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NEW YORK (
) -- "Sometimes huge moves in few stocks can signal which ways the market's headed," Jim Cramer told the viewers of his "Mad Money" TV show Wednesday.
He said the key to understanding the markets is to learn what the big movers are signaling.
Case in point,
, which was up 7% today on a strong quarter as consumers trade up from fast food to better food, along with heavy equipment maker
, which was down sharply on falling new home starts.
To the novice investor, the moves in these two stocks may not seem important. But Cramer said to him, they're signaling that the consumer economy is good, but the industrial economy is not only bad, but may be getting worse.
Cramer said investors are right to worry that a new leg lower may have come to the markets. He said the leadership groups that led the rally off Dow 6,500, mainly technology, oil and the banks, are starting to break down, with bellwethers
both down sharply, along with several key banks, and with oil unable to trend any higher.
Cramer said its no wonder that the defensive stocks, like
were higher today, as investors begin to lock in profits and start thinking defense.
He said that the 5% to 7% market correction he's been predicting may be at hand.
In a special Wednesday edition of his "Sell Block" segment, Cramer issued a rare jailbreak for
and removed the company's CEO, Lewis Campbell, from his "Wall Of Shame."
Cramer added Campbell to his Wall Of Shame on June 10, when the company seemed to be struggling for survival. At the time, Textron had just issued a big secondary offering of stock, along with a bond offering, in hopes of raising enough cash to bail out its struggling financial services division.
In retrospect, Cramer said that secondary offering actually made investors money, and he may have been too focused on the company's past and not its future.
Cramer said since adding Lewis to the wall, Textron's stock has risen from $11 a share to $18.43. The company delivered a 2-cent-a-share profit and offered rosy guidance for its fourth quarter. Cramer said Lewis has turned the ailing Textron around, by winding down its financial services division and focusing on its other divisions.
Cramer said he hopes all CEOs on his Wall Of Shame do what Lewis did, and fix their companies rather than retiring or getting fired.
Rebutting the Analysts
In the "Executive Decision" segment, Cramer spoke with Bob LaPenta, chairman, president and CEO of
L-1 Identity Solutions
, a stock Cramer recommended on Oct 16 at $6.86 a share. Since that recommendation, the company's earnings and outlook have come under fire from analysts, taking the stock below Cramer's call.
LaPenta said that when he first appeared on "Mad Money" three years ago, L-1 was a $50 million company with negative earnings. Today the company is No. 1 in the biometric space, delivering revenues of $700 million and cash earnings of $100 million.
LaPenta said the perceived shortfall analysts are citing stems from the company's acquisition from last year, which due to a rival bid, caused the company to tender an all cash offer. However, LaPenta said that once that debt is repaid and its new contracts integrated, the company will have great cash flow and growth in 2011.
LaPenta reminded Cramer that he's the largest shareholder in L-1, and he said he sleeps well at night. He said that he's never been more excited about the company's prospects. LaPenta also noted the company's growth overseas, as an additional driver in its growth.
Cramer said he's standing by his recommendation of L-1 Identity Solutions.
Outrage of the Day
Cramer took aim at investment banker
for its handling of the
IPO, an IPO which Cramer recommended investors to participate in.
Cramer said that at the last minute, Goldman added $300 million in convertible bonds to the offer, and after opening at $12.50 a share, the stock dropped to close at $12.10 on its first day of trading.
Cramer said he's calling out investment banks which offer bad deals for investors, like this one. He said no one is policing these deals, and disclosing something at the last minute, while it may be legal, is not the right thing to do.
Cramer said investment houses, like Goldman, should be bringing good deals to market, the kind that lure investors back to stocks, and not bad one which only scare investors away.
Cramer also took aim at
, a company he recently panned, for its "announcement" that it raised full year guidance when it reported its third quarter.
In fact, Under Armour beat expectations by 8 cents a share, but only raised guidance by 5 cents a share, thus falling short by 3 cents a share from what was previously reported. Cramer said investors are too smart to be confused by misleading math, and the company should be ashamed of itself.
Cramer was bullish on
RF Micro Devices
He was bearish on
Great Atlantic & Pacific Tea
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At the time of publication, Cramer was not long any stock mentioned.
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