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Investors will profit if they devote attention to the dry subject of dry shipping, Jim Cramer told viewers of his "Mad Money" TV show Wednesday.
Nobody talks about dry bulk shipping stocks because they're boring. "I can't throw pies or wear funny clothes when I talk about dry bulk shipping," Cramer said. The money to be made on these stocks, however, is very exciting; they provide "huge and reliable dividends," he said.
Dry bulk shipping stocks have risen enormously since July, when Cramer recommended them. "This industry is one of the great bull markets in the world right now," he said.
Cramer took a break from his discussion of dry bulk shippers to note that
reported earnings. "Do not sell," Cramer strongly urged viewers. Pointing to the success of Paypal, large share volume and loads of cash, he concluded eBay is going to $50.
Cramer finished discussion of dry cargo shippers by selecting two of his favorites. Of the conservative variety of dry shippers, Cramer selected
( OCNF), seeing bigger upside with Paragon.
Of the riskier shippers, Cramer selected
Genco Shipping & Trading
. Diana is up 17% since July and offers a 6% yield, giving it an edge over Genco.
Cramer concluded by stressing the value of the play. Because dry bulk shipping companies don't invest in growth (they rarely build new ships), they pay a lot of dividends back to investors.
Even though investing in these stocks is "not sexy," sometimes you have to go for the easy money, and that's what dry bulk shippers offer.
Cramer stressed that dry bulk shipping is a set of stocks that work in the same way that
fo. These companies are consistent performers that pay big dividends.
Globalization and high demand for raw materials in China are behind bulk shippers' recent success, Cramer said. In addition, because dry bulk ships offer lower margins for shipbuilders, few of them are being made, so the ships are scarce. The high demand and short supply work together to drive up the price of this kind of shipping, Cramer said.
All of these companies are in the "sweet spot," Cramer said, but they can be grouped into two distinct groups that offer different scenarios to investors. The first group of shippers is completely chartered out for the year, meaning that changes in the Baltic Exchange Dry Index, an indicator of the price of dry bulk shipping, will not affect the stocks' performance. Those companies have already booked their shipping in advance, so they offer steadier performance that doesn't depend on external factors, Cramer said. Conservative investors should opt for these companies.
Those shipping companies that have partially chartered their fleets have greater exposure to the Baltic index. Their prices will rise or fall based on demand for the goods they ship. Investors who can tolerate more risk should buy these stocks.
To shed more light on dry shipping, Cramer welcomed Peter Georgiopoulos, CEO of General Maritime and chairman of Genco. He asked Georgiopoulos if bulk shipping rates are currently sustainable and whether they have room to improve.
Georgiopoulos compared the current dry cargo market to the period immediately following World War II, when iron, steel and cement had to be brought to Europe and Japan to rebuild the war-damaged countries. Citing a similar environment in today's China, he said he believes there is a lot of room for growth in the shipping market. He further asserted that shipyards are "locked up," and it could be as late as 2011 or 2012 before a new dry bulk boat is built, meaning that supply should not change any time soon.
"This is a bull market," Cramer assured viewers. "Pay attention," he said. "The money being made here is gigantic.''
Cramer brought Mark Penn, author of
on the line to discuss his book and its potential influence on investments, politics and culture.
Cramer claimed he could use the book as a handbook for the next 25 shows, saying its counterintuitive findings have broad implications that include potential stock picks.
Penn and Cramer discussed the emergence of the culture of women's strength. Cramer believed this was the force behind the success of apparel companies
Penn noted that women have increased their presence in strength professions, and their numbers have grown in traditionally masculine job markets such as the armed forces and firefighting.
Cramer then asked Penn to explain the success of
and the emergence of video games as a cultural force. Penn noted that the average age of video gamers has risen to 33.
In a final illustration of a counterintuitive trend with commercial impact, Penn explained that the majority of car-buyers are women. Despite this, the sales model is still geared toward men.
Cramer asked whether the trends outlined in Penn's book could influence the presidential race, possibly helping Hillary Clinton win. Penn laughed, saying he believes Clinton can be elected without reading
Am I Diversified?
Cramer mentioned that even though he loves visiting colleges and admires the risk-taking of young investors, it is important for everyone to diversify. With that, he led into the "Am I Diversified?" segment.
The first caller asked if
( VOLV) and
represented a diversified portfolo. Noting that Google was more of an advertising play than a tech company, Cramer blessed the portfolio, although many would disagree with his separation of Google and Brocade.
The second caller asked about
, and cash.
Cramer said the portfolio relied on "too much energy complex" with Enterprise, Halliburton and Peabody. He instructed the caller to "throw away BTU," ring the register on Halliburton, and pick up a defense stock and a health care stock to replace them. Further, he asserted that "the market is too good" to devote too much of a portfolio to cash.
The final caller asked about
Cramer blessed the portfolio: "You've got absolute diversification."
Cramer was bullish on
Cramer was bearish on
Jack in the Box
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At the time of publication, Cramer was long Caterpillar, ConocoPhillips, McDonald's and Raytheon.
Jim 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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