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A Capital Idea
After the president's speech Thursday night pledging to rebuild New Orleans, Jim Cramer wants to buy the soon-to-be largest bank in Louisiana,
Capital One Financial
Cramer noted Friday on his "Mad Money" TV show that Capital One is set to acquire
( HIB), Louisiana's largest bank. Cramer said he believes Bush's plan to rebuild New Orleans through the use of private accounts will be a boon to the banks.
Capital One is "about to pick up one of the only banks that will be making money in the horrible yield-curve environment."
Cramer also is a fan of Capital One's credit card business. The company has had improving delinquency rates, he noted, and Congress recently passed legislation making it harder for people to default on their debt -- including credit card debt.
Finally, Cramer said Capital One is likely to be a takeover target at the hands of
. Wachovia has a relationship with
( KRB) for credit card issuance. But, MBNA is being acquired by
Bank of America
, a bitter rival of Wachovia.
Wachovia will likely end its relationship with MBNA once MBNA becomes part of Bank of America, Cramer said. Wachovia will then probably seek to strike a deal with Capital One for credit card issuance or set out to acquire the company as Capital One is the only remaining large independent credit card company.
"I want you to own Capital One because the president is bailing out Hibernia, and they're buying it, because Congress made it almost impossible to get out of credit card debt by going bankrupt, and because I'm betting Wachovia tries to take it over," said Cramer.
Games People Play
Cramer, who has been bearish on video-game publishing stocks even as he's been bullish on retailer
and Xbox 360 console-maker
, has reconsidered his stance. He now believes "it's possible the video-game industry becomes
big story in the media over the next five years."
Video games are not just for kids anymore, he said, adding that companies are paying huge amounts of money to get their products and advertisements placed in video games. "Experts say this could be a billion dollar business by 2010," said Cramer.
As such, Cramer is bullish on
( ERTS) and
. Electronic Arts is "best of breed," he said and while the stock isn't cheap, "if you're willing to hold it for three years, I think you're going to make a lot of money." Activision is "reasonably priced," and Cramer expects it to grow 20% a year. Thus, he says, it deserves a higher multiple than its current P/E of 26 times 2007 earnings estimates.
"These companies aren't super cheap," and they will be volatile, said Cramer. "But you're paying up for growth ... not hype."
A caller asked about
, which is cheaper on a P/E basis than Electronic Arts or Activision. Cramer said Atari was not best of breed, saying "I just don't have a good feel about Atari."
Over a Barrel
Don't believe talk that perhaps we're not running out of oil, or that the price of oil is coming down, said Cramer. "The situation remains desperate."
Proof of just how desperate, said Cramer, can be seen by the price Chinese investors paid for
Ecuadorian properties this week. Cramer, who owns EnCana for his
ActionAlertsPLUS charitable trust, had all but written off these properties after rebels blew up a pipeline leading from the property and took 10 soldiers hostage.
Amazingly, said Cramer, EnCana was able to sell the property for a hefty price because "Ecuador was one of the few places that had any oil for sale, and the Chinese are in major buy mode."
"To those who think the spike is over, who are thinking $35 a barrel, who think that natural gas is coming back down to $5, I say
give me a break!
" said Cramer. "EnCana just sold a house of cards to the Chinese at a sky-high price because the Chinese are plain desperate for oil."
, which he bought for Action Alerts Plus this week. Occidental's fundamentals are improving, he said, and the company gets one-tenth of its earnings from Ecuador. "Who's to say OXY may not be the next in line for Chinese buyers?"
Finally, Cramer noted news this week that a new agreement will allow a "billion dollars" of American wine to be sold in Europe that "couldn't be done before." Cramer had Bill Newlands, president of
( FO) Jim Beam Brands division on the show to ask if Fortune Brands would be able to sell more wine in Europe after the recent "truce."
Newlands said indeed business conditions "are getting better than they once were," noting the U.K. market was a "big opportunity for California wines."
Cramer summed up the interview saying the news is pertinent because Fortune Brands' "stock is down and down badly ... this is a stock that has historically returned a fabulous return ... they just got this great break ... I'm doing a 'mon back* on FO."
Cramer was bullish on
Kinder Morgan Energy Partners
Kinder Morgan Inc.
Central European Distribution
Brown & Brown
Annaly Mortgage Management
Allscripts Healthcare Solutions
SiRF Technology Holdings
Plum Creek Timber
Cramer was bearish on
Hudson City Bancorp
Allied Waste Industries
Take-Two Interactive Software
*For all you home-gamers, a 'mon-back opportunity means Cramer would back up the figurative truck and load up on a stock.
At the time of publication, Cramer was long GameStop, Microsoft, Motorola, Occidental Petroleum and EnCana.
James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for
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