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Investors should shield themselves from the coming housing-led recession with a bulletproof portfolio, Jim Cramer told viewers of his "Mad Money" TV show Thursday.
Cramer said the current situation is similar to that of 1990, where there was a sharp downturn and averages fell 13% in six months because of credit problems related to commercial real estate. Right now, he said, the credit problems are in residential real estate.
He said if investors are going to make money, they have to own stocks that worked in 1990. Those included high-growth stocks, indestructible stocks with solid balance sheets, high dividend-yielding plays, and companies with international exposure.
Currently, he said, the agriculture, mining, infrastructure and technology sectors all work right now.
"When the going gets tough, your first priority has to be capital preservation," Cramer told viewers. "What stocks would I want as my bulletproof vest?" he asked. "I've got five stocks for you."
The first is
, a stock he owns for his charitable trust,
Action Alerts PLUS.
Altria is as indestructible as it gets, he said. It has a huge farm business, has little exposure to higher commodity prices and is a big "rest of worlder." The company is splitting into two businesses--a domestic business and an international one -- and that should unlock a lot of value," said Cramer, adding it has a 4% dividend yield.
The next bullet proof stock is
, which he also owns for his charitable trust.
This stock has significant exposure overseas and does more business with China than the U.S., he said, noting it's a great stock for those that detest dollars.
, which reported an "amazing" quarter Wednesday, is safety stock No.3.
He said Foster Wheeler has a market capitalization of $10 billion and could double that. This company is a multi-year story and is more about the Middle East than the U.S., Cramer said. In addition, he said it is planning a two-by-one split, which people will know more about in January.
, another Action Alerts PLUS stock. He said it is about to close its merger with
and is on track to close the deal by the end of the year.
Transocean is a "principal beneficiary" of higher oil prices and has basically no U.S. exposure, Cramer said.
, the "ultimate bullet proof stock" that just reported the best quarter it has had so far, he said.
"These are the stocks you want for the worst case scenario," according to Cramer. "These are your bullet proof vest."
During his "Sell Block" segment, Cramer urged viewers to take
off the table. He said it is a high-multiple stock that has lost its momentum.
Usually when he hears about increases in inventory from a company during a conference call, it is a read flag, Cramer said. But when he heard about it from Under Armour he went against his rules and thought it was OK to buy it because the company's CEO Kevin Plank was so positive on the stock.
Then three insiders sold some positions of their stock. Cramer said he doesn't know why these insiders sold, but they crossed a line. He said he doesn't believe Under Armour would have been up nearly as much after its inventory increase if he hadn't championed it.
Cramer said he feels like a dope because these three insiders were able to sell their stock at higher prices.
Moreover, he said the company is losing momentum. He also said retail is a tough place to be right now and the remaining markets Under Armour wants to get into are going to be defended like crazy by competitors like
"Sell Under Armour," Cramer said.
On a side note, he also advised viewers to sell the four horsemen of the mortgage crisis:
Ambac Financial Group
Don't be tempted to buy these stocks even though they look low, Cramer warned. If people own them, wait for the inevitable short squeeze and then unload them, he said.
In his "Mad Mail" segment, Cramer told viewers he got only about two hours of sleep last night because of
. He said he feels bad and angry about the stock's recent performance. The stock, which closed at $7.09 Thursday, has lost nearly 50 percent of its value in three days.
Cramer was bullish on
Las Vegas Sands
Cramer was bearish on
NorthStar Realty Finance
Buffalo Wild Wings
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At the time of publication, Cramer was long Altria, Freeport-McMorRan, Foster Wheeler, Transocean, Hologic, McDonald's and CVS Caremark.
Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money."
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Some of the stocks mentioned by Mr. Cramer on "Mad Money" are held in Mr. Cramer's Action Alerts PLUS Portfolio. When that is the case, appropriate disclosure is made on the program and in the "Mad Money" recap available on TheStreet.com. The Action Alerts PLUS Portfolio contains all of Mr. Cramer's personal investments in publicly-traded equity securities only, and does not include any mutual fund holdings or other institutionally managed assets, private equity investments, or his holdings in TheStreet.com, Inc. Since March 2005, the Action Alerts PLUS Portfolio has been held by a Trust, the realized profits from which have been pledged to charity. Mr. Cramer retains full investment discretion with respect to all securities contained in the Trust. Mr. Cramer is subject to certain trading restrictions, and must hold all securities in the Action Alerts PLUS Portfolio for at least one month, and is not permitted to buy or sell any security he has spoken about on television or on his radio program for five days following the broadcast.