

Let's also not forget global infrastructure plays, now that the world is not heading toward financial Armageddon:

Oh, and that reminds me. There are a lot of companies that are peripheral to the housing business that have been crushed. Let's also look at them:

  • USG (USG) -- Another big Buffett pick. The stock currently trades 5 points lower than the price at which Buffett has implied he would back up the truck -- that is to say, the price at which he'd buy more.
  • Bed Bath & Beyond (BBBY) - Get Bed Bath & Beyond Inc. Report -- You would think it sold mortgages given the way this stock has fallen. Listen, everyone needs towels and sheets. They're like staples.

If you want more stock ideas that I believe are likely to soar between now and year's end, check out these portfolios on Stockpickr.com:

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And try to enjoy the weekend for once.

-- James

At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.

James Altucher is president of Stockpickr LLC, a wholly owned subsidiary of TheStreet.com and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs a fund of hedge funds. He is also a weekly columnist for

The Financial Times

and the author of

Trade Like a Hedge Fund

,

Trade Like Warren Buffett

and

SuperCa$h

. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;

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